Salzer Electronics is an attractive growth stock: revenue grew 16.4% and EBITDA 15.1% annually over the last three years
02-06-2016 • About Salzer Electronics (
$SALZER) • By InTwits
Salzer Electronics is a growth stock in Other Elect.Equip./ Prod. industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.
Growth story
Salzer Electronics showed fast growth in the last financial year. Salzer Electronics's revenue surged on 27.5% in FY2016. At the same time the company well managed its profitability and also showed EBITDA growth of 22.3% for the same period.
In the longer period Salzer Electronics showed fast revenue growth of 16.4% from FY2013 to FY2016 annually. EBITDA surged on 15.1% from FY2013 to FY2016 annually.
Salzer Electronics ($SALZER) financials for the last 5 years
| mln. INR | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Revenue | 2,229 | 2,287 | 2,445 | 2,833 | 3,611 |
|---|
| Revenue growth, % | | 2.6% | 6.9% | 15.9% | 27.5% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 288 | 285 | 303 | 356 | 435 |
|---|
| EBITDA growth, % | | -0.8% | 6.0% | 17.6% | 22.3% |
|---|
| EBITDA margin, % | 12.9% | 12.5% | 12.4% | 12.6% | 12.1% |
|---|
| Net Income | 82 | 71 | 84 | 120 | 170 |
|---|
| Net Income margin, % | 3.68% | 3.09% | 3.45% | 4.23% | 4.72% |
|---|
| |
| CAPEX | 152 | 128 | 101 | 231 | 353 |
|---|
| CAPEX/Revenue, % | 6.84% | 5.60% | 4.11% | 8.16% | 9.78% |
|---|
| Debt | 591 | 723 | 827 | 968 | 990 |
|---|
| Cash | 42 | 82 | 26 | 17 | 51 |
|---|
| Net Debt/EBITDA | 1.9x | 2.2x | 2.6x | 2.7x | 2.2x |
|---|
| |
| ROIC, % | 14.6% | 12.7% | 13.0% | 14.6% | 13.8% |
|---|
| ROE, % | 10.1% | 8.1% | 9.0% | 11.7% | 11.2% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. If we look for the longer period the company showed small EBITDA margin decline of 0.400 pp from 12.5% in FY2013 to 12.1% in FY2016.
Salzer Electronics shows attractive ROIC at 13.8% for the last 12 months which assumes stable development model. Three years ago it was a bit lower at 12.7%. For the last three years the average ROIC was 13.8%.
Net Income margin surged on 0.500 pp from 4.20% to 4.70% in FY2016. In the last 3 years the company's Net Income margin surged on 1.60 pp from 3.10% in FY2013 to 4.70% in FY2016.
Salzer Electronics operates at ROE of 11.2%. Average ROE for the last three years was 10.7%.
Capital expenditures (CAPEX)
To this fast growth Salzer Electronics had to invest in CAPEX.In FY2016 Salzer Electronics had CAPEX/Revenue of 9.78%. CAPEX/Revenue surged on 4.18 pp from 5.60% in FY2013 to 9.78% in FY2016. It's average level of CAPEX/Revenue for the last three years was 7.35%.
Leverage (Debt)
Having such a fast growth profile Salzer Electronics keeps medium debt level at 2.2x Net Debt/EBITDA. In the last 3 years Salzer Electronics's leverage decreased slightly on 0.09x from 2.25x in FY2013 to 2.16x in FY2016.
Valuation vs. comparable companies
The company trades at 8.0x EV/EBITDA which is 67.2% lower than 24.5x Other Elect.Equip./ Prod. industry avearge calculated based on 90 companies. The market closed today at 15.0x P/E for Salzer Electronics which is 42.9% lower than 26.3x Other Elect.Equip./ Prod. peer group avearge calculated on the basis of 8 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 42.7x EV/(EBITDA-CAPEX) which is not surprisingly 593% higher than 6.2x Other Elect.Equip./ Prod. industry avearge calculated based on 3 companies.
Peers in Other Elect.Equip./ Prod.
