Recent Developments:

Capex delayed:

The delays in the construction of their new manufacturing Unit-3 primarily attributed to several factors beyond their immediate control. These challenges included adjustments required for the installation of specialized equipment, unexpected structural issues necessitating reconstruction efforts, and more recently, disruptions caused by an unusually prolonged monsoon season and associated labor shortages. The company is now more proactive and assured that every effort is being made to bring this project to fruition within the revised timeline of December 2024.

Post Capex Completion:

Post installation of new Salvagnini machine for the fabrication of elevator components, the business expects to boost production efficiency by threefold. The company now has a 3-3.5x asset turnover. As a result, based on the net asset block of Rs 50 crore following capex completion, the company may generate a topline of Rs 250-300 crore. Operating leverage will become apparent starting in Q4.

Reason for losses in Steel polishing division:

1. Raw Material Procurement: AIL procure stainless steel 2B coils from suppliers. These materials are initially booked under the Steel Polishing Segment as a purchase.

2. Processing and Transfer: After undergoing cutting and polishing in the Steel Polishing Division, the processed steel is transferred to our Elevator Division on a challan basis (cost basis). This internal transfer ensures that the majority of the processed steel is used within the company.

3. Revenue Generation: The primary objective of this division is not standalone profitability but to ensure a seamless supply chain for their elevator products, thereby reducing costs and dependencies in the long run.

Jun’24 results:

The company has reported a decent set of numbers with highest EBITDA margins at 19.2% despite a notable increase in employee costs and other expenses y-oy and q-o-q. This increase is primarily attributable to their expansion initiatives, including the opening of 2 new branches and current capex.

Disclaimer: Invested from lower levels and recently scaled up. No buy/sell recommendation by any means.

PB @ 7 seems highly priced. We can expect the growth at 30CAGR but y we want to buy at this price?

Dabur’s entry into the cosmetics market aims to diversify its portfolio, leverage its strong consumer base, and capture growth in the beauty segment. By acquiring brands like NewU and exploring new ventures, hope it expands its market share and capitalize on the booming cosmetics industry.

Can anyone validate the company’s interpretation of the Net Worth criteria is correct? On a consol basis they have met the threshold since FY21 but due to the merger last year the clock gets reset? That doesn’t make much sense.