Elin Electronics corrects 7% on its launch, but the stock remains stable
Experts say that investors should hold their shares for the medium to long term because the EMS business in India has enormous potential.
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Elin Electronics failed to capture the attention of investors on its launch, with the stock falling roughly 7% on December 30. But don't be alarmed. Given the huge potential in the electronics manufacturing services (EMS) market in the future, experts advise owning the stock for the long term.
On the NSE, the stock began at Rs 244, down 1.2 percent from its issue price of Rs 247.
As the day went, it fell more, closing 6.66 percent lower at Rs 230.55. (at the time of writing this article). With respectable financials (despite modest volatility in the operating profit margin), it is unquestionably a more appealing price than Dixon Technologies and Amber Enterprises.
Experts believe Elin's debut performance was hampered by the weak equities market environment and previous poor listings of other firms.
Elin Electronics, founded in 1969, is one of India's oldest makers of products for major light, fan, and small kitchen appliance brands. It is also one of the major producers of fractional horsepower motors.
With three production sites in Ghaziabad (Uttar Pradesh), Baddi (Himachal Pradesh), and Verna (Himachal Pradesh), the company operates as both an original equipment manufacturer (OEM) and an original design manufacturer (ODM) (Goa).
It began its adventure around five decades ago by producing the tape-deck mechanism for cassette players, and has since progressed to the product line it has today.
"Elin appears to be reasonably valued at 31.3X FY22 earnings and 29.7X FY23 earnings, compared to Dixon Technologies and Amber Enterprises, which trade at 140.4X and 62.8X FY23 earnings, respectively," said Narendra Solanki, Head, Equity Research, Anand Rathi Shares & Stock Brokers. Solanki recommended investing in the stock for its long-term growth prospects.
Elin's revenues and PAT (profit after tax) increased at a CAGR of 18 and 19 percent, respectively, between FY20 and FY22. on the strength of a healthy industry outlook. In the same time period, its EBITDA (earnings before interest, tax, depreciation, and amortisation) increased at a CAGR of 19%.
Return on equity was 12.9 percent in FY22, compared to 13.3 percent in FY21 and 12.1 percent in FY20, and return on capital employed was 15.8 percent, compared to 14.9 percent and 15.4 percent in the same time.
Its addressable market in the core product sectors where it now operates is expected to increase to Rs 41,600 crore by FY26 (29 percent CAGR).
Signify Innovations, Eveready, Philips, Bosch, Faber, Panasonic, Usha, Havells, Groupe SEB (Maharaja brand), Molbio Diagnostics, Denso, and IFB are among its important customers. Elin has developed solid ties with its high-profile clientele over the years.
Manish Chowdhury, Head of Research at Stoxbox, believes that investors should hold their shares for the medium to long term because the EMS market in India has enormous potential.
Elin Electronics received Rs 475 crore in a public offering, which will be utilised to repay debt and expand current facilities in Ghaziabad and Verna.
Meanwhile, the benchmark indices remained range-bound after sliding roughly 4% from their December 1 highs. KFin Technologies, Uniparts India, Landmark Cars, Abans Holdings, and Sula Vineyards are among the recent listings in the current month that finished the listing day at a discount to the issue price and are still trading below it.
