Elin Electronics failed to catch the eye of investors on its debut as the stock fell nearly 7 percent on December 30. But don't panic. Experts have advised holding the stock for the long-term given the immense potential in the electronics manufacturing services (EMS) industry going ahead.
The stock opened at Rs 244 on the NSE, down 1.2 percent from its issue price of Rs 247.
As the day progressed, it corrected further and traded 6.66 percent down at Rs 230.55 (at the time of writing this article). With healthy financials (albeit slight volatility in the operating profit margin), it is definitely an attractive valuation compared to its peers Dixon Technologies and Amber Enterprises.
But the subdued equity market environment, and recent disappointing listings of several companies, may have impacted Elin’s debut performance, experts said.
Founded in 1969, Elin Electronics is one of the oldest manufacturers of products for major light, fan, and small kitchen appliances brands in India. Also, it is one of the largest manufacturers of fractional horsepower motors.
The company operates as both an original equipment manufacturer (OEM) and an original design manufacturer (ODM), with three manufacturing facilities in Ghaziabad (Uttar Pradesh), Baddi (Himachal Pradesh), and Verna (Goa).
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It started its journey about five decades back by manufacturing the tape-deck mechanism for cassette players, and graduated from there into the product line it has today.
"Elin seems attractively valued at a P/E of 31.3X its FY22 earnings, and 29.7X FY23 earnings, compared to Dixon Technologies and Amber Enterprises, which are trading at a P/E of 140.4X and 62.8X FY23 earnings, respectively," said Narendra Solanki, Head, Equity Research, Anand Rathi Shares and Stock Brokers. Solanki advised holding on to the stock for its long-term growth prospects.
Over FY20-FY22, Elin’s revenues and PAT (profit after tax) grew at a CAGR of 18 and 19 percent, respectively. on the back of a robust industry outlook. Its EBITDA (earnings before interest, tax, depreciation, and amortisation) also grew at a CAGR of 19 percent in the same period.
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Its return on equity stood at 12.9 percent in FY22 against 13.3 percent in FY21 and 12.1 percent in FY20, while return on capital employed came in at 15.8 percent against 14.9 percent and 15.4 percent in the same period.
Its addressable market in the key product segments where it’s present is likely to grow to Rs 41,600 crore by FY26 (29 percent CAGR).
Its key customers are Signify Innovations, Eveready, Philips, Bosch, Faber, Panasonic, Usha, Havells, Groupe SEB (Maharaja brand), Molbio Diagnostics, Denso, and IFB. Elin has built strong relationships with its marquee clients over the years.
Manish Chowdhury, Head of Research at Stoxbox, also feels that investors should hold on to their shares with a mid-to-long term perspective as he believed there was immense potential in the EMS industry in India.
Elin Electronics raised Rs 475 crore via a public issue, which will be used to repay certain borrowings, and expand existing facilities at Ghaziabad and Verna.
Meanwhile, the benchmark indices remained range-bound after falling nearly 4 percent from record high levels on December 1. All the recent listings in the current month, including KFin Technologies, Uniparts India, Landmark Cars, Abans Holdings, and Sula Vineyards closed the listing day at a discount to the issue price, and are still trading below it.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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