Salzer Electronics held a conference call on Nov 16, 2015. In the conference call the company was represented by Rajesh Duraiswamy, JMD and Shankaran, Director of the company.

Key takeaways of the call

Industrial Switchgear can do a business of Rs 200 crore in FY16. Wire and cables expects to grow 15-16% in volume but due to the fluctuation in copper price, the sales in value terms moderate to about 5-6% for current fiscal.

Sales through L&T business was up by 4%yoy in H1FY16. L&T business contributed about Rs 26 crore in Q2FY16 as against Rs 24 crore in Q2FY15 and Rs 26.9 crore in Q1FY16. The Sneider and GE business grew 27-28% and 17-18 % respectively.

GE got 1000 locomotives supply order from IR over next 10 years. Similarly Alstom got 800 locomotive orders from IR. Since Salzer is the preferred supplier for other products the company is hope full of bagging order for supply of 3 type transformers as well. The company hopes to get Rs 80-90 crore of revenue for 3 type dry transformer in next 3 years and Rs 20-25 crore in first year of operations i.e. FY17.

Capex for transformer is Rs 22-23 crore and the operation of transformer capacity will commence in Q1FY17. Capex for capacitor is Rs 15 crore which will be spread over Q4FY16 and Q1FY17.

The company is talking to a Capacitor company and this business will contribute about Rs 8-10 crore in FY17.

All three new products/New businesses will bring incremental revenue of Rs 200-250 crore to topline by FY19.

Switchgear business on an average gives an EBITDA margin of 15-16%. Copper business margin will be 9%. Building products typically gives a margin of 11%. EMS gave about 18% EBITDA in Q2FY16.

Inventory is currently around 2.5 months and expects this to drop to 2 months in H2FY16.

EM business: Of the annual revenue of Rs 43 crore revenue for this year, the company has already booked 25 crore so far. Of the balance Rs 18 crore, majority of that will be booked in Q3FY16.

Market for 3 type dry transformer in the country is approx about Rs 2000 crore. About 3 competitors operate in India including Tamura from Japan, Graphomiz , an Italian Company and one Chinese player.

Copper wires and cable accounted for 33% of STO in Q2FY16 with sales de-grew by 13%qoq. The decline in sales on qoq basis is largely due to fall in copper price as volume grew by 20%qoq.

Sales of EM in Q2FY16 decline 15qoq. Since this is order book driven business the company has made installation to the tune of Rs 20 crore in Q2FY16 but could book only Rs 7 crore as audit did not happen. However balance amount of Rs 13 crore will be booked in next 2 quarter.

The company is in line for Rs 400 crore of revenue for FY16.

For H1FY16 the industrial switchgear business accounts for 49% of sales with a growth of 26%yoy, the building products accounted for 4% with a fall of 9%yoy; copper business accounted 34% of sales with a growth of 6%yoy and Energy Management accounted 13% with sales grew by 800%yoy.

Exports more than 50 countries including European countries