Also, in the concall someone raised the point about JSW1, which management said is not a competition, but I do feel it’s not all as rosy as they say. Other among competition can be mjunction, Ofbusiness which is already mentioned in the thread

How integral is Gagan Banga to Sammaan? He seems to have stuck with the company through its downturn. I am hoping he will continue to stay with the company.

How is Sammaan’s ESOP diluting the existing shareholders? Which companies in India have sensible ESOPs where the strike price makes sure that the management takes up skin in the game without diluting the share holders too much?

Q2FY25 Concall Summary

Business Updates

• The volume growth in Thailand was 32% in H1. In spite of dumping by China in Thailand the company has maintained market share and also done good margins
• The plant in Chennai has started and volumes from this facility shall continue to grow in upcoming quarters
• The management has started TPM projects in the Thailand and Chennai facility as well

Participants

Investec

iThought

KSA Securities

SI Investments

Kotak Mutual Fund

Magma Ventures

Kapoor & Co.

RTL Investments

QnA

• The volume off take from Chennai facility has to be at 14000 tons in current year as that was the commitment made under PLI scheme from government. 80% of commitment has to be achieved otherwise PLI benefits will not flow in
• The company has 42% market share in India and over 30% market share in Thailand and in both places even though competition has come in the margins have been maintained
• In India 65% of tire production happens in South India while the manufacturing facility of the company is in Central and West India which leads to higher freight cost
• The long term plan is to supply to customers in North and West India from the mother facilities in Indore and Pithampura while for the customers in South from the Chennai facility which will lead to optimized freight costs
• The facility in Chennai cannot be used to make any other product, as it will destroy the fabric of manufacturing culture for the particular product that is bead wire. The factory will not be disturbed to produce anything else
• While the company continues to fight for market share in the Thailand market it does affect margins because China continues to dump excessively in that market. The company does not want to apply for anti dumping in Thailand as it will not be taken positively by its customers
• Aarti Wires is doubling capacity from 15000 tons to 30000 tons with a new plant and Bansal Wire is adding capacity in multiple segments which will be new competition coming in
• Global competitors in this space have not been able to reach double digit EBITDA including the Chinese one’s while the company has done consistently double digit numbers
• From a business perspective market share holds a higher salience than running after profitability only as that will add scale over the longer term and in turn lead to profitability
• On a Rs 90000 crore tyre industry in India the bead wire industry would be valued at Rs 2000 crore considering the amount of bead wire involved in construction of a tyre
• The company has got approval from Bridgestone for their new facility in Thailand and the team from Japan will come for the final audit post which a significant allocation will start towards that company from Q4 of current financial year
• In Q2 higher quantities were sold particularly from Chennai to lower quality customers since approval from higher quality customers for the Chennai facility have not yet been received
• Towards the business in America the company has already achieved a run rate of 100 plus tons a month for some customers and volume pickup will be much faster going forward
• Structurally the prices for American and European customers are better than the South East Asian customers but volatility over the last six months have affected the margins somewhat due to elevated freight costs
• Going forward EBITDA margins will remain at 15-16% only and focus will be to achieve 20% volume growth in FY25

Thank you Raman ji for sharing your thoughts. Just a quick question I see you have trimmed your position a bit from 6.1 to 5, just wanna know the reason behind it any concerns or just profit booking.

I have written below my investment thesis on Ceinsys tech

Since the risks are high when I invest in small & micro caps ,I personally like a company with the following attributes :

1)Good management with strong execution skills & skin in the game (bcos we are betting on the jockey )

Sagar Meghe’s (Promoter ) political career has been marked by his involvement with multiple political parties and his efforts in both politics and business. His career has been shaped by a blend of familial influence, a strong commitment to education, entrepreneurial initiatives, and a vision for regional development.

After joining BJP in 2014, Sagar Meghe’s political career has been influenced by his family’s strategic shift and their connections within the party. The move to BJP was largely driven by the influence of Nitin Gadkari, a senior BJP leader and personal friend of the Meghe family, who played a significant role in welcoming them into the party .

Sagar Meghe does not appear to hold any active responsibilities within the BJP . After facing political setbacks, including a significant defeat in the Lok Sabha elections from Wardha, Sagar Meghe reportedly moved to Dubai with his family.

