I am interested. @StageInvesting promised it and I hope they will keep the word!

I am interested… Kindly add me
h24.patel@gmail.com

Glenmark Life Sciences –

Q3 FY 24 concall summary –

Sales – 573 vs 541 cr

EBITDA – 173 vs 145 cr ( margin @ 30 vs 27 pc )

PAT – 119 vs 105 cr

Seeing better demand outlook from North America. Reported good growth across LATAM, India, US, RoW Mkts. EU business was flattish, Japan business de-grew due some inventory correction issues

CMO business ( generic molecules ) seeing descent uptick. Seeing increased enquiries from multiple customers

Company’s revenue breakdown by geography –

EMs – 22 pc

Europe – 22 pc

India – 24 pc

LATAM – 16 pc

US – 11 pc

Japan – 6 pc

Therapy wise revenue breakdown –

Diabetes – 4 pc

CNS – 17 pc

Cardiovascular – 41 pc

Pain management – 6 pc

Others – 32 pc

R&D expenses for Q3 at 18 cr @ aprox 3 pc of sales

Expect to end FY 24 with a capex of 150-160 cr

Remain net debt free with net cash balance of around 135 cr on the books

Q4 LY was a strong Qtr. Expecting Q4 in this FY to be relatively softer

Gross margins expanded due to 2 reasons – lower RM costs and higher CMO business where the margins are higher

Most of company’s exports to US, EU are air lifted and are hence not affected by the disruptions in Red sea

Q3 employee costs are elevated due performance linked bonuses issued to management. Likely to remain elevated in Q4 too. Should normalise in FY 25

Expecting CMO business to go to > 600 cr/yr in next 4-5 yrs from a current annual run rate of 150 cr/yr. This should help improve company’s Gross Margin profile

Company is now focussing on Onco segment to expand their product basket

Disc: hold a small tracking position, not SEBI registered, biased

Overview:

The company covered in this issue is Indo Rama Synthetics (India) Ltd. (IRSIL), which is on a high growth path. It is one of India’s major dedicated polyester manufacturer with an Integrated Manufacturing Complex in Butibori, near Nagpur in Maharashtra. Its production capacity is 6,10,050 TPA of Polyester Staple Fibre, Filament Yarn, Draw Texturized Yarn, Fully Drawn Yarn and Textile grade Chips.

Sector Profile:

The man-made fibre (MMF) industry in India is witnessing rapid growth and has become a favored investment destination due to low manufacturing costs. The sector contributes 17% of India’s textile exports making it the world’s sixth-largest exporter of MMF textiles. The government’s strong policy support, including the allowance of 100% FDI and initiatives like the National Technical Textiles Mission and Production Linked Incentive (PLI) scheme is expected to fuel the industry’s growth.

The MMF market in India is dominated by polyester and viscose with polyester holding the majority share at around 77.5%, while viscose accounts for 16.5%. Polyester is expected to continue dominating global fibre demand by 2030. The man-made fibre industry is well positioned to drive substantial growth in India’s textile sector and this industry is expected to grow at 6% annually. The PLI scheme for textiles is expected to boost the high-value MMF segment, creating new employment and trade opportunities. The rising prices of cotton also contribute to the growth of the MMF textile sector.

Despite challenges such as rising raw material cost, supply disruptions and cheaper import of fabrics, the MMF sector is poised for substantial growth. Seven (7) PM-Mitra Parks will attract lucrative investment opportunities. Similar to China, these Textile Parks will create 7 textile hubs which will reduce overall cost of production and boost exports.

About IRSIL:

IRSIL offers polyester products such as Polyester Filament Yarn (PFY), Polyester Staple Fibre (PSF), Draw Texturised Yarn (DTY), Fully Drawn Yarn (FDY), Specialty Fibre and Chips. These products find application in Apparel & Sportswear, Home Furnishing & Textiles, Hygiene & Non-woven and Automotive.

India consume 75% of the company products while the remaining 25% goes to exports. Nepal and Turkey account for 23% and 28% of total exports respectively. The company has a strong presence in important global markets such as Turkey, MENA, Brazil, Argentina, Mexico, Germany, Spain, Italy, Bangladesh, Nepal, etc. for its high-quality products.

