Salzer Electronics Q3FY17 Concall Summary

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Merger Talk

Merger of Salzer Magnet Wires with Salzer Electronics Ltd. Products from Salzer Magnet Wires are complimentary in nature so company will benefit through

  • Improvement in operational efficiencies
  • Better price negotiation from raw material suppliers due to eco

 Update on New Facility for 3 Phase dry-type Transformer

  • Facility is finally ready and production has finally started
  • Delay of 6 months in completion of the facility. No cost escalation due to delay. Total investment cost Rs 25.5 Cr
  • Potential market size of Rs 2000 Cr. Demand seen from renewable power industry, railways and defense
  • Company aims to garner 5% market in 3 years
  • Just 2-3 incumbents in India but high competition from overseas players. Difficult to dislodge the incumbents
  • First year revenue seen at Rs.15-18 Cr
  • Market growing at 10-11% past 2-3 years

ESSL Order Update

  • ESSL is a govt joint venture of all companies under power ministry
  • Salzer won a 5-year contract for supply of lighting controls to 3 local bodies- Varanasi, Jharkhand and Jalna
  • Total order size approx. Rs 19 Cr
  • Company’s responsibility is to supply, install and run the project for 5 years

Other New Order wins

  • Export order from Smith Detection
  • Domestic order from KONE, Alstom and GE
  • GE contract details
  •  Company is a preferred GE Energy supplier and has been dealing with GE for last 5-6 years
    • New order came when company was introduced to GE Transportation
    • Order is for selling high power contractors
    • Order size Rs 15 Cr for a period of 10 years
    • Company has also been introduced to GE Transportation USA to supply various parts

Update on New Capacitor Plant

  • Plant is for manufacturing only power capacitors
  • Market size Rs 750 to 1000 Cr with growth of 15% CAGR
  • Highly competitive market
  • Company has advantage to use the existing distribution segment to distribute the new product

Growth Prospect

  • Factors supporting growth
    • New revenue stream through commissioning of 3 phase dry-type transformer facility
    • One time energy management order
    • Price increase in building segment and industrial switchgear segment
  • External market conditions still challenging.
  • Should see double digit growth from next year

Products for Telecom towers and Railways

  • Telecom tower
    • Salzer has installed >200-300 towers in Tamilnadu and Karnataka for Indus towers
    • No further momentum. The company is continuously following up
    • Salzer has also approached American Tower Corporation
  • Railways
    • Product is for unmanned railway gate
    • Project is at RDSO approval level
    • Company got one trial order and the product was installed. Company is awaiting full order
    • Progress expected in 2017

Volume Growth Explanation

  • Industrial switch gear segment
    •  Entire growth is due to volume growth as there was no price increase
  • Cable and wire segment
    • Price increase effect only for 2 months- November and December
    • Volume growth 24%

Clarification on other income

  • Other income increased from Rs 1.5 Cr to Rs 2.4 Cr
  • Increase due to investment profit coming in the Q3 FY17