Salasar Techno Engineering LtdQ1 FY21Industrial Manufacturing

Salasar Techno Engineering Ltd

Q1 FY21 Earnings Call Analysis

Management growth scorecard

Revenue

Category 1

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Revenue guidance

Category 1

→The company expects a 40% to 45% growth in revenue in the next financial year despite the pandemic challenges (Pages 3, 6, 11, 13, 14).
→Telecommunication segment, especially with upcoming 5G rollout, is projected to grow by 10% to 12%, driven by new towers and deployment on existing towers (Pages 4, 10, 14).
→Heavy structure division (new vertical) is expected to contribute around Rs. 100 crores in revenue (Pages 3, 6, 14).
→EPC business is projected in the range of Rs. 250-270 crores, with overall topline expected to be around Rs. 850 crores plus/minus (Page 14).
→Continuous and steady order inflow is expected from telecom (Rs. 25-30 crores per month regular orders) and other sectors like railway and transmission (Pages 6, 9).
→Capacity expansion plans, including potential new galvanizing plant, may further support growth (Page 12).

Category 3

→Company expects around 40% to 45% revenue growth in the next financial year despite pandemic challenges.
→Top line is likely to reach approximately Rs. 850 crore, driven by growth in new verticals, telecom, and manufacturing segments.
→New heavy structure division expected to contribute around Rs. 100 crore.
→Telecom and other structure segments anticipated to grow by 10% to 12%.
→EPC segment revenue targeted around Rs. 250-270 crore, restricted to about 25%-30% of total business due to capital and working capital concerns.
→EBITDA margins are expected to remain stable around 9.5% to 11%, with a best-case scenario at 10.5%-11%.
→The company focuses on selective orders with good margins, emphasizing bottom-line growth over mere top-line increase.

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Yes

→During the financial year, the company raised Rs. 17.1 crores by issuing 10 lakh preferential share warrants, primarily utilized for capex on the new vertical.
→No explicit mention of any ongoing or future fundraising through debt or equity in the Q4 FY21 earnings call transcript.
→The company is focusing on growth through existing resources and CAPEX investment on new verticals, including a potential galvanizing plant, but has not announced new fundraising plans.
→Bonus shares were issued in a 1:1 ratio, doubling capital from reserves and surplus, but this does not raise new capital.
→The management has not indicated any immediate plans for fresh equity or debt issuance during this call.

Yes

→Total order book as of May 31, 2021: Rs. 988 crores.
→EPC orders pending execution as of March 31, 2021: Rs. 260 crores.
→EPC orders received in April and May 2021: Rs. 326 crores.
→EPC orders with lowest bid status, awaiting LOI: Rs. 80 crores.
→Orders for new heavy structure manufacturing plant: Rs. 70 crores.
→Bangalore Metro track-laying order under execution (JV): Rs. 250 crores.
→Regular telecom orders estimated at Rs. 25-30 crores per month (not usually included in order book).
→EPC order inflow for FY21: Approximately Rs. 375 crores.
→Railway segment pending order book: Rs. 76 crores plus Rs. 250 crores for Bangalore Metro track laying.
→Expectation of another Rs. 200-300 crores growth from telecom and 100 crores from new vertical in upcoming years.

Yes

→The company incurred a total CAPEX of about Rs. 20 crore on a new heavy structural fabrication vertical commissioned by March end, with a capacity of 15,000 tonnes per annum targeting bridges, power plants, airport hangers, metro stations, stadiums, and prefabricated structures.
→There is a plan under discussion to set up a new galvanizing plant to increase capacity, with the announcement pending.
→The company raised Rs. 17.1 crores through the issue of 10 lakh preferential share warrants, primarily utilized for capex on the new vertical.
→Future capacity increase plans will be considered once full utilization of the current capacity is achieved.
→The focus remains on expanding manufacturing capability and selectively bidding for orders according to capacity and margin considerations.

How does Salasar Techno Engineering Ltd rank vs peers in Industrial Manufacturing?

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