IRSIL has an integrated production facility in Butibori, near Nagpur, Maharashtra. Its capacity includes Polyester Staple Fibre (PSF): 2,63,550 TPA, Polyester Filament Yarn (PFY): 2,59,000 TPA, Draw Texturised Yarn (DTY): 1,38,946 TPA & Polyester Chips: 87,500 TPA.

The Board of Directors has approved an expansion plan of Rs. 600 crore in the company and its wholly owned subsidiary (WOS) towards the addition of equipment for value addition and diversifying into a 700 TPD PET Resin manufacturing facility at its Butibori Plant.

IRSIL has technical collaborations with Chemtex Intl. Inc. (USA), Oerlikon Barmag (Germany), Zimmer AG (Germany), Autefa (Germany), LTG Ameliorair (France), Bertrams (Switzerland), LVD (Belgium), among other MNCs.

The company’s R&D is focused on product development & process improvements. It has successfully developed products like fibre suitable for hygiene applications, full dull and black dope-dyed yarns, modification of existing draw textured yarn (DTY) machines for auto-doffing, automation to prevent metallic contamination in hygiene products and new DTY products.

Shareholding:

The aggregate promoter shareholding in the company increased to ~82% from ~75% after the completion of a preferential issue and further acquisition of shares tendered in the open offer in May 2019. To comply with SEBI’s minimum public shareholding requirements, a member from promoter group sold ~7% of the total capital of the company in an offer for sale (OFS) in October 2020. Further, an open market sale of 0.13% of share capital was done in February 2021 after which the company complied with maximum promoter stake requirements. Now the promoters stake stand at around 75% with DIIs having around 3% and remaining 22% with the public.

Financials:
The company generates net cash and has improved net cash flows over the last two years. There has been growth in net profit with increasing profit margin on a QoQ basis… The statutory auditor of the company is Walker Chandiok & Co LLP.

PE ratio: – Price to Earnings’ ratio, which indicates for every rupee of earnings how much an investor is willing to pay for a share. This stock has a PE ratio of around 12 which is low and comparatively undervalued .

Return on Assets (ROA): – ROA shows how efficiently a company can convert the money used to purchase assets into net income or profits. This stock has ROA of -0.94 % which is not a great sign.

Current ratio: – The current ratio measures a company’s ability to pay its short-term liabilities with its short-term assets. This stock has a satisfactory current ratio of 0.85 .

Return on equity: – ROE measures the ability of a firm to generate profits from its shareholders investments in the company. This stock has a 3 Years ROE of 28 % .

Debt to equity ratio: – It is a good metric to check out the capital structure along with its performance. This stock has a D/E ratio of 1.15 which is satisfactory.

Sales growth: – This stock has reported revenue growth of 0.13 % which is not great in relation to its growth and performance.

Operating Margin: – This will tell you about the operational efficiency of the company. The operating margin of stock for the current financial year is 0.83 %.

Pros:

It is a company with zero promoter pledge. Mr. Aloke Lohia, one of the promoters, is the Founder and CEO of Indorama Ventures Ltd. (IVL). IVL is located in Bangkok and is a producer in the intermediate petrochemicals industry and the world’s largest producer of PET resins and a manufacturer of wool yarns.

Cons:

The primary raw materials required for polyester production are Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG). Both PTA and MEG are petrochemical derivatives, making the industry sensitive to crude oil prices.

Conclusion:

Overall, it can be said that stock is struggling to cross 45-55 price level & once closing above this level may lead to new heights provided expansion projects completes on time.

Disclaimer :

I am not a SEBI registered advisor and this report is solely for educational purposes. The information provided does not constitute any form of recommendation. Therefore, please conduct your own analysis before engaging in any trades or consult your financial advisor. The writer holds no responsibility for your intended decisions and any resulting financial losses.

Founded in 1992, Subex is a telecom AI product company that works in the space of Digital Trust i.e. it is focused on privacy, security, risk mitigation, predictability and confidence in data mainly in the telecommunication space focusing on products for communications service providers (CSPs) globally.