Apart from him the management team is professionally managed with diverse experience. Ex .Mr. Prashant Kamat – WTD, Vice Chairman and CEO Mr. Kamat is the Whole Time Director, Vice Chairman, and Chief Executive Officer at Ceinsys Tech. He was previously the Chief Executive Officer at AllyGrow. As a techno-commercial professional, Prashant has a progressive career of over 28 years which is characterized by significant accomplishments and increasing responsibilities. He has a proven track record in operations, finance, strategic marketing, business expansion, and new product development.

Skin in game -The company raised 235 cr (at 559/- share price )recently where Rare capital came in as strategic partner .The promoter themselves invested close to 100 cr !

Rare capital (main partners ) brings in Ceinsys’ data center capabilities (not physical but tech enabled , scale of Amazon & Google ).They have built a 3200 Cr revenue company in 10 years and sold it for $217m .

2)A company which has competitive edge /Right to win and have clear focused “strategic intent “ for years .I can clearly see “sustainable profitable growth “atleast for next 5 years –all the 3 words are very important for me –sustainable ,profitable and growth !!

Ceinsys tech is a technology-driven organization that specializes in offering Geospatial and ER&D solutions by providing independent opinions, actionable insights, and efficient solutions across private and government enterprises across the utility, infrastructure, natural resources, and Manufacturing sectors .

KEY INISGHTS – Current predominantly in government tender business where their hit rate of tender to order is 90%+

.I think its because of political connections , first mover advantage ,good team with width and depth of knowledge (well qualified team 82Engrs,PhD.M.Tech.MS,18%- MBA,ITI-Diploma holder ) having been there for long with VERY LOW 1% attrition rate and a very lucrative retention rate of repeat customers of 40%+

From where growth will come From :

The company is leveraging on India’s projected geospatial market growth which is expected to grow at CAGR of 13.5% by 2025.

The company is focused on capitalizing on substantial funding opportunities provided by government initiatives such as National Infrastructure Pipeline (NIP), Jal Jeevan Mission, and Namami Gange program, with a proposed budget of approximately USD15 Billion for water-related projects .Companies order book is now 1000 cr + L1 bid of another circa 300 cr majorly in this area (Present large Geography is Maharastra + UP ,seed geography is Bihar ,Jharkhand and Rajasthan –hence growth will come from Geographical reach also)

Focused on tapping the growth avenues in smart water management and renewable energy sectors, as India’s aims to add over 340 GW of renewable capacity by 2030.

The acquisition of Allygrow allows Ceinsys Tech to broaden its service portfolio by incorporating Allygrow’s expertise in core engineering design, development, and manufacturing engineering services. This expansion is particularly significant in the automotive and aerospace sectors, where Allygrow has established proficiency

In 2018, Grammer AG, of Germany(USD 2.5 Bn revenue company ), specializing in automotive interiors and commercial vehicle seats, teamed up with AllyGrow, to form a joint venture in India (70% Ally Grow, 30% Grammer). The JV is functioning as an extension of Grammer AG’s R&D Centre and providing high end engineering services to Grammer global locations.

Establishment of a new vertical MEG-Next which focuses on innovative product development activities related to Metaverse, Ed- Tech, Gaming (not right strategic fitment as per me,lets see ) and Mobility

3)Company should have pricing power

Operating margin beyond 15 % + with increasing sales according to me is a good sign of pricing power .

4)Available at reasonable valuation ,which we all want .

Its not cheap but reasonably valued through reverse DCF method .If we expect 20% share price cagr return for next 10 years the implied PAT growth is 24% cagr which I think this company can achieve given sales growth would be above 15% cagr because of sector tailwind hence operating leverage would play in and PAT growth would be above 25% cagr (see past track record below for 5 years ,sales growth 7% ,PAT growth 59% ) .I expect this to be like Tata Elxsi in Geo Spatial sector !

5)Risks:

• Political risk
• Cultural integration (not sure of Organization structure )
• Debtors risk in Govt outstanding

6)Key things to watch out for me :

• Top line growth according to me would be above 25% pa for next 3 years with improved Operating margin %
• Mix of revenue split between Govt. & Private orders (expect to be 50:50 over 2-3 years )
• Geo spatial and ER&D revenue mix (would be 50:50)
• Geographical penetration beyond Maharashtra and UP
• Data Centre revenue

Discl : Invested and hence views may be biased