The company has done well over the past two years thanks to the strong bounce back in demand after the pandemic. However, its valuation seems to fully capture the growth momentum. Given this and lower promoter group holding make the IPO more suitable for long term investors with high risk appetite.
Business
Incorporated in 1982, Elin manufactures and assembles a wide array of products including LED lighting, fans and switches, small appliances, fractional horsepower motors, medical diagnostic cartridges, which together account for over 90% of the revenue. Its clients include Signify, which contributes 84% to LED lighting fans and switches revenue, Philips which forms 84% of small appliances revenue and Havells, which forms 56% of fractional horsepower motors revenue. The company also has other brands such as Crompton, Usha, Panasonic, Bosch and IFB as clients.
Financials
In FY22, revenue grew by 27% year-on- year to Rs 1,094 crore while net profit rose by 14% to Rs 39 crore. The company will use Rs 88 crore from IPO proceeds to reduce debt from Rs 100 crore in FY22. The return on equity (RoE) was 12-14% over the past three years. In the first half of FY23, revenue and net profit were Rs 604 crore and Rs 21 crore, respectively.
Valuations
The company demands a trailing price-earnings (P/E) multiple of up to 31. Elin’s business is capital intensive with low margin and high client concentration risk. It has no like-to-like peer. Amber Enterprises, another electronics manufacturer trades at a P/E of over 50. Amber’s stock is down 40% year-to-date.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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