It appears the Q4 results are out and looks good but there seems to be some error in Q3 as it includes demerged entity numbers QOQ which should have been excluded but YOY looks fine

Transcripts are already available
77b60446-9c1b-4070-b74d-c941203df1c5.pdf (bseindia.com)
AI generated future growth drivers.

• Cover Glass Technology: The company is making progress with its complex cover glass product, with RFQs received and prototypes well-received by customers. They anticipate business awards in the first half of the year and significant turnover contribution in the next three to four years.
• Walter Pack Stabilization: The Walter Pack business is showing improvement, reflected in increased EBITDA margins. Continued growth is expected in both domestic and export markets.
• Revenue Outlook: The order book covers 85% of the revenue outlook for FY25, with an expected industry growth of 8% to 10%. SJS Enterprises aims for higher growth due to increased content per vehicle.
• Product Margins: The company is focusing on high-value products with less competition, leading to sustainable higher margins. Chrome plating is the only product with mid-teens margin profile.

Galaxy announced a fair set of numbers today and seems to be making significant progress on the CAPEX front (CWIP up to 26 Cr for March ending, out of their assumed CAPEX of Rs. 35 Cr).

Providing a summary for everyone on this thread (and myself to refer back to):

Background: company was founded by Mr. Vinod Kangsara (passed away in 2019) – current main promoters are his wife (Indiraben Kangsara) and daughters (Shetal Devang Gor and Tuhina Bera) – who now seem to be NRIs and aren’t actively involved in the business operations. CEO is Mr. Nitin Santoki – who seems to be Rajkot based with a strong presence in the industry (no information on his shareholding). It seems that Mr. Nitin’s family has other companies in associated fields of the industry (common in auto ancillary businesses, wouldn’t consider it to be a corporate governance issue – refer to the link for Adico group below).

Catalyst/Trigger: Change in management post 2019, might have triggered a new approach to the business(speculatio). Dr. Devang Gor who is a Chair at the Department of Radiology in a leading healthcare network in Pennsylvania, USA was appointed on the board in August 2019 after completing an Exec MBA from Temple University (potentially to groom him for this role?).
Key business trigger seems to be a new product development as mentioned by Mr. Nitin in his interview (https://www.youtube.com/watch?v=ygyf4W54XCU&t=1s) – where they are manufacturing roller bearings with a hub casting attached. This saves their customer the time, effort and the cost of otherwise attaching the hub casting separately to the product.
It seems another competitor offering a similar product is Orbit Bearings (also Rajkot based), who has grown significantly by being the first taper roller bearing company to manufacture these bearings with a hub casting (Cylindrical Roller Bearings | Truck Axle Bearings | Taper Roller Bearings | Truck Hub Bearings | Orbit Bearings India Pvt. Ltd.). Orbit Bearings has scaled significantly and did a revenue of Rs. 624 Cr in 2022 with a PBT of Rs. 151 Cr. Orbit has a capacity of 10 Million pcs per annum, and it’s interesting to note that Galaxy has decided to set up a plant which takes their total production capacity to 9.5 Million per annum (in Phase 1)! Other smaller competitors also seem to be equally profitable (Turbo Bearings does a Sale of 99 Cr with a PBT of 27 Cr).

Has anyone studied the bearing industry in greater detail to check how they compare with SKF, Timken, Schaeffler?

https://www.adicogroup.com/international/group-of-companies.html

Good inights, Rahul.

Thanks for taking the time to prepare this. I think HFCs deserve a separate thread of their own.

Let me chip in my couple of thoughts.

1. The “A Players”, i.e. the ones which have good asset quality (GNPA ~1.5%), high ROE (~14-15%+) and low leverage (<4 times Debt/Equity) are mostly owned by PE firms, who entered in early stages and have navigated the companies to their IPOs.

For example, Aptus and India Shelter is heavily held by Westbridge, Aavas by Kedaara, Home first by Warburg Pincus (Orange Clove) etc.

These PE players are basically funds which have end of life. Until these PE funds are on the cap table, expect these companies to face constant bouts of stock supply and therefore, prices may remain compressed despite 25-30% AUM growth and pristine asset quality. At least that is how these A-player stocks are playing out for now.

2. “B players” like PNB housing, LIC housing, Can Fin, etc. (I would also call Can fin a B player, because of its leverage and modest 15% growth, although it has strong parentage of Canara bank and very good asset quality) are fighting against inertia and their growth rates have never really appealed, Moreover, their leverage positions may give them lesser headroom for aggressive growth compared to A-players. All this shows up in their mid-teens AUM growth and moderate asset quality.

PNB housing might foray into microfinance under new leadership, Can fin homes might foray into digital transformation and risk management after Ambala incident, but give or take, these are 10-15% growers. Dont expect the moon from them.

3. Now come the underdogs, Hudco, Repco, etc. These are actually the “C Players” behaving like “A players” temporarily. when credit cycle turns, they have proven to disappoint a lot. Hudco for example, is known to trade at <1 PB and is now trading at 3.12 PB.

Here’s a look at Hudco at a high level:

In FY24, Hudco’s topline has grown by 9%, operating profits have grown by 12%, however its PB is re-rated from 0.56 PB to 3.12 PB, a whopping 6x PB update. Naturally the price has gained 6x not much because of fundamental growth but because of re-rerating.

Take a look at an A Player, in comparison:

Home First:

Aptus:

AUM and Book Value Growth wise, Hudco stands nowhere close to the A players:

Hudco’s Balance Sheet metrics:

Hudco’s AUM growth (Derived):

Home First’s Balance Sheet metrics:

Home First’s AUM growth (YoY):

Aptus’s Balance Sheet metrics:

Aptus’s AUM growth (YoY):

Clearly, the A players have better balance sheet, less leverage, higher AUM growth, less delinquencies and credit cost.

Now look at the price chart of Home first, Aptus and Hudco for last 1 year.

@mayank_raghuwanshi, Mayank, this is how I see Rategain. I have assumed 22% growth. Management has guided for 2,000 crores revenue by FY27 (including ~300 crores inorganic revenues). Margin guidance is 25% by FY27. I am comfortable with 2PEG.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation . Also note that I recently joined a investment advisory firm. My portfolio is not a recommendation for anyone. Some of these stocks might be in clients portfolio as well so please be aware of vested interest.