Good analysis, and good stock pick.I think the valuations are little high now.

I am looking for any chances to improve margins in the coming few quarters as new stores mature , if management say yes then still there is some value left in the script.

Actually I find the strategy of expansion quite great.

One can expand in two ways –

1. Go to 5-6 States together and try to gain market share.
2. Be the market leader in one state and then go to next.

The 1st strategy is expensive. In jewellery business, trust is the biggest intangible. They would need to do a lot of work to generate India wide trust, while capital at hand allows for only 2-3 stores in each state to capitalize on that. You might feel that brand building and distribution presence won’t go hand in hand.

The 2nd strategy is what they are following. Tanishq has 60 stores in Maharashtra. PNG is clearly not a market leader in Maharashtra even. Consolidating and becoming market leader in one state brings operational efficiency. Less inventory movement expenses, your market know how is better. This is why, their return ratios are quite good.

Please find below notes from promoter interview and concall transcripts. Key highlights include 6x capacity expansion

• Manufactures fin and tube heat exchangers for HVAC applications which finds applications in cooling systems of Railways, Metros, Data Centers, Air chillers, logistics, cold rooms etc.
• Exchangers form 10% of RAC and may go up to 20% for complex products
• Commercial refrigeration industry is growing at 20-25% CAGR segment where company mainly operates (97% revenues towards commercial)
• 5 types of heat exchangers viz. shell and tube, spiral, plate, special and fin & tube
o Company is mainly into fin & tube and does copper to copper and copper to aluminium
• First to develop air condenser for bus ACs
• Setup new subsidiary and machines for air cooler, oil coolers and new machines
o Plate and bar exchangers
• Focus on export markets viz. US & Europe
• Exports have increased to 15% of revenues and plans to double exports
• Exports have 2.0x margins
• Annual turnover for finned tube heat exchangers is anticipated to grow from USD 133 Mn in 2022 to nearly USD 277 Mn by 2029, almost doubling in size
• Europe and Asia are planning China +1
• In USA, there is ADD on Chinese heat exchangers
o Forecast good export on back on repeat orders plus new product lines plus new customers

Analysis
• Historically gross asset turn has ben 5-6x and with incremental capex of INR 300 Cr which gets fully utilized by H1FY27
o Commercial production from Sep-25 and assume full ramp up in at max a years’ time
o Sep-26 should be operating at overall capacity utilization of 60-70%
• Changing export mix estimated to go up to 30-35% from current 20%
• Export orders have double margin of domestic thereby high chances of PE rerating with both topline growth and margin expansion
• Estimated revenues of c. INR 2,000 Cr revenues (6x asset turn on gross block of INR 340 Cr) with 20% steady EBITDA and 13-15% PAT margins
• In Mar’26, on 1 year forward multiple of 35-40x, estimated Mcap should be INR 10,000 Cr (250 Cr Pat times 35-40x multiple)
• 3x from current levels in 18-24 months’ time (Current Mcap is c. INR 3,650 Cr going to 10,000 Cr)