Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Servotech Power

Key Investment thesis –> Developing EV charging Infra and Delivering Solar Rooftop solutions across India. Key Business wins for EV charging Infra, Association with key businesses B2B

Read Pick1, Pick2, Pick3, Pick4, Pick5, Pick6, Pick7, Pick8, Pick9, Pick10, Pick11, Pick12, Pick13, Pick14, Pick15, Pick16, Pick17, Pick18, Pick19, Pick20

Business

SPSL is in the business of high-end solar products and EV chargers. It develops ultra -fast DC chargers and Home AC chargers, and has installed over 2400 EV chargers in collaboration with oil marketing companies

Product Profile:
a) EV Charger: Electric Vehicle Charging Station, AC Charger, DC Charger
b) Solar Products: Solar Inverter, Solar Panels, Solar Batteries, ServPort, SMU
c) Power & Backup: Battery, Servo Stabilizer, etc.
d) LEDs: Domestic LED, Commercial LED
e) Oxygen Concentrator: Oxygen Concentrator 5L and Oxygen Concentrator 10L
f) UVC: UV-C Handheld Disinfection Lamp – 6W, Portable UV-C Disinfection Lamp – 36W (Sensor Equipped), Portable UV-C Disinfection Lamp – 38W, UV-C Disinfection RoboTruk – 150W, UV-C Sterilization Bag, UV-C LED Sterilization Box with 10W Wifi Charger, UV Sterilization Box with Charger, UV-C Car Intelligent Sanitizer, Car Air Sanitizer, UV Air Purifier, FAR UV-C Digital Sanitizer

Covered the thesis here in quick 12 min Video

Well-equipped 2 manufacturing facilities spanning over 80,000 sq. ft. and 1,44,000 sq. ft. respectively in Sonipat, Haryana

Capacity to manufacture 30,000 AC EV Chargers and 12,000 DC EV chargers annually

The company is majorly into B2B operations and having Marquee clientele comprising of BPCL, IOCL, HPCL, Nayara Energy, UPNEDA and others

Employee strength -500+

Revenue Breakup

Range of EV AC AND DC chargers

DC chargers have amazing features on fast port, advanced connectivity and user friendliness

Range of Solar solutions

Solar panels, Solar Inverters, Solar Batteries

ESS : Energy storage system (Major tailwinds may appear here)

Solar Street light (too much commodity)

Solar charge controller

EV CHARGER Components

Another interesting solution is Servport

Fundamental Ratios, Cash, EBITDA, PAT

ROCE and ROE > 10%, Pledging 0%, Debt to equity under control

High TTM PE and PB ratio

12X Sales and 12X PAT in 10 Years, Stable EBITDA numbers, Improving NPM

Promoter has good skin in game at ~60% shareholding, FII holding 5% approx

Cash conversion cycle have improved in recent years

Triggers

Macro Trends :

Developing EV charging Infra and Solar Rooftop solutions Infra across India

Journey and recent forays

Government subsidies & policies promoting local manufacturing of EV Components and sustainable energy resources

Growing need for carbon neutral has increased the demand forsustainable energy solution

Increasing demand for EV charging stations with healthy traction in order pipeline in addition to a sizable order backlog. Govt. allocate subsidies of INR 800 Cr to set up 22,000 fast chargers at various fuel pumps across India. The government has sanctioned 2,877 such charging stations across 68 cities in 25 states and UTs. In addition, 1,576 charging stations on nine
expressways and 16 highways have also been sanctioned.

Projections indicate that fast-charging stations will witness a CAGR of over 40% by 2025.

New additions in budget 2024 like Pumped Storage Policy and exemption of customs duty on lithium will incentivize renewable energy integration and adoption

Rising urbanization and awareness of climate change have led to increase in demand for cost-efficient products

PM Suryodaya Yojana to solarize 1 Cr Households. 50 solar parks with an aggregate capacity of 37.49 GW have been approved in India

Company has worked on Capacity Expansion

Preferential shares allotment and warrants issued at 83 Rs (approx raised 74cr)

Backward integration efforts for key components (control set and power module) are on track, with the control set already being manufactured in India.

Solar Segment:

Regular monthly sales of ₹8-10 crores in the solar segment, targeting a total of ₹100-150 crores annually.
Plans to expand presence in 20-21 states within two months to leverage government schemes for household electricity.

International Expansion:

Export business is expected to grow, with previous year’s revenue at approximately ₹40 crores and positive momentum for future exports.
Attending international exhibitions and establishing a dedicated export team.

Patents; Innovation and Leadership

51% Growth in the Dealer & Distributor Network

Hired 128+ employees in Q1

Coninuous order wins from Major OEM’s —Current order book stands at approximately 8,000-8,500 pieces of DC chargers, indicating strong demand.

Order win from BPCL worth ₹120 Crs for the supply of 1,800 DC EV chargers
Order win from IOCL and other EV Charger OEM’s worth ₹111 Crs for the supply of 1,400 DC EV chargers
Order win from BPCL for the supply of 2,649 AC EV chargers
Order win from HPCL and other EV charger OEM’s worth ₹102 Crs for the supply of 1,500 DC EV chargers

Signed a contract with Adani Total Energies E-Mobility Ltd. (ATEL) for the supply of AC EV chargers

SPSL will be responsible for manufacturing, supplying and Installing AC EV Chargers at different Airports and other said locations

Collaborated with an international company to enhance its in-house components manufacturing.

SPSL will be constructing a cutting-edge manufacturing facility focused on the production of Power Modules, Control Circuits, and PLCs. The new plant will have an initial annual production capacity of 24,000 power modules & will ramp up its production capacity to 2.4 lakh power modules annually

Solar energy storage

Servotech Secures Order of around 1.2 MW Solar Energy Storage and Grid Connected Systems from Rural Development Department and UPNEDA. Servotech will be responsible for installing multiple 75kW solar-based energy storage systems, designed to provide reliable and uninterrupted power supply across Uttar Pradesh. Additionally, the company will also be designing, manufacturing, supplying, erecting, testing and commissioning 20 kW and 40 kW grid-connected solar power systems, contributing to the state’s renewable energy goals. This order will prove to be essential for overcoming geographical and infrastructural challenges in areas of Uttar Pradesh by enabling a broader reach of sustainable energy solutions and ensuring the penetration of renewable energy into the grid.

Creating new subsidiary “Servotech Sports and Entertainment Pvt. Ltd.”

Servotech aims to capitalize on the sporting fervor, its immense popularity, and global appeal to strengthen its brand presence and connect with a wider audience base. This strategic alignment presents an exciting opportunity for Servotech to extend its reach beyond its industry boundaries and tap into new avenues of success and engagement, establishing itself as not just a leader in the EV charging and solar energy sectors, but also as a prominent player in the sports industry.

Technicals

Technical chart on 21st Aug24

Risks

Consistent Equity dilution, consistent increase in borrowing and Negative cash flows poses risk to company business growth

PE is high and any 2 bad qtrs can screw the returns profile from the current levels

Large capital working requirements is another thing to watch out for

Highly competitive industry both in Solar and EV industry

Delay in projects due to Govt policies or Land acquisition issues

Components import is another risk

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