Thanks to initial efforts here by @Dev_S,Focus has been on my watchlist. There was an interview few months back which really brought out the uniqueness of the company for me:
https://www.youtube.com/embed/mAqrBTabnSY
Mr. Sheth articulates his company’s position & ambitions very well here. Post the concall lot of things stood out:
→ First & foremost,the ASP of Focus’ products is far higher than the well known peers(starting price of Rs. 1500 vs. Rs. 200 ASP for peers) So is profitability,as seen by far higher EBITDA margins.
→ Clients like BMW imply strong capabilities. It was interesting to note that cos like BMW,Ikea,etc. could deploy Focus’ abilities outside India too…it hasn’t yet happened yet though.
→ For a small company,it was great to see fiscal prudence. CFO mentioned that company isn’t utilizing WC limits,even in the interview earlier non-aggression on debt side stood out.
→ Business seems very scalable,especially on the Infra side. There is a possibility that many more opps for Focus lighting show up…mgt mentioned that Govt is looking to generate revenues from all/majority of historically important sites.
→ Availability of large land space leaves ample room for capacity addition. It was also clear that company is not entering business verticals just to add revenue and profitability is a key benchmark. There is a desire to sweat out existing assets to the largest extent possible.
→ Railway orders & Infra orders both are backed by solid payment terms. So cash flