Why Nelco Share Price is Rising

Welcome to today's edition of stocks made easy.

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• Top 5 Multibagger Growth Stocks to Watch Out for in 2025

In today's edition, we'll look at a smallcap Tata group stock that's making some bold moves in the SATCOM sector.

In case you haven't guessed it, the company is Nelco.

Nelco, a part of Tata Group, was started in 1940 as an electronics company. It currently offers solutions in areas of VSAT connectivity, Satcom projects, among other things.

On 2 December 2024, share price of Nelco rallied over 15%.

Did the company win a big order?

Or did it introduce a groundbreaking product to register such a steep one-day rally?

Let's find out...

Why Nelco Share is Rising

# Relaxation of Satellite Communication Norms

According to media reports, the Indian government is considering easing some security regulations for satellite communication licences to align with international standards.

This move could potentially facilitate companies such as Elon Musk's Starlink and Jeff Bezos's Amazon Kuiper in providing satellite-based telecom services in India.

Applications from Starlink and Amazon Kuiper for GMPCS licences are still pending as both firms have yet to fulfil all security prerequisites.

Meanwhile, this move will also benefit the existing Indian players in the industry. Nelco, a subsidiary of Tata Power, is already in the business of providing domestic satellite communication services to close user group networks via Satellite System on non-exclusive basis within the territorial boundary of India.

It mainly provides services to the enterprises sector.

Investors on Dalal Street have already started touting satellite communications as a big emerging theme and Nelco is one of the beneficiaries.

As India moves towards a digital world, satellite communication or SATCOM is emerging as a transformative tool to reach the country's most remote corners.

The Tata group company is into satellite communications and is also a direct play to Air India's flight internet.

What Next?

With the deregulation of the space sector and the accelerated rollout of the New Space Policy 2023, new opportunities for VSAT applications are expected to emerge.

Additionally, advancements in technology are anticipated to lower bandwidth costs, making VSAT technology more competitive and potentially expanding its consumer base.

Nelco provides B2B VSAT services in banking, oil & gas exploration, renewable energy, telemedicine, mining and construction and rural education. It enjoys strong market share especially in the oil & gas and banking (ATM) segments.

The company is also part of the reputed Tata group, so it continues to draw support from group companies. Through Tata Power and its subsidiaries, Tatas currently hold around 50.1% stake in Nelco.

In the past 5 years, the company's revenue has grown at a CAGR of 11% while profit has growth at a CAGR of 1.2%.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	2,199	2,261	2,601	3,133	3,203
Growth (%)	15%	3%	15%	20%	2%
Operating Profit	523	477	553	643	624
OPM (%)	24%	21%	21%	21%	19%
Net Profit	144	124	161	199	237
Net Margin (%)	7%	5%	6%	6%	7%
ROE (%)	23.6	17.4	19.5	20.5	20.8
ROCE (%)	21.1	15.8	21.4	25.5	27.2
Dividend (Rs)	1.2	1.2	1.8	2.0	2.2
Debt to Equity (x)	1.7	0.9	0.6	0.4	0.3

Source: Equitymaster

The performance of Nelco in the second half of this year is expected to be better than the first half amid expectations of improved revenue visibility.

How Nelco Share Price has Performed Recently

In the past 5 days, Nelco share price has gained 22%.

In a month, the stock is up 35%.

Nelco has a 52-week high of Rs 1,336 touched on 5 September 2024 and a 52-week low of Rs 648 touched on 4 June 2024.

In the past 1 year, Nelco shares are up 61%.

Here's a table comparing Nelco with its peers -

Comparative Analysis

Company	Nelco	Control Print	Empower India	Ducon Infra	Silver Touch
ROE (%)	20.8	18.1	2.3	6.3	15.6
ROCE (%)	27.2	25.1	2.4	9.4	20.1
Latest EPS (Rs)	9.2	31.9	0.1	0.4	14.9
TTM PE (x)	113.7	22.5	25.1	20.9	47.5
TTM Price to book (x)	18.7	3.4	0.8	1.6	7.5
Dividend yield (%)	0.2	1.3	0.0	0.0	0.1
Industry PE	106.5
Industry PB	12.6

Source: Equitymaster

For a detailed analysis, check out Nelco's financial factsheet.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...