Swelect Energy Systems Ltd (Swelect), founded in 1994, is a Chennai based prominent manufacturer of power electronics and enewable energy. Earlier acknowledged as Numeric Power Systems Ltd, Swelect operates primarily across four major segments, namely, Contract Manufacturing, Solar Energy Systems/ Services, foundry and others.
Valuation and view
With renewable energy gaining traction in India, the sector is likely to attract huge investments going forward. Swelect, a renowned name in renewable energy space, is well placed to take benefits of this opportunity. The government’s announcement to raise the solar power capacity to 1, 00,000 MW by 2022 has brought a golden opportunity for the company as Swelect, also a channel partner of MNRE, is likely to get a boost to its revenue-base from the same. Expectations for a consistent growth in exports of solar modules from India also makes us positive for Swelect’s growth prospects, given the company’s ~25% earnings comes from exports.
We initiate BUY rating on Swelect. At CMP of Rs564.0, Swelect is currently trading at an EV/EBITDA of 17.1x FY16E and 12.7x FY17E. Considering the company’s strong fundamentals, we recommend ‘BUY’ with a target price of Rs670.0, which implies potential upside of ~19% to the CMP from one year perspective.
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