Through their HyperSense line of offerings, Subex empowers communications service providers and enterprise customers to make faster, better decisions by leveraging Artificial Intelligence (AI) across the data value chain. Subex leverages its award-winning product portfolio in areas such as Business Assurance and Fraud Management and enhances them with the power of HyperSense to help CSPs reduce risk, combat fraud and thereby ensure profitability.

Key Points:

1.Products based on Digital trust
Digital Trust is a concept that enables users to carry out business transactions in a safe, secure, ethical and reliable manner. Some of the products the company offers Revenue Assurance, Network Analytics, Fraud Management, Identity Analytic, Partner Ecosystem Management, IoT Security, Analytic Center of Trust and Anomaly Detection.

2.Debt-Free
From the 1990’s to the 2000’s the company acquired companies using equity and its revenue grew at a compounded annual rate of 33% between 2000 and 2007. However, with the acquisition of Syndesis using cash of $165 million, the company became debt-free in FY21. Now company is almost debt free with debt to equity ratio of 0.07 only.

3.Revenue Split by Service
Managed services: 28%
Support Services & Others: 31%
Implementation, Customization and License: 41%

4.Geographical Split
Europe, Middle East, Africa (EMEA): 60%
Aisa-Pacific (APAC) Region: 20%
Americas: ~18%
India: ~2%

5.Clients
Some of the major clients include – Airtel, Optus, VI, Jio, etc., which include 75% of the world’s top 50 telecom companies.
It has 98% customer retention. Approximately 60% of revenue is annuity/recurring.

Key Developments/Announcements
The company has joined the ORAN Alliance to support the development and standardization of Open RAN (radio access networks). The company will work with Skylab to offer Internet of Things (IoT) and OT cybersecurity solutions and services in the maritime sector. The company has announced the launch of HyperSense, an end-to-end augmented analytic platform.
Subex extended its partnership with Robi to upgrade its existing Integrated Revenue Assurance and Fraud Management (iRAFM) system.

Restructuring
The company completed the restructuring of Subex Assurance into Subex Ltd. Another exercise was the successful shift of revenue maximization solutions to the parent company. The RMS business of Subex Assurance LLP was transferred to the company by way of a slump sale for a lump sum consideration of Rs.95 crore.

Focus
(a.)Jio platforms partners with Subex HyperSense AI to augment its 5G product line.

(b.)The U.S. Patent and Trademark Office granted the company a patent that defines the future of revenue maximization for telecoms.

(c.)5-year contract with Dhiraagu (the leading telecom operator in the Maldives) for integrated revenue assurance and fraud management.

(d.)Horizon 1 (Enhance the core): Business from Tier-I customers keen to refreshing outdated technologies

(e.)Horizon 2 (Growth in new areas): Highly dependent on the growth of 5G Technology. It includes IoT Security (a multi-vertical product) & Analytics Center of Trust.

(f.)Horizon 3 (Invest in Emerging Areas (Multi-Vertical SaaS)): It includes CrunchMetrics, an automated anomaly detection software and IDcentral.

(g.)Making inroads in the multi-vertical IoT Security space and incubating virtual startups within the organization to diversify into new areas and verticals. Subex is investing heavily in new areas like artificial intelligence (AI)/machine learning (ML), Augmented analysis, and deep learning-based anomaly detection.

Financials:

Q1 FY24 results show a 42% increase in revenue y-o-y basis.
Optimizing costs and enhancing operational efficiency.
Timeline for achieving a positive bottom line in about a year.
Need to improve sales team performance and top-line growth.

Strategic Initiatives:

Secured three new logos in core business domain, focused on expanding footprint in strategic accounts.
Investing in talent development and reshaping skills in evolving technology landscape.
Collaborating with a leading strategic player and exploring opportunities in blockchain technology.
Partner Ecosystem Management and IoT security offerings are gaining traction.

Product Offerings:

1. HyperSense Fraud Management System

Traditional monitoring and fraud detection methods are proving to be inadequate in the face of heightened risks because of rapid digitization, new technologies and innovative techniques used by fraudsters.

