Buy Salzer Electronics Ltd Target Rs.271 - Sushil Finance
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Salzer Electronics’ has reported numbers for Q4FY22. Following are the highlights of the performance for the quarter:
Highlights from the Quarter (Q4FY22):
Salzer Electronics reported consolidated revenues of Rs. 238.9 cr for the quarter, up 22% YoY and 9% QoQ. EBITDA for the quarter stood at Rs. 13.9 cr, translating to an EBITDA margin of 5.82% vs Rs. 16.9 cr at a margin of 8.63% in Q3FY21 (down 281 bps YoY) and Rs. 18.4 cr at a margin of 8.41% (down 258 bps QoQ) in the preceding quarter. The margin contraction was due to increase in raw material costs, which skyrocketed during the last quarter of the fiscal year for a variety of reasons such as rising commodity prices and supply chain disruptions; along with product development costs-a one time expense. The company took price increases 2 to 3 times to keep up with rising costs. Net profit for the quarter stood at Rs. 4.6 cr vs Rs. 7.3 cr in the same quarter last year (down 38% YoY) and Rs. 7.6 Cr in the preceding quarter (down 40% QoQ). The company delivered an EPS of Rs. 2.03 for Q4FY22
The full year results stood at revenues of Rs. 804 cr, EBITDA of Rs. 66 cr at an EBITDA margin of 8.2% and net income of Rs. 24 cr at a net margin of 3.0%. The company delivered an EPS of Rs. 15.14 for FY22. export revenue for the fiscal comprised of 23.3% of total revenues. The segmental breakup for the year was, 50.3% for Industrial Switchgear, 43.2% for Wires and Cables and 6.5% from the building segment. The management expects Q1FY23 to be a difficult quarter, but is optimistic that things will get better as the commodity prices come down and EBITDA margins to return to above 10%.
OUTLOOK AND VALUATION
Slazer’s performance for the quarter has taken a hit due to the steep rise in raw material costs. The company has taken measures to soften the blow by these external factors by taking price hikes across products. We expect the company to recover on the margin front once the macro scenario improves. We maintain our forecasts and keep our view positive on Salzer Electronics. We maintain our target price of Rs. 271 (@10x FY24E EPS) which is an upside of ~64.4% from today’s price of Rs. 165. We maintain BUY for Salzer Electronics over an invest horizon of 18-24 months.
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