About Salasar Techno Engineering
Salasar Techno Engineering Limited (“Salasar Techno” or the “Company) provides customized steel fabrication and infrastructure solutions in India. With almost 10 years of experience, the Company provides telecommunication towers, transmission towers and substation structures and solar module mounting structures. The Company has Ramboll’s (a leading company from Denmark) technical expertise and support in structural design of tubular telecom towers.
In FY 2018, the Company received approved vendor status from Power Grid Corporation. In addition, the Company received 1st order for transmission lines monopoles and order from central organization for railway for track electrification worth Rs. 49.50 Cr.
WHAT’S DRIVING THE STOCK
Strong Financial Position
| Particulars | 2013 | 2014 | 2015 | 2016 | 2017 |
| Total Income from Operations | 212.79 | 292.37 | 330.11 | 310.00 | 384.29 |
| Expenses | 195.90 | 269.24 | 302.14 | 283.19 | 345.71 |
| EBITDA | 16.90 | 23.13 | 27.97 | 26.81 | 38.58 |
| Depreciation | 1.69 | 1.95 | 5.95 | 3.09 | 3.29 |
| Finance Costs | 8.21 | 11.07 | 10.03 | 8.75 | 7.27 |
| Other income | 0.11 | 0.20 | 0.25 | 0.19 | 0.35 |
| Exceptional items | 0.00 | 0.00 | 2.09 | 2.83 | (0.48) |
| PBT | 7.10 | 10.31 | 10.15 | 12.34 | 28.86 |
| Tax | 2.17 | 4.05 | 3.83 | 5.40 | 10.10 |
| Extraordinary Items | – | – | 0.06 | – | – |
| PAT (before Minority Interest and share of Associates) | 4.93 | 6.26 | 6.27 | 6.94 | 18.76 |
| EPS | 5.06 | 6.42 | 6.36 | 13.94 | 18.84 |
Profitability Ratio
| Particulars | 2013 | 2014 | 2015 | 2016 | 2017 |
| EBITDA Margin (%) | 7.94% | 7.91% | 8.47% | 8.65% | 10.04% |
| Net Profit Margin (%) | 2.32% | 2.14% | 1.90% | 2.24% | 4.88% |
Balance Sheet Figures
| Particulars | 2013 | 2014 | 2015 | 2016 | 2017 |
| Share Capital | 4.88 | 4.88 | 4.98 | 4.98 | 9.96 |
| Reserves & Surplus | 45.79 | 52.04 | 59.48 | 72.91 | 86.67 |
| Net worth | 50.67 | 56.91 | 64.46 | 77.89 | 96.63 |
| Long Term Borrowings | 17.80 | 19.11 | 13.82 | 11.30 | 7.05 |
| Current liabilities | 87.65 | 126.83 | 105.74 | 84.54 | 138.98 |
| Other long term liabilities and provisions | 0.48 | 0.29 | 0.39 | 0.52 | 10.75 |
| Deferred tax liabilities | 2.51 | 3.59 | 3.229 | 3.71 | 3.71 |
| Total Liabilities | 159.10 | 206.73 | 187.64 | 177.96 | 257.12 |
| Particulars | 2013 | 2014 | 2015 | 2016 | 2017 |
| Fixed Assets | 38.22 | 54.34 | 53.77 | 55.03 | 61.58 |
| Noncurrent Investments | – | – | – | – | – |
| Current assets | 120.03 | 151.65 | 132.99 | 121.96 | 189.70 |
| Long term advances and other noncurrent assets | 0.83 | 0.72 | 0.86 | 0.95 | 5.84 |
| Goodwill | 0.03 | 0.03 | 0.03 | 0.02 | – |
| Total assets | 159.10 | 206.73 | 187.64 | 177.96 | 257.12 |
Efficiency Ratio
| Particulars | 2013 | 2014 | 2015 | 2016 | 2017 |
| Return on Capital Employed | 24.68% | 30.42% | 35.73% | 30.06% | 37.21% |
| Return on Equity | 9.74% | 11.00% | 9.72% | 8.91% | 19.41% |
Diversified Product Portfolio
Salasar has a strong product portfolio enabling it to cater to its various marquee customers present across diverse industries such as telecom, engineering, infrastructure etc. The Company’s diverse product portfolio includes:
INDUSTRY PROSPECTS
Strong Prospects for Telecom Industry
- Total mobile services market revenue in India is expected to touch U.S. $ 37 billion in 2017. Indian telecommunication services market will grow by 10.3 % Y-o-Y to reach US$ 103.9 billion by 2020
- Leading player in virtual world by having 700 million internet users of 4.7 billion global users
- The Government of India also plans to auction the 5G spectrum
- It is expected that data consumption per person will increase to 200 GB from current 2GB per month by 2020
Strong Prospects for Power Industry
- India’s Power Transmission networks constitute the vital part of the entire power value chain. The growth of power sector is contingent to development of a robust and a reliable transmission network
- Ministry of Power has set target of 1,229.4 billion units (BU) of electricity to be generated in FY 2018.
