Buy Price: 240
Reasons for buying:
- Company is into manufacturing and supply of forgings and precision engineering components.
- They are ISO certified and have factory in Karnataka. 90% of sales is from exports across 80 countries.
- They spend 2-4% of sales on R&D and have 45 members in it.
- The end user industries are automobile, railways, defence, agriculture (majority), oil & gas and new energy.
- Management has guided for 25% revenue growth with EBITDA margins of 20-22%.
- Last year Sales were 327 CR, the company has recently done QIP to raise 150 CR. This is being done to double their capacity which will get operationalized in about 2 quarters. Management has said commissioning of the new plan will lead to higher margins.
- With government capex in railways and defence booming, the company is expecting a good amount of order in flow.
- Their R&D team is investigating exciting projects – like lithium batteries, electric charging stations, hydrogen opportunity etc.
- Several star investors like Ashish Kacholia and Samit Vartak hold minor stakes.
Risks:
- Company has poor cash flows as compared to its ambition. This has led to consistently negative CFO and company is forced to dilute equity and raise funds.
- Due to the nature of the business, the company’s working capital cycle is around 150 days.
- If there is a global slowdown or currency risk, the company will be affected because as of now domestic sales is just 10%.
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