EXICOM TELE-SYSTEMS
EXICOM TELE-SYSTEMS
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Stock Research and Analysis Report (information valid up-to 12th November 2024)
Exicom tele-systems operates within two major business segments, their EV charging business and their critical power solutions business. While the EV charging business contributed to approximately 24% of their revenue in FY24, the critical power solutions business contributed 76% of their revenue during the same period. Being one of the earliest players in the EV charging business in India, they have a 60% market share in the residential charging space while they have a 25% market share in the public charging space. Whereas, for their power conversion systems business, they have a 16% market share and for their energy storage solutions business, they have a 10% market share.
ABOUT
In FY 24, almost 82% of the company’s revenue came from domestic markets while 18% came from exports.
Exicom’s power solutions business has a presence in South-East Asia and Africa.
The management is trying to expand the EV Charging business in the Middle East, Europe and South-East Asia.
EV Charging clients include OEM players such as “Mahindra and Mahindra”, “MG Motors”, “JBM Limited.” Clients also include CPOs like “Reliance BP Mobility” and fleet aggregators such as “Blu Smart Mobility.”
Critical Power clients include major telecom companies like ”Reliance Jio Infocom,” “Maxis Telecom,” and “BSNL.” Clients also include tower companies such as “Indus Towers,” and “American Tower Corp."
CAPITAL ALLOCATION
R&D investments
The management plans to invest 40 crores from its IPO proceeds into R&D and product development over FY 25 and FY 26.
These investments will help Exicom develop and modernize their charging, power conversion and battery storage technology.
This R&D will help Exicom reduce its dependence on imports for raw materials while enhance their ability to customize their products for the Indian market.
This strategy aligned with government initiatives like the Fame II policy and the PLI scheme which promote local manufacturing and innovation in the EV sector.
Capex for New Telangana Factory
A new manufacturing facility in Telangana will produce a range of Exicom’s products including EV chargers, DC power systems and Li-Ion battery solutions.
This expansion will help increase production capacity. The company currently has 3 factories, 1 in Solan and 2 in Gurugram.
This new manufacturing facility has an overall estimated cost of Rs 171 crores. Out of which, 146 crores is being raised through the IPO funds, 6 crores through pre-IPO funds and 19 crores through internal accruals.
This facility should be complete by the end of FY 25.
Tritium Group Acquisition
Exicom Power Solutions B.V. Netherlands, a subsidiary of Exicom Tele-Systems Limited, entered into a definitive agreement to acquire 100% of the business and assets of the Tritium group of companies on August 8, 2024.
The acquisition cost was approximately Rs 300 crores.
The acquisition was funded by a mix of IPO proceeds and term loans.
The acquisition provides access to international markets and strengthens Exicom’s position as a global player in the EV charging infrastructure market.
SECTOR ANALYSIS
A large portion of Exicom’s revenue comes from government clients and is dependent on government spending to boost the sector. Government capex spending is a major factor contributing to Exicom’s growth and over the years the Indian government has increased its yearly capex spending providing companies like Exicom a major source of revenue and orders. Due to union elections, the Indian government had only spent 27% of the yearly capex budget by August 2024. Therefore, bulk of the capex spending is anticipated to flow into H2 FY 2025 providing a good short-term revenue potential for Exicom.
Source: Indian Brand Equity Foundation (IBEF)
Government and private spending in the telecom sector is cyclical in nature with periods of increased spending with periods of little spending. Similarly, growth trends in the telecom sector are also cyclical leading to cyclical growth for companies like Exicom. Currently, the sector is going through a growth phase with increased government and private spending on improving power management systems and energy storage systems towards the 5G and 6G rollout. Due to the rollout of 5G and companies working on 6G, there is an increasing need of reliable and efficient backup power. Companies have increased their demand for Li-Ion batteries and reduced their dependency on older Lead Acid batteries. This shift in trend towards Li-Ion batteries is benefitting companies like Exicom.
Source: Indian Brand Equity Foundation (IBEF)
Exicom’s power solution products also have several applications in the data center business which is expected to grow at a strong rate of 11% in the next 9 years. Growth in the data center sector will massively benefit companies like Exicom by helping them secure orders and gain revenue.
Source: Indian Brand Equity Foundation (IBEF)
Although the company only generates 24% of its revenue from EV Chargers, their revenue dependency on EV chargers has grown in the past few years. Overall, the EV sector has a massive growth potential in India with the EV charging market expected to grow at a CAGR of 38.14% between FY 23 and FY 30. However, few headwinds might impact Exicom’s growth in the short term. The Indian government discontinued the Fame II subsidy on March 31 2024. This has slowed down demand for electric vehicles in India leading to headwinds in demand for EV Chargers. This was followed by a degrowth of 16.3% in the company’s revenue in Q1 FY25 compared to the previous quarter in Q4 FY24. According to an article on "The Mint," the overall Indian passenger vehicle (PV) market saw slower-than-expected growth in the first half of FY25, with a modest growth rate of just 0.5%, below the initial expectations of 3-4% forecast by the Society of Indian Automobile Manufacturers (Siam).
Exicom's management acknowledges a slowdown in new orders for EV chargers in the first half of FY25, primarily due to high inventory levels at Charging Point Operators (CPOs). However, demand for EVs and EV chargers are expected to revive in H2 FY25.
FINANCIALS
(Consolidated figures in Rs. Crores)
PEER COMPARISON
SWOT ANALYSIS
RISKS AND MITIGATION
Risk 1: Supply chain disruptions, price fluctuations for raw materials.
Mitigation 1: Exicom is actively pursuing localization strategies to reduce its dependence on imports and mitigate the risks associated with global supply chain disruptions. The company is increasing its reliance on in-house design capabilities to optimize production costs and reduce reliance on external suppliers for specific components. Exicom is also exploring battery technologies that utilize more readily available raw materials, such as sodium-ion batteries, to mitigate the risks associated with sourcing lithium, cobalt, and nickel.
Risk 2: Over 50% of Exicom's revenue from its Critical Power business comes from its top five customers, including government entities and public sector undertakings (PSUs). This leads to a very high customer concentration and a potential risk on revenues.
Mitgation 2: The company is expanding its product portfolio beyond its core offerings to reduce dependence on specific market segments. Moreover, it is also expanding into foreign markets.
Risk 3: High competition in industry might lead to difficulty in securing orders through government tenders.
Mitigation 3: Increasing investment in R&D will help improve their EV charging and critical power solutions products and services and compete with peers.
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