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Pioneers in the manufacturing of EV chargers KEY CHANGES: TARGET ….

Exicom Tele-Systems Ltd. (ETSL), incorporated in 1994, is a power management solutions provider which specialises in DC power systems, Li-ion-based energy storage solutions, and electric vehicle (EV) charging. It has a market share of 16% in DC power systems and 10% in Li-ion battery applications for the telecom sector market, and a market share of 60% and 25% in the residential and public charging segments, respectively. They operate three manufacturing facilities in India, comprising Solan Facility situated at Solan, Himachal Pradesh, and Gurugram Facility I and Gurugram Facility II situated at Gurugram, Haryana.

• India's telecommunications power systems market is projected to grow from ?15 billion in FY23 to ?24 billion in FY28 at an 8.5% CAGR. Energy storage solutions are also expected to grow from ?19.5 billion in FY23 to ?36.1 billion in FY28.

• CRISIL Market Intelligence & Analytics predicts EV charging market value to grow to ~?13-14 billion in FY24 due to doubled EV sales and a 50% increase in public charging stations.

• The company has undertaken a pre-IPO placement of 52.59 lakh equity shares at an issue price of ?135 per share, aggregating to ?71cr, bought by investors like Rare Enterprise, Belgrave Investment Fund etc.

• The total order received from the electric vehicle charging solutions business grew to ?133.9cr in H1FY24 from ?85.6cr in H1FY23. Additionally, orders from the critical power business grew 42% YoY to ?603cr at the end of H1FY24.

• They provide EV chargers to automotive OEMs like Mahindra & Mahindra Limited, MG Motors Ltd., and JBM Ltd., as well as charge point operators such as Reliance BP Mobility Ltd. (JioBP). They also serve telecommunications companies like Jio Infocom Ltd., and tower companies like Indus Tower.

• ETSL’s revenue grew from ?512.9cr in FY21 to ? 707.9cr in FY23, representing a CAGR of 17.5%, while its PAT grew from ?12.7cr in FY21 to ?31cr in FY23 at a CAGR of 56.5%. In FY23, the company’s key performance indicators of ROE stood at 13.4% and ROCE at 13.7%.

• In H1FY24, revenue from operations more than doubled to ?455cr and net profit of ?27.4cr as against a loss a year ago.

• At the upper price band of Rs.142, ETSL is available at a P/E of 31x (FY24E Annualised), which appears to be fully priced. Considering the EV sector's robust outlook, Company’s first mover advantage in both power management solutions and EV charging infrastructure, improving financial and operational track record and future expansion plans, we assign a “Subscribe” rating on a medium to long term basis

Purpose of IPO

The IPO consists of fresh issue totalling to ?329cr and offer for sale amounting to ?100cr.The proceeds of the fresh issue will be used towards setting up production lines at the manufacturing facility in Telangana(?145.8cr), investment in R&D as well as product development(?40cr), and payment of debt (?50.3cr)to support working capital requirements (?69cr) and for general corporate purposes.

Key Risks

• Slowdown or decline in the adoption of EVs could negatively impact the company’s profitability and growth prospects.

• The company’s critical power solutions business depends heavily on its top five customers, who contribute a significant portion of revenue (51% of revenue in FY23).

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