Salasar Techno Engineering Ltd (STEL) founded in 2006, as a tower manufacturer, has rapidly expanded into a leading Steel structure manufacturer and EPC infrastructure company, offering services across the telecom, energy, and railway verticals. All these three verticals are experiencing significant traction given the following:
- Telecom: Trends like the 5G rollout, demand for telecom towers, infrastructure development, etc. Indian government is backing telecom infrastructure with plans to add 8 lac new mobile towers over the next 2 years.
- Railways: Government investment in infrastructure, modernization, and high-speed rail projects. India is making strides toward complete electrification of its rail network, with a dedicated budget of Rs 6,500 crore allocated for 2024-25.
- Energy: Renewable energy adoption, power transmission projects, and growth in infrastructure. The country has set an enhanced target at the COP26 of 500 GW of non-fossil fuel-based energy by 2030.
Based on the current order book of INR 2500 cr, we expect STEL’s revenue/EBITDA/Net profit to grow by 20%/10%/5% to INR 2088cr/INR 208cr/ INR 87cr over FY24-27E. We expect the EBITDA/Net margins to remain flat at 10%/4.5%.
The company’s ROE is currently at 12% and is projected to improve by 100 bps by FY27. ROIC stands at 14% and is expected to stay steady through FY27. The debt to equity ratio is at 0.8 and is anticipated to remain stable.
STEL operates three state-of-the-art manufacturing facilities with a combined production capacity of 2,11,000 MTPA. A new facility of 96000 MTPA has been set up at Harpur, UP. The next phase of capacity expansion is expected towards the end of FY26 at an outlay of INR 60 cr.
At the CMP of INR 17 per share (35X FY27 P/E) we believe that the stock is fully valued.