Salasar Techno Engineering Ltd
(BSE: 540642) (CMP: Rs.289.20) (FV: Rs.10) BY Rahul Sharma
Incorporated in June 2006 and promoted by Mr. Gyanendra Agarwal, Salasar Techno Engineering Ltd (SALASAR) is engaged in the manufacture of customized steel fabrication and infrastructure solutions (EPC) for Telecommunication Towers, Transmission Towers & Substation Structures, Solar Module Mounting Structures and Steel Utility Poles. Mr. Alok Kumar is the Chairman & Managing Director of the company. SALASAR provides 360° solutions by carrying out engineering, designing, fabrication, galvanization and deployment. Its key products include Telecommunication Towers, Power Transmission Line Towers, Smart Lighting Poles, Monopoles, Guard Rails, Sub-station Structures, Solar Module Mounting Structures and Customized Galvanized and Non-galvanized steel structures. It also provides a host of services that includes complete engineering, procurement and control for projects such as Rural Electrification, Power Transmission Lines and Solar Power Plants. SALASAR has 3 (including 1 subsidiary unit) state-of-the-art manufacturing facilities in Uttar Pradesh with a cumulative area of ~1,30,000 square yards that are well-equipped with the latest machineries, heavy overhead cranes, multiple hydra equipment and other handling equipments to
facilitate seamless manufacturing process and easy logistics. Its average monthly production capacity stands at 8,000 TPA. It recently enhanced its installed manufacturing/fabrication capacity from 50,000 TPA to 1,00,000 TPA with the installation of the new Galvanizing Plant at its wholly owned subsidiary – Salasar Stainless Ltd. SALASAR has collaborated with Ramboll a Danish Company and a market leader in innovative design and supply of tower solutions, for Structural Design of Tubular Telecom Towers. SALASAR has consistently performed well with over 95% of its FY17 revenues from the Power and Telecom sector. It will benefit from the burgeoning opportunity in the Telecom, Steel and Power sectors on the back of master reforms and government initiatives like ‘Power for All by 2019’, ‘Housing for All’, ‘Smart Cities’, ‘Affordable Housing’, etc. SALASAR is a leading player in the Telecom Tower business and has supplied over 20,000 towers of various designs of Angular, Tubular and Hybrid Ground Based Towers (GBT) and Roof Top Towers (RTT) since inception. It has received the ‘Approved Vendor’ status from PGCIL along with the first order for Transmission Line Monopoles. It has also received its first order from a Central Organization for Railway Track Electrification worth Rs.49.5 crore. Over the last 5 years, SALASAR’s total revenue/ EBITDA/ PAT have grown at 18%/ 23%/ 40% CAGR to Rs.4162 mn/ Rs.391 mn/ Rs.187 mn in FY17. During Q1FY18, its total revenue grew 51% to Rs.1251 mn from Rs.828 mn in Q1FY17, EBITDA soared 62% to Rs.123 mn from Rs.76 mn in Q1FY17 and PAT soared 79% to Rs.61 mn from Rs.34 mn in Q1FY17. SALASAR’s FY17 performance was also commendable. Its EBITDA, PAT, ROE and ROA margins have constantly improved. Its Debt/Equity ratio is also low. With the additional 50,000 TPA capacity of the Galvanizing plant, SALASAR plans to expand its product portfolio by upgrading its existing products and introducing new ones to maintain its market share and engage new customers. At the CMP of Rs.289.20, the stock trades at a P/E of 13.4x on its EPS (TTM) of Rs.21.55. The stock is available at a discount compared to the Industry P/E of 27.4x, S&P BSE Sensex Mid-Cap P/E of 40.1x and Nifty Mid-Cap 150 P/E of 49.2x. Therefore, we have a Buy on the stock with a long-term price target of Rs.650.