Below we provide Salzer Electronics benchmarking against other companies in Other Elect.Equip./ Prod. industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Indosolar ($INDOSOLAR) | -85.0% | -34.7% | -71.0% | 1,797.0% | |
| B.C. Power Controls ($BCP) | 129.0% | -2.2% | 2.2% | 115.3% | |
| Ece Industries ($ECEIND) | | -30.9% | -14.8% | 58.1% | -12.8% |
| Pitti Laminations ($PITTILAM) | | -23.9% | -19.4% | 35.9% | -8.3% |
| Genus Power Infrastructures ($GENUSPOWER) | | -7.5% | 17.4% | 19.5% | -6.3% |
| |
|---|
| Median (14 companies) | 29.8% | -2.6% | -9.3% | 5.3% | -6.3% |
|---|
| Salzer Electronics ($SALZER) | | 2.6% | 6.9% | 15.9% | 27.5% |
Top companies by Gross margin, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top |
|---|
| Malvica Engineering ($MALVICAE) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| |
|---|
| Median (1 company) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
|---|
Top companies by EBITDA margin, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Fluidomat ($FLUIDOM) | | | | 28.0% | |
| Indosolar ($INDOSOLAR) | -114.4% | -52.7% | -140.0% | 16.3% | |
| Genus Power Infrastructures ($GENUSPOWER) | 14.1% | 11.0% | 13.8% | 13.8% | 14.8% |
| Pitti Laminations ($PITTILAM) | 15.6% | 13.6% | 13.2% | 12.0% | 6.2% |
| Birla Ericsson Optical ($BIRLAERIC) | 2.6% | 9.0% | 12.3% | 11.3% | 10.7% |
| |
|---|
| Median (16 companies) | 8.0% | 8.8% | 8.7% | 7.8% | 8.4% |
|---|
| Salzer Electronics ($SALZER) | 12.9% | 12.5% | 12.4% | 12.6% | 12.1% |
Top companies by CAPEX/Revenue, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Indosolar ($INDOSOLAR) | 311.2% | 148.3% | 42.3% | 26.9% | |
| Diamond Power Infrastructure ($DIAPOWER) | | 6.8% | 8.4% | 8.7% | |
| Birla Ericsson Optical ($BIRLAERIC) | 1.3% | 4.4% | 4.0% | 3.5% | |
| Kirloskar Electric Company ($KECL) | 1.8% | 0.7% | 1.8% | 2.3% | 0.3% |
| Genus Power Infrastructures ($GENUSPOWER) | 3.4% | 3.6% | 2.0% | 2.2% | 3.7% |
| |
|---|
| Median (6 companies) | 2.8% | 4.0% | 3.6% | 2.9% | 2.0% |
|---|
| Salzer Electronics ($SALZER) | 6.8% | 5.6% | 4.1% | 8.2% | 9.8% |
Top companies by ROIC, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Birla Ericsson Optical ($BIRLAERIC) | -2.2% | 8.2% | 27.3% | 16.6% | |
| Genus Power Infrastructures ($GENUSPOWER) | 12.4% | 8.0% | 12.2% | 13.5% | 12.7% |
| Hbl Power Systems ($HBLPOWER) | 10.6% | 10.1% | 4.3% | 6.7% | |
| Indosolar ($INDOSOLAR) | -14.0% | -6.8% | -5.2% | 2.2% | |
| Malvica Engineering ($MALVICAE) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| |
|---|
| Median (23 companies) | 8.9% | 8.1% | 7.0% | 2.2% | 0.0% |
|---|
| Salzer Electronics ($SALZER) | 14.6% | 12.7% | 13.0% | 14.6% | 13.8% |
Top companies by Net Debt / EBITDA
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Diamond Power Infrastructure ($DIAPOWER) | 3.3x | 5.2x | 4.8x | 46.8x | |
| Indosolar ($INDOSOLAR) | | | | 20.3x | |
| Hbl Power Systems ($HBLPOWER) | 4.1x | 4.4x | 6.8x | 4.7x | |
| Genus Power Infrastructures ($GENUSPOWER) | 3.2x | 3.9x | 2.9x | 2.7x | 1.5x |
| Birla Ericsson Optical ($BIRLAERIC) | 14.5x | 2.9x | 1.3x | 1.6x | 0.0x |
| |
|---|
| Median (13 companies) | 3.6x | 4.3x | 2.9x | 0.0x | 0.0x |
|---|
| Salzer Electronics ($SALZER) | 1.9x | 2.2x | 2.6x | 2.7x | 2.2x |
