Salasar Techno Engineering LtdQ2 FY23Industrial Manufacturing

Salasar Techno Engineering Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 2

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 2

→Healthy revenue growth of 24.3% in Q1 FY24 driven by rising demand and efficient order execution.
→Strong order book of approximately INR1,435 crores providing good growth visibility.
→Expansion through a new state-of-the-art galvanization plant operational by end of Q2 FY24 expected to add INR50 crores in incremental revenue during the year.
→Increasing focus on exports, especially to developed countries like USA and Canada, with ongoing large export projects to Nepal and Africa.
→Growth drivers include telecom tower demand (5G rollout), power transmission and distribution, railway electrification (orders of INR400 crores under execution), and rural electrification (orders of INR750 crores).
→Capex and modernization across power and railway sectors expected to provide ample opportunities.
→New galvanizing plant to enable production of larger monopoles, offering better margins and differentiation.
→Overall, company confident of sustaining and improving margins and revenue growth through diversified sectors and technological edge.

Margin guidance

Category 2

Future Growth Expectations for Salasar Techno Engineering Limited: - Revenue from operations grew 24.3% in Q1 FY24, driven by rising demand and efficient order execution. - EBITDA margins improved to 9.01% in Q1 FY24, up from 8.02% YoY, with sustainable margins expected between 9%-10%. - Commissioning of a new state-of-the-art galvanizing plant by end of Q2 FY24 expected to add at least INR 50 crores incremental revenue within the year. - The new galvanizing plant will produce higher margin monopoles, likely boosting operating margins and revenue visibility. - Strong order book of INR 1,435 crores with good growth visibility across domestic and international markets. - Large capex plans in power transmission, rural electrification (INR 25,000+ crores), railway electrification (INR 1.07 lakh crores), and telecom (5G rollout) sectors are key growth drivers. - Export opportunities in developed markets (US, Canada) expected to increase over time post-approval. - Overall, operational scaling, product innovation, and sectoral growth support positive earnings and EPS growth trajectory.

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Fundraise plans

Yes

→Currently, Salasar Techno Engineering Limited has a working capital limit of INR 250 crores and a similar non-fund-based bank guarantee limit.
→There are plans to increase this limit by INR 50 crores over the current financial year to support growth.
→Regarding equity dilution, there are no immediate plans for further equity dilution.
→However, depending on future opportunities or situations, the company may consider equity dilution.
→No explicit mention of new debt fundraising beyond the planned increase in working capital limits was made.

Order book

Yes

→Current overall order book stands at approximately INR 1,435 crores.
→EPC order pipeline is about INR 1,243 crores.
→Domestic and international orders in towers and poles segment exceed INR 88 crores.
→Heavy steel and structural division has orders worth more than INR 100 crores.
→Export order book includes a European bank-aided project in Nepal valued at INR 143 crores, with around INR 100 crores worth of exports over 18–24 months.
→Additional export orders are expected soon from Africa, including telecom towers valued around INR 10–15 crores.
→Railways EPC projects under execution around INR 350–400 crores.
→Rural electrification orders worth INR 750 crores recently won, with further large opportunities as more than INR 25,000 crores is to be spent on rural electrification.
→Growth expected from power transmission monopoles with new galvanizing plant enabling higher capacities.

Capex plans

Yes

→Salasar Techno Engineering is commissioning a new state-of-the-art galvanizing plant (imported from Germany and Italy) by the end of Q2 FY24, focused on producing monopoles for high-voltage power transmission lines (400 kV and above).
→The new galvanizing plant will add incremental revenue of approximately INR 50 crores in FY24.
→Plans to increase working capital and bank guarantee limits by INR 50 crores during the year to support growth.
→No immediate plans for equity dilution; however, future dilution could be considered depending on opportunities.
→The company aims to leverage the new galvanizing plant to improve margins and product offerings, including exports to developed countries like the USA and Canada.
→Ongoing focus on EPC projects and heavy steel structures with expected capital expenditure aligned to expansion and operational efficiency.

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