Elin Electronics IPO Fundamental Analysis (Subscribe)

Elin Electronics Limited IPO Review

Elin Electronics is an electronics manufacturing services (EMS) manufacturer of end-to-end product solutions for major brands of lighting, fans, and small/ kitchen appliances in India; it also manufactures fractional horsepower motor in India. Top 10 customers contributed 81% of revenues during H1FY23.

The Issuer serves both original equipment manufacturer (OEM) and original design manufacturer (ODM) business models.

OEM Model:- It manufactures and supply products on the basis of designs developed by their customers, who then further distribute these products under their own brands.

ODM Model:- The products are conceptualized and designed then marketed to the customers prospective customers under their brands. ODM capabilities were developed with respect to lighting products and small appliances.

Product portfolio in EMS includes

LED lighting, fans and switches- Includes lighting products, ceiling, fresh air and TPW fans, and modular switches and sockets. Its key customers are Signify Innovations and Eveready. Has 7.8% market share. This category contributed 30.41% to revenues in FY22.
Small appliances such as dry and steam irons, toasters, hand blenders, mixer grinders, hair dryer and hair straightener. Its key customers are Philips, Bosch, Faber, Panasonic and Usha. Has market share of 10.7%. This category contributed 23% to revenues in FY22.
Fractional horsepower motors, which is used in mixer grinder, hand blender, wet grinder, chimney, air conditioner, heat convector, TPW fans etc. Its key customers are Havells, Bosch, Faber, Panasonic, Preethi. Fractional horsepower motors are sold in their own brand name "Elin". Has market share of 12%. This category contributed 21.66% to revenues in FY22.
Miscellaneous products- Terminal block for air conditioners, stainless steel blade for mixer grinders, die casting, radio sets. It also manufactures medical diagnostic cartridges for use in diagnostic devices, and plastic moulded and sheet metal parts and components, largely for customers in the auto ancillary and consumer durables sectors. This category contributed 19.31% to revenues in FY22.

The Issuer has three manufacturing facilities which are located in Ghaziabad (Uttar Pradesh), Baddi (Himachal Pradesh) and Verna (Goa). As on October 31, 2022, the large scale setup included 157 units of molding machines and 104 units of power presses.

Financial Review

Elin posted total revenues of Rs 604.74 crore for H1FY23 and PAT of Rs 20.67 crore for the same period. For FY22, income from operations increased by 27% to Rs 1094.67 crore from Rs 864.90 crore in FY21. The Issuer earned PAT of Rs 39.15 crore as compared to Rs 34.86 crore in FY21 and Rs 27.49 crore in FY20.

EBITDA margins have remained between 7-8% in the last three fiscals as can be seen in the table. Net margins have been in the range of 3-4% during the last three fiscals.

Return on net worth has been 6.46% (H1FY23), 12.92% (FY22) respectively and Debt to Equity is 0.32x of equity as at the end of FY22.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Financials and Ratios				Amount in INR Crores
	H1FY23	FY22	FY 21	FY 20
Total revenue	604.74	1094.67	864.9	786.37
Revenue from operations	604.46	1093.75	862.38	785.58
PAT	20.67	39.15	34.86	27.49
EBITDA	43.36	79.93	69.00	56.24
Total Assets	589.24	532.61	508.29	387.61
Net Cash from operating activities	31.43	51.28	-33.64	76.81
EBITDA Margin	7.17%	7.31%	8.00%	7.16%
Net Margin	3.42%	3.58%	4.04%	3.50%

Valuation and Peer Comparison

The IPO is priced at 24.41x with annualized EPS of 10.12 for H1FY23 calculated at the upper price band of Rs 247. P/E is 25.76x when calculated with EPS of 9.59 for FY22. It's listed peers, Dixon traded at P/E 140.44x and Amber Enterprises at 62.82x. Though, please note that the comparable peers are much bigger in terms of their operations. The Issuer enjoys higher profitability margins when compared with its peers because of its inhouse manufacturing of components. The current valuations appear to be reasonable. Elin's P/BV is 8.74 as at the end of FY22 while Dixon has P/BV of 25.67 and Amber's P/BV is 6.85 as at the end of FY22.

Table 2 - Listed Peer Comparison
Listed Peer Comparison
Particulars	Dixon	Amber	Elin
Face Value	2	10	5
Revenue from operations (FY22 INR Crores)	10700.89	4239.63	1094.67
EBITDA margin	3.58%	7.34%	7.31%
PAT margin	1.78%	2.65%	3.58%
P/E	140.44	62.82	NA
EPS	32.31	32.41	9.59
NAV	168.06	526.17	74.21
Return on net worth	19.08%	6.28%	12.92%
Debt to Equity	0.28	0.41	0.32
CMP(on 16th Dec)	4061.05	2036.90	NA

Issue Details

Elin IPO (Rs 475 crore) opens on 20th Dec- 22nd Dec 2022 with a price band of 234-247 per share. Retail quota is 35% and investors can apply with minimum bid of 60 shares (Rs 14,820). Maximum lot size is 780 shares (Rs 1,92,660).The Issue is both fresh Issue (Rs 175 crore) and an OFS (Rs 300 crore) by promoter shareholders (Rs 300 crore). Fresh Issue proceeds would be utilized towards repayment of debt (Rs 40.81crore) and funding capex (Rs 37.59 crore) The Promoter Group currently holds 53.98% of shareholding of the Company and will hold 32.93% post issue. The Issue is expected to list on 30th Dec 2022.

Conclusion and Investment Strategy

The Issuer manufactures and assembles a wide array of products and provides end-to-end product solutions. It is associated with branded clients. The topline of the Issuer is growing consistently. Valuations are cheaper when compared to the peers, however considering it's scale of operations and business model, valuations appear to be reasonable and fair. However, it should also be considered that promoter shareholding reduces to 32% from 54%. Considering all these factors, one shall subscribe to the Issue.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 15th Dec 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.