Salzer Electronics is a good investment at Rs 214

The Indian GDP growth for the quarter ended December 2017 stood at 7.2% as against 6.3% in the previous quarter. However, fiscal deficit for the quarter overshot the target by 13.7% in January 2018. The GST collections for January remained stable at Rs 86,318 crore, but they are expected to increase on the back of anti-evasion measures undertaken by the government. While the Indian stock indices performed in line with global peers, the major event during last week was the banking fraud which should increase provisioning pressure on the banking system. The financial performance of public sector banks was worst hit and the banking sector is expected to see more chaos going forward with the government tightening its grip on PSU banks and trying to identify the gaps in the existing banking system. This chaos in the Indian banking system has actually hurt the sentiments of foreign institutional investors and it might induce them to sell Indian stocks in the coming days. The Indian Volatility Index (VIX), which is a gauge for the markets’ short term expectation, has surged by 1.93% to close at 14.07. It will be interesting to watch the VIX direction during the coming week as markets are going to be extremely volatile.

Salzer Electronics was formed in 1985 in collaboration with a German company called Saelzer. It started its journey as a manufacturer of Cam operated rotary switches. Since then, it has evolved from a single product manufacturer to a company that offers complete and customised electrical solutions to its customers. It has four state-of-the-art manufacturing facilities located in Coimbatore. Through various initiatives, Salzer has able to bring in high quality products of international standards and gain leadership position. Be it association with L&T or Plitron from Canada, it has always focused on getting into technologies which are niche and of great value. Due to this, Salzer has come out with products of highest quality. It has also been able to get the preferred vendors’ status with global giants like GE and Schneider. The company has classified its businesses into four different divisions namely, the industrial switchgear business, the copper business of wire and cable business, the building segment business and the energy management business. Financial results for the December quarter 2017 has been very good for Salzer Electronics Ltd. Revenue from operations were at Rs 111 crore for the quarter with exports contributing around 18% of the revenues. The growth was mainly driven by a good pick up in the industrial switchgear business and also higher demand in the agri-cable market. The EBITDA for the same quarter stood at Rs 14 crore compared to Rs 10 crore in the corresponding previous quarter. The reason for this increase was due to better product mix and increased exports to North America. Profit after tax stood at Rs 5.3 crore in Q3 FY’18 as against Rs 3.4 crore in the corresponding previous quarter, showing a growth of around 57%. The Salzer stock quoting at Rs 214 is a very good buy for a 50% price appreciation in the next one year on fundamental basis.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.