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Swelect Energy Systems Limited ‘Buy,
Shareholding Pattern Particulars Sep’17 Jun’17 Mar'17 Promoter 62.9% 63.5% 64.1% FPIs - - - Insti. 0.8% 1.6% 1.8% N. Insti. 36.3% 34.9% 34.1%
Relative Capital Market Strength
• Swelect Energy Systems Limited is engaged in the business of manufacturing and trading of solar power projects, solar and wind power generation, contract manufacturing services, installation and maintenance services, sale of solar photovoltaic inverters and energy efficient lighting systems.
• The Company has three segments: Contract manufacturing-UPS Systems, Solar Energy Systems/Services and Others. Its products portfolio includes Solar PV modules, Solar Charge Controllers, Solar Inverters, Solar On Grid Inverters, Grid Interactive Inverter Systems, Roof Top and Utility Scale Projects, Module Mounting Structures and Energy Efficient Lighting.
• Its solutions include compact solar home system, special purpose vehicle (SPV) for base transceiver station (BTS) telecom, SPV for captive consumption, solar hybrid uninterruptible power supply (UPS), engineering, procurement, and construction (EPC) and operations and maintenance (O&M) for solar farms, and green building solution.
Swelect Energy Systems Limited
1
Jan 11, 2018
Rating Matrix
CMP Rs. 503.7
Rating Buy
Holding Period 12-18 Months Current Level Investment
Upside Potential 25%
52 week H/L Rs. 633.0/326.8
Face value Rs. 10
Sector Heavy Electrical Equipments
Category Small Cap
F&O Stock N/A
Source: Choice Research/ Annual reports; Financial data-Ace equity
Financial Snapshot:
Company Synopsis: • The company’s latest addition of roll forming machines in its Salem Plant, has
enhanced its ability to offer state of the art Module Mounting Systems (MMS) with an output of 10 MW per month. This expansion and capacity addition has given them a unique advantage of near total backward integration in the manufacturing of BoS (Balance of System).
• With the amalgamation of HHV ST into SWELECT and the expansion of the Salem Plant the company has earned a greater market visibility as an OEM player in the industry.
• Earlier this year the company the company has built the Largest Floating Solar power plant for NTPC. This plant is located in Kayankulam, Kerala on the back waters having a capacity of 100Kwp. The plant was indigenously developed as a part of ‘Make In India’ initiative at Rajiv Gandhi Combined Cycle Power Plant (RGCCPP) in Kerala’s Kayamkulam district.
• They have recently designed, manufactured, installed and commissioned a 3.5 MW Solar Power plant for a major and leading Dairy products company in Tamil Nadu. 1 MW SPV roof top installation was designed, manufactured, installed and commissioned on one of Chennai’s largest commercial rooftop for a major IT Park. 150 Kw SPV Car Port was recently designed, manufactured, installed and commissioned for Chennai Metro Rail. 10 MW SPV Power Plant in Kunigal, Karnataka is under design and is expected to start construction very soon.
Outlook: • Growth in solar power installed capacity is expected to surpass the installed
capacity of wind power, reaching 100 GW by 2022 from its current levels of 14.77 GW as of November 2017. Three new solar parks have been approved in 2017-18 with a total capacity of 1,523 MW.
• The Government of India is also planning ‘Rent a Roof’ policy to push adoption of solar energy while giving the households a chance to become energy independent. They have also signed a US$ 100 million agreement with the World Bank for ‘Shared Infrastructure for Solar Parks Project’.
• On the back of a strong cliental and a strong execution capabilities coupled with the government’s push towards adopting renewable energy is expected to benefit the company in the coming years.
Valuation: On the valuation front, at CMP Rs. 503.7 , the company is trading at a P/E multiple of 23.5x as compared to the peer average of 20.1x, whereas the EV/EBITDA multiple is 19.4x as compared to the peer average of 15.6x. After considering all these factors and high probability of strong growth in the future we recommend a “Buy” rating on this stock.
