Shareholders of Salzer Electronics seem to be in a celebratory mood as the company's stock has consistently hit record highs over the past few years by maintaining a steady upward trend. Even during periods of market volatility, the shares have shown remarkable resilience, experiencing only slight corrections before quickly resuming their upward momentum.
The company's shares, which were valued at ₹100 four years ago, are now trading at ₹1,062, reflecting a remarkable gain of 962%. So far this year, the stock has surged 163%, marking its highest annual gain since its listing in 2015. Compared to its all-time low of ₹54.30 per share, the stock is now trading 1,900% higher.
Since 2020, the stock has consistently posted positive returns, achieving gains of 18% in 2020, 48% in 2021, 29% in 2022, and 64.84% in 2023.
Salzer Electronics operates across industrial switchgear, wires & cables, building management, and energy management divisions through its six manufacturing facilities in Tamil Nadu. It commands an impressive market share of 25% in CAM-operated rotary switches and 20% in wire ducts in India.
The company also has a vast distribution network, both local and global, and exports to 50 countries. Moreover, it has access to L&T’s local network through more than 350 distributors. Salzer operates through 4 divisions: industrial switchgear, wires & cables, building products, and energy management. Exports contributed a 26.9% share in FY24 to the company's revenue.
The company's revenue mix for FY24 from industrial switchgear, wires and cables and building products stood at 54.7%, 39.5% and 5.9%. Over the years, the share of industrial switchgears has increased steadily from 44.8% in FY20 to 54.7% in FY24, and domestic brokerage firm HDFC Securities expects it to grow at a healthy pace over the next few years on the back of increasing demand for safe and reliable systems coupled with a rise in demand for HVDC systems across the T&D network.
Expansion of the high-tension transmission network to cater to the growing energy demand across the manufacturing and industrial sectors is expected to further stimulate demand for the company’s products. The wires and cables division also continues to grow at a healthy clip.
The company also announced its foray into smart meters with a fully backward integrated facility, having a capacity of 40 lakh meters with a total capex of ₹40 crore. Salzer aims to increase this to one crore meters in the next few years. This has an added revenue potential of ₹1,000 crore per annum at current capacity. The company aims to capitalise on the growing demand for smart meters in the country, both for commercial and residential use.
With the unique proposition of customised solutions for its clients and with long-term partnerships with marquee customers like L&T, GE, Schneider, Indian Railways, etc., the brokerage believes that Salzer is well placed to capitalise on the rising demand for its products with increasing spending on infrastructure, engineering, and power distribution in India.
The company has delivered an impressive revenue CAGR of 16.9% over the past decade. Industrial switchgear and wires & cables divisions should continue to grow at healthy rates, going forward. Switchgears grew at 24.9% CAGR and wires & cables at 13.8% CAGR between FY20 and FY24.
The brokerage said that the smart meter business provides additional revenue visibility. It expects margins to improve from hereon, on the back of normalisation in RM prices, and as a result, it anticipates return ratios to improve significantly over the next 2-3 years.
In July, the brokerage recommended investors buy the stock for the short term, setting a bull case fair value of ₹1,080 for the next 2-3 quarters. However, the stock surpassed the target price ahead of schedule. On August 30, it reached a new record high of ₹1,142 per share.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
