Salasar Techno Engineering LtdQ3 FY21
Salasar Techno Engineering Ltd Q3 FY21 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹6.17P/E: 64.6Market Cap: ₹1.3K CrSector: Industrial Manufacturing
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
Yes
Capex
Yes
3 of 5 growth signals are positive.
Full analysisRevenue guidance
Category 3- →Company aims for steady growth of 15%-20% year-on-year, considering capacity and financial prudence.
- →Plans incremental heavy structure steel division expansion with CAPEX of ~Rs. 40 crores, targeting Rs. 150-200 crores revenue per year.
- →New galvanizing plant CAPEX of Rs. 50 crores expected to add capacity (90,000 tons) and margin improvement.
- →Telecom sector outlook positive with expected 5G rollout driving exponential demand increases.
- →Power transmission and railway electrification segments also show large order books and government commitment.
- →Order book (~Rs. 967 crores) executable over 12-18 months indicates healthy near-to-medium term revenue visibility.
- →Focus on manageable order inflow to maintain margins and avoid overextension, limiting aggressive scaling despite large market opportunities.
- →Exploring scaling up with potential equity infusion (including discussions on rights issues) to capitalize on opportunities.
Margin guidance
Category 3- →Company targets steady growth of 15% to 20% year-on-year, maintaining manageable scale to ensure efficiency and margin sustainability.
- →New heavy structure steel division expected to contribute incremental revenue of Rs. 80-100 crores annually, with plans for further expansion targeting Rs. 150-200 crores yearly.
- →Expansion includes new galvanizing plant (Rs. 50 crore CAPEX) to increase capacity by 90,000 tons, improving margins and operational efficiency.
- →Telecom segment poised for strong growth, driven by 5G rollout and increased rural connectivity; anticipated monthly telecom order inflow around Rs. 30-35 crores.
- →EPC segment has robust order book of Rs. 967 crores, executable over 12-18 months, supporting sustained revenues.
- →EBITDA margins expected in the 10%-11% range; company focuses on maintaining margins despite input cost pressures.
- →No exact EPS guidance provided, but profit growth aligns with revenue and margin expansion, with past PAT margin around 5%.
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Fundraise plans
Yes- →The company has recently undertaken CAPEX of Rs. 20-25 crores generating incremental revenue of Rs. 80-100 crores this year.
- →There are plans for further CAPEX including a new heavy structures facility (~Rs. 40 crores) expected to generate Rs. 150-200 crores in revenue annually.
- →Another Rs. 50 crore CAPEX is planned for a new galvanizing plant to increase capacity.
- →The management is exploring various funding options for growth, including rights issues and debt, as needed.
- →They acknowledge the availability of "easy money" in the market and are open to raising funds through rights issues, especially from existing shareholders, to accelerate growth.
- →There is a cautious approach to scaling up rapidly but they are open to borrowing or equity fundraising if growth opportunities are compelling.
- →No definitive decision has been finalized on new fundraising yet; it depends on growth opportunities and market conditions.
Order book
Yes- →As of September 30, 2021, the total order book stands at Rs. 967 crores.
- →This includes:
- → - Unexecuted orders worth Rs. 561 crores.
- → - L1 EPC orders of Rs. 110 crores.
- → - Manufacturing orders outstanding under the Heavy Structure unit of Rs. 61 crores.
- → - Orders in Salasar Adorus amounting to Rs. 235 crores.
- → - Export orders of Rs. 32 crores.
- →The Heavy Steel Structure Division has started operations with Rs. 61 crores unexecuted orders and ongoing negotiations.
- →EPC orders typically execute over 12 to 18 months, with some projects extending up to 20-24 months.
- →The company has good visibility of orders in telecom, power transmission, railways, and heavy structures with several large projects in the pipeline.
Capex plans
Yes- →Recently completed CAPEX of Rs. 20-25 crores leading to incremental revenue of Rs. 80-100 crores annually.
- →New heavy structure steel division started; plans to expand with an additional facility requiring Rs. 40 crores CAPEX, expected to generate Rs. 150-200 crores annual revenue (under consideration, not finalized).
- →Investment of Rs. 50 crores to set up a new galvanizing plant adjacent to existing units, increasing capacity by 90,000 tons and improving cost efficiency; partly funded by Rs. 37 crores bank loan and internal accruals.
- →Focus on 5G readiness with in-house design teams collaborating with customers to provide lighter, smarter, and faster deployable telecom towers.
- →Considering growth opportunities and open to rights issues or borrowing to fund expansion based on market conditions and opportunities.
How does Salasar Techno Engineering Ltd rank vs peers in Industrial Manufacturing?
Pro feature1Salasar Techno Engineering Ltd
Rev 3Mar 3
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