Salzer Electronics: PAT growth of 19% & revenue growth of 12% for FY24 at a PE of 35
Rs 7500 cr incremental revenue from Smart Meters over the next 5 years. EBITDA growth of 30% and Revenue growth of 20% for FY25.
1. Industrial Switchgears, Wires & Cables & Energy management business
salzergroup.net | NSE: SALZERELEC
Largest manufacturer of Cam Operated Rotary Switches – Market leader with 25% share
2. FY20-24: PAT CAGR of 16% & Revenue CAGR of 20%
3. FY23: PAT up 76% & Revenue up 32%
4. 9M-24: PAT up 13% & Revenue up 14% YoY
5. Q4-24: PAT up 35% & Revenue up 8% YoY
PAT down 1% & Revenue up 15% QoQ
6. Strong FY24: PAT up 19% & Revenue up 12%
7. Business metrics: Improving return ratios
8. Strong outlook: Revenue growth of 20%+
i. FY25: Revenue growth of 20%+
Excluding the smart meters, we expect to grow anywhere between 18% and 23% in the coming year. Smart meter business sales will be over and above that
ii. FY25: EBITDA growth of 30%
Revenue growth of 20% with EBITDA margin expanding from 10% to 11% implies an EBITDA growth of 30%
Yes, excluding top meter, EBITDA margins, we have improved to around 70 basis points this year compared to last year. So we expect this to go up by another 1 percentage point in the coming year.
iii. FY24-29: Potentail to add Rs 1,500 cr revenue per year
The Smart Meter facility will add incremental revenues starting from FY25 with Rs 7500 cr incremental revenue over the next 5 years
This year, Salzer Electronics achieved noteworthy milestones in product development. Most notably, we successfully created a Smart Meter facility and received BIS certification.
The current smart metering manufacturing capacity of 4 million units per year, when used fully, could result in revenues of Rs.1,000 crore
Once this capacity is completely utilized, the company could go in for doubling of capacity, to around 80 lakh meters per year.
iv. Doubling in 4 years: 26% revenue CAGR till FY27
On doubling SALZERELEC: I'm confident that we will be able to do this definitely in 4 years. But if things work out well, yes, maybe we can do this one more year earlier.
9. PAT growth of 19% & revenue growth of 12% in FY24 at a PE of 35
10. So Wait and Watch
If I hold the stock then one may continue holding on to SALZERELEC
The performance of SALZERELEC has not been exciting in FY24. The guidance for 30% EBITDA growth in FY25 provides a reason to continue in the stock.
The real excitement in SALZERELEC is on account of Rs 7500 cr incremental revenue to be added over the next five years on account of smart meters. smart meters will not only add to incremental revenue but add incremental margin of 12-15% from FY25 compared to the FY24 EBITDA margin of 10%
EBITDA Margin of Smart Meters Business: I think definitely, it will be between 12% and 15% for the first year.
11. Join the ride
If I am looking to enter SALZERELEC then
SALZERELEC has delivered PAT growth of 19% with revenue growth of 12% in FY24 at a PE of 35 which makes the valuations quite expansion in the short term.
The guidance of SALZERELEC to deliver EBITDA growth of 30% in FY25 on the back of revenue growth of 20% with EBITDA margin expansion from 10% to 11% at a PE of 35 makes the valuations acceptable over the medium term
The outlook of incremental revenues and incremental marings provides opportunity in SALZERELEC provides opportunity in the stock over the longer term. One needs to keep a watch on the execution as FY25 will be the first year of the smart meter business.
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