- Annual growth rate in renewable energy generation has been estimated to be 27% and 18% for conventional energy
- Indian power sector has investment potential of Rs 15 trillion (US$ 225 billion) in next 4–5 years
Robust Order Book
The Company has executed various projects over the past among few major projects were for Rajasthan Rajya Vidyut Prasaran Nigam Ltd, NTPC Ltd (Raj), Today Green Energy Pvt Ltd, Bharti Infratel Ltd, Reliance Jio Infocomm Ltd, Zamil Infra Pvt Ltd, Indus Towers Ltd, Welspun Energy Pvt Ltd and ATC Telecom Infrastructure Pvt Ltd.
Execution of projects of U. P. Power Transmission Corporation Ltd, Acme Cleantech Solution Pvt Ltd, Bharti Hexacom Ltd, Renew Solar Energy Pvt Ltd, Mahindra Susten Pvt. Ltd, Reliance Jio Infocomm Ltd, Prayatna Developers Pvt Ltd, Paschimanchal Vidyut Vitran Nigam Ltd, PES Solar Pvt Ltd and many more are under process.
On 24th January, 2018, the Company received new additional order to supply 1300 telecom towers worth Rs. 94 Cr. from Reliance Jio. With this order, the total order book now stands at Rs. 425 Cr.
Capacity Expansion
Recently, Salasar Techno’s wholly owned subsidiary Salasar Stainless Ltd has installed Galvanizing Plant of 50,000 MT which has increased its installed galvanizing capacity to 1,00,000 MT. Apart from this, the Company continues to expand its product portfolio by upgrading existing products and introducing new ones to maintain market share and engage new customers. Focusing on new segment like Railways and Power could also help utilise the new capacity better.
WHAT’S DRAGGING THE STOCK
Dependent on Government Projects | Transmission Business
Transmission business is highly dependent on projects awarded or funded by the Government or State Governments. Salasar Techno has various government clients and any slowdown in spending by the government could result in lower growth and profitability.
Client Concentration
The Company’s top five clients contribute 55.1% of revenues as on 31st March, 2017 and this ratio was 64.5% and 63.1% as on 31st March 2016 and 31st March 2015 respectively. Any decline in quality standards, growing competition and change in customer demand may result in exit by any one or more of these big clients resulting in impact on revenue and profitability.
Competition
| Company Name | Price | Market Cap | Revenue | Net Profit | P/E |
| KEC International | 418.25 | 10,752.72 | 8,584.40 | 304.78 | 26.26 |
| Kalpataru Power | 475.85 | 7,302.42 | 7,512.47 | 186.46 | 23.80 |
| Skipper | 235.55 | 2,412.11 | 1,702.96 | 111.5 | 19.89 |
| Salasar Techno | 352.35 | 468.11 | 384.29 | 18.76 | 17.13 |
About Author
Won’t the current consolidation in the telecom sector impact the tower players and indirectly will impact salasar techno in the telecom towers division. as it still contributes 50% of revenue.
It will… positively.