Particular (Rs. Mn)
Q2FY18 Q2FY17 Change (YoY)
Total Revenue 423.4 279.8 51.4%
EBITDA (Excl OI) -2.5 7.2 -135.1%
EBITDA Margin (%)
-0.6% 2.6% (320) Bps
PAT 36.3 77.1 -52.9%
NPM (%) 8.6% 27.6% (1900) Bps
Quarterly Snapshot: Particulars (Rs. Mn) FY15 FY16 FY17 FY18E FY19E Revenue from operations 2,218.5 2,761.9 2,413.0 - - EBITDA (Excl OI) 74.2 232.2 240.2 - - EBITDA Margin (%) 3.3% 8.4% 10.0% - - PAT -3.8 165.6 216.3 - - NPM (%) -0.2% 6.0% 9.0% - - ROE (%) 5.1% 9.6% 11.6% - - P/E - 23.0 23.5 - - EPS -0.37 16.38 21.4 - - EV/EBITDA - 16.0 19.4 - - P/BV 0.8 0.6 0.5 - -
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Swelect Energy Systems Lts. Sensex
Investment in Subsidiary
Particular Amount (Rs. Mn)
Swelect Solar Energy Private Limited 44.4
Swelect Energy Systems Pte. Limited 437.3
Amex Alloys Private Limited 163.6 Swelect Green Energy Solutions Private Limited
13.5
SWELECT Inc 6.9 Swelect Power Systems Private Limited
0.1
Unquoted Investment in Debt Instruments Swelect Green Energy Solutions Private Limited 630.0
2 Source: Choice Research/ Annual reports; Financial data-Ace equity
Peer Comparison:
Financial Snapshot: Particulars (Rs. Mn) FY13 FY14 FY15 FY16 FY17 Revenue from operations 1764.7 1764.5 2218.5 2761.9 2413.0 Gr (%) -70.6% 0.0% 25.7% 24.5% -12.6% EBITDA (Excl OI) 19.9 61.7 74.2 232.2 240.2 EBITDA Margin (%) 1.1% 3.5% 3.3% 8.4% 10.0% PAT -1085.2 161.8 -3.8 165.6 216.3 NPM (%) -61.5% 9.2% -0.2% 6.0% 9.0% Net Worth 6652.3 6784.2 6780.0 6820.3 7002.3 Total Assets 8046.8 8786.2 9010.0 8709.5 9005.7 Total Debt 447.5 1011.5 1267.6 1123.1 998.3 Cash flow from Operations -355.1 -439.8 -47.7 35.0 286.5 D/E (x) 14.9 6.7 5.3 6.1 7.0 Current Ratio (x) 4.72 4.75 5.37 3.83 3.5 Profitablity ratios (%) ROCE (%) -0.8% -0.5% -1.2% 0.8% 0.6% ROE (%) -16.3% 2.4% -0.1% 2.4% 3.1% ROA (%) -13.5% 1.8% 0.0% 1.9% 2.4% Efficiency ratios (x) Receivable days 153.0 75.3 79.0 81.3 105.3 Inventory days 138.9 65.8 57.2 49.6 78.2 Payable days 83.9 85.8 73.1 61.8 92.2
Companies CMP ROE (%) 12MR(%) M. Cap
(Rs. Mn) EPS BVPS EBIDTA
Margin (%) NPM (%)
Surana Solar Ltd. 20.3 6.1% 90.1 998.9 0.5 8.6 8.7% 2.7% Swelect Energy Systems Ltd. 503.7 3.1% -11.4 5090.4 21.4 692.9 10.0% 9.0% Ujaas Energy Ltd. 27.2 16.1% 53.5 5430.0 1.8 11.4 15.2% 7.8% Indosolar Ltd. 12.6 19.6% -42.8 4613.8 -1.6 -8.1 16.4% -13.2% Websol Energy Systems Ltd. 127.4 133.4% 288.0 2799.4 36.1 27.1 9.7% 26.8%
Average 138.2 35.7% 75.5 3786.5 11.7 146.4 12.0% 6.6%
Companies P/E (x) P/Bv (x) P/Sales(x
) EV/EBIDTA
(x) D/E PAT(Rs.
Mn) EBIDTA(Rs.
Mn) Sales (Rs. Mn)
Surana Solar Ltd. 38.7 2.4 1.1 15.1 0.7 25.8 82.3 949.1 Swelect Energy Systems Ltd. 23.5 0.7 2.1 19.4 0.2 216.3 240.2 2413.0 Ujaas Energy Ltd. 14.7 2.4 1.1 8.7 0.5 368.6 720.3 4744.4 Indosolar Ltd. - -1.6 1.0 19.1 -3.2 -581.9 726.0 4423.1 Websol Energy Systems Ltd. 3.5 4.7 0.9 15.5 2.8 793.5 286.0 2960.8
Average 20.1 1.7 1.3 15.6 0.2 164.5 410.9 3098.1
Choice’s Rating Rationale The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months. Stocks between these bands are classified as Neutral. Don’t be an Investor by Force, Be an investor by CHOICE
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suggested stock.
Fundamental Research Team
Name Designation Email id Contact No.
Sunder Sanmukhani Head-Fundamental Research [email protected] 022 - 6707 9910
Satish Kumar Research Analyst [email protected] 022 - 6707 9913
Rajnath Yadav Research Analyst [email protected] 022 - 6707 9912
Aman Lamba Research Associate [email protected] 022 - 67079917
Devanshi Shah Research Associate [email protected] 022 - 67079916
Shrey Gandhi Research Associate [email protected] 022 - 67079914
Dhvanit Wadia Research Associate [email protected] 022 - 67079915
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OUR TEAM
Disclaimer
This is solely for information of clients of Choice Broking and does not construe to be an investment advice. It is also not intended as an offer or solicitation for the purchase and sale of any financial instruments. Any action taken by you on the basis of the information contained herein is your responsibility alone and Choice Broking its subsidiaries or its employees or associates will not be liable in any manner for the consequences of such action taken by you. We have exercised due diligence in checking the correctness and authenticity of the information contained in this recommendation, but Choice Broking or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this recommendation or any action taken on basis of this information. This report is based on the fundamental analysis with a view to forecast future price. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Choice Broking has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Choice Broking makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice. The information and any disclosures provided herein are in summary form and have been prepared for informational purposes. The recommendations and suggested price levels are intended purely for stock market investment purposes. The recommendations are valid for the day of the report and will remain valid till the target period. The information and any disclosures provided herein may be considered confidential. Any use, distribution, modification, copying, forwarding or disclosure by any person is strictly prohibited. The information and any disclosures provided herein do not constitute a solicitation or offer to purchase or sell any security or other financial product or instrument. The current performance may be unaudited. Past performance does not guarantee future returns. There can be no assurance that investments will achieve any targeted rates of return, and there is no guarantee against the loss of your entire investment.
POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement – • Analyst interest of the stock /Instrument(s): - No. • Firm interest of the stock / Instrument (s): - No.
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