Salzer Electronics hosted a
conference call on Aug 8, 2023. In the conference call the company was
represented by Rajesh Doraiswamy, Joint Managing Director.
Key takeaways of the call
Growth in Q1Fy24 was mainly
driven by the higher margin switchgear business that led to margin improvement.
Contribution from Exports at
22.55%, export revenue grew 37.9% YoY in Q1 FY24, driven by higher sales from
North and South America, Europe and Asian countries. Expect to continue with a similar growth
trajectory with its strong product offerings and brand position in the market. Developed
new customers and new products for NA market and that have facilitated growth
in NA market in Q1FY24.
Based on domestic and export
outlook, the company is cautiously optimistic about the overall business
performance.
The company expects a revenue
growth of about 20-25% for FY24. EBITDA margin 100-150 bps compared to last
FY23 due to better realization in IS and better revenue mix. Confident of crossing 4% PAT margin for current
fiscal.
Last fiscal the company grew by 30%.
But the growth moderated in Q1FY24. There
is lot of growth opportunities but there are also lots of global headwinds. Provided
there are no global headwinds the company will do better growth.
Cables & Wires business faces
the challenge of pricing and competition.
For FY24, the revenue of C&W business is expected to grow at 18-20% from
FY23 level is expected for C&W is expected. EBITDA margin of C&W that was
used to be about 7.5-8% has dropped to 6.5-7% now. So the focus is to bring the
EBITDA margin back to 7.5%-8% by this
fiscal end.
Global switchgear market is
expected to grow at a CAGR at 5.5% to USD 145 billion during 2023-2031 and Indian market is expected
to register a growth of 7.7% CAGR for the same period.
Over the last 3 quarter price
were increased multiple time and RM cost has come down. With RM cost declining further
will lead to further margin expansion.
Capacity utilization of enamel
wires stands at about 80% and the sales of this product is expected to grow at
about 5% going forward.
Looking into opportunity in smart
meter business and will update in 2-3 quarters if there is any development.
Electric charger are in final stage
of testing at ARAI. Testing should be completed by this quarter and revenue to
start flow from Q3FY24. The company is focused on fast chargers largely find
usage in highways aiming to charge a car in 30 minutes.
Industrial Switchgear segment
growth was driven largely by transformers 3 phase, rotary switches and wire
harness.
Capacity utilization (at plant
level) is in the range of about 60-80%.
Receivables as end of Q1FY24 is
at Rs 287 crore or at about 90 days. Debt – expect to maintain borrowings at
this level for FY24 due to WC requirement.
No single customer not giving
more 10% of revenue top 20 customers giving about 45% of revenue.
Renewable industry contributes
about 15-19% of the revenue for the company and this segment growth is at
faster rate.
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