Subex’s AI-First Fraud Management on HyperSense is an end-to-end fraud management solution that provides 360-degree protection across various service offerings. It leverages AI at every step of the fraud management process to effectively combat fraud and security risks. With a state-of-the-art AI engine at its core, it helps fraud teams increase business-coverage, accuracy, agility and enables them to use AI sustainably. It is designed to build digital trust by leveraging explainable AI capabilities that provide complete transparency on how decisions are made.

2. Network Security

The network security suite utilizes multi-layered detection with signatures, heuristics and machine learning being the main proponents to detect and prevent network attacks early in the kill chain. Its solution delivers quick return on investment (ROI) by reducing threat activity both upstream and downstream. The solution can also scale seamlessly across geographies, device numbers, architectures and connectivity flavors.

3. Business Assurance

In today’s hyper-competitive environment, revenue assurance has rapidly evolved from assuring revenues (with a primary business focus on EBITDA) to assuring business models as business assurance. 80% of RA business requirements today are looking to explore analytics solutions. Further 70% of Tier-1 telecoms are looking to re-engineer their risk framework to suit new business models. These numbers are further substantiated by the TM forum which mention that 100% of business data flows require the delivery of intelligent analytics. This new environment has necessitated a shift in mindset from traditional RA to active risk intelligence (ARI) with business assurance. With ARI, operators enable efficiency & optimization and embrace AI driven robotic process automation & identification of unknowns. With its re-imagined assurance product stack, operators can assess and address impacts in near real-time or in some cases, proactively. In today’s reality of multi-service, multi-disciplinary offerings (eg. banking, retail, digital content etc.), the comprehensive AI/ML capabilities in the solution will help its telecom partners.

4. Partner Ecosystem Management

Expand business capabilities while working with traditional partners and digital disruptions to introduce new-age products and services. Partner Ecosystem Management enables collaboration between communication services providers (CSP) and their partners to manage all aspects, from partner on-boarding to billing and dispute settlement, taking care of entire partner life-cycle management through a transparent process.

5. Network Analytics

Improve decisions towards making the right network investments and getting the most from your existing spending. Through advanced analytics, you can ensure that you always make the right capacity spends while having complete visibility of your network assets. This can help you reduce your operational expenses, while keeping the capex in check.

6. Analytic Center of Trust (ACT)

A solution framework built to help organizations transform from a traditional business to a digital one through the power of data analytics. ACT enables you to build trust in your data and analytic program making it a powerful factor in driving business through data driven decision-making. It focuses on multiple dimensions of people, process, technology and data to drive transformation across the business.

7. Anomaly Detection

Conventional methods based on a reactive approach to responding to alarms triggered by static thresholds fail to meet the needs of modern-day organizations. What organizations need is a solution that can automatically look through billions of records, identify unusual patterns, intelligently correlate these patterns with their context of occurrence, and flag outliers that can cause business impact – all in real-time. Towards this end, Subex delivers AI-based anomaly detection for digital businesses through its subsidiary.

S W O T Analysis:

Strengths

Leader in the Telecom AI and analytics space, it helps businesses thrive by creating connected experiences.
Sticky Revenue Model: About 60% of revenue is annuity/recurring and > 98% customers retention.
Investing heavily in new areas like Genarative AI.
Established market position with strong client relationships in the telecom software service segment.
Received significant industry validation and market recognition for its AI offerings.
Growth in Net Profit with an Increasing Profit Margin (QoQ).
Growing revenue every quarter for the past 2 quarters.
Rising profits every quarter for the past 2 quarters.
FIIs / FPIs or Institutions raise their shareholding.
Now company is almost debt-free with debt to equity ratio of 0.07 only.

Weakness

The company has low interest coverage ratio.
Declining RoCE & RoE over the last 2 years.

Opportunities
Stock with Low PE (PE < = 10)

Threats
The group derives almost its entire revenue from the telecom segment. Any slowdown in the telecom segment could adversely impact the group.

Disclaimer :
I am not a SEBI registered advisor and this report is solely for educational purposes. The information provided does not constitute any form of recommendation. Therefore, please conduct your own analysis before engaging in any trades or consult your financial advisor. I holds no responsibility for your intended decisions and any resulting financial losses.