Salzer manufactures Load Break Switches, Wiring Ducts, Terminal Connectors, Selector Switches, Ammeter Switches, Voltmeter Switches, DC Disconnectors, Electro Magnetic Relays and Magnetic Wires besides Modular Wiring Accessories and Allied Specialty Products.

With international approval and innovative designs the company's market share for these products is continuously growing.

The company has also entered into collaboration with M/s. Plitron Manufacturing Inc., Canada(Leading Manufacturing of Transformers in North America), in 1995 for manufacturing Toroidal Transformers with 50% Buy-Back.

Today, it is market leader in India for Rotary Switches, PV Application Switches & PVC Wiring Ducts (channels) and provides complete customized electrical solutions.

The company has one patent for its rotary switch and five products are awaiting patent.

June 2016 quarter results

For the quarter ended June 2016, sales fell 1% to Rs 90.13 crore. OPM fell 160 basis points to 12.0% which saw OP go down 13% to Rs 10.84 crore.

Other income grew 9% to Rs 60 lakh and interest cost went down 19% to Rs 3.35 crore. As depreciation jumped 14% to Rs 2.32 crore, PBT fell 15% to Rs 5.77 crore.

As tax provision fell 31% to Rs 1.18 crore (tax incidence fell from 25.4% to 20.5%), PAT fell 9% to Rs 4.58 crore.

One time impact

In June 2015 quarter, the revenue and PAT included Rs 16 crore and 1.90 crore respectively from one time contract for Energy Management Services. As against this, June 2016 quarter includes revenue and PAT of Rs 1.90 crore and Rs 5 lakh respectively.

FY 2016 results

For FY 2016, sales grew 27% to Rs 361.13 crore. OPM fell 60 basis points to 11.9% which saw OP rise 21% to Rs 42.89 crore.

PBT grew 43% to Rs 24.24 crore.

PAT went up 42% to Rs 17.040 crore.

The Company has successfully shipped its first order for IPD in Australia. The Company is confident of growing this business and increasing revenue contribution from this new client.

The project to manufacture Three Phase Dry Type transformers in Technical Tie-up with Trafomodern is coming up very well and the Company expects revenues from this project from Q3FY17

During the quarter the company allotted 75000 equity shares upon conversion of share warrants issued to the promoters

Also the company allotted 26500 shares by way of ESOP.

Enjoys strong positioning

The company is established player in the switch gear industry for the manufacture of CAM Operated Rotary Switches with Latest technology at international standards mainly for industrial purpose and has the facilities of taking the multiple outputs as well as sequence with various programs in all capacities from 6 Amps to 400 Amps.

The company's products are well received in the International and Local Markets and all leading OEMs including public sector undertaking are using standardized Salzer switches.

The company is progressing well and is now planning to improve the quality further to superior standards to expand the export markets.

By 2020 the company plans to achieve sales of Rs 1000 crore

By 2020 the company plans to achieve sales of Rs 1000 crore. New products will drive growth. With new products the company hopes to grow 20% each year and double sales in 5 years. It hopes to add Rs 250 crore by way of contribution from new products.

The management feels that sales can grow 25% in FY 2017 with 50 basis points improvement in OPM.

Sales from TLT can contribute to Rs 6 crore in FY 2017 and this is going to be continuing business.

With a gradual revival in the domestic capital expenditure (capex) cycle in the key industries and an improvement in the project spending, sustained growth can be expected going forward.

Management comments

Commenting on the results, R. Doraiswamy, Managing Director, Salzer Electronics Ltd said: "We have witnessed moderate growth in segments of Industrial Switchgear and very good growth in the Wires and Cables division in this quarter.

I am happy to inform that we have been able to achieve the expected margins on account of higher operational efficiencies. We intend to improve it further in the coming quarters. I am pleased to share that we have successfully shipped our first consignment to IPD – Australia, with whom we had signed an agreement last year. We look at growing this association and expect revenue contribution from this new client to continue increasing.

Going forward, we will continue to focus on adding new, niche and high margin products, enter new geography and offer total and customised electrical solutions to our existing and new customers."

Valuation

The share price trades at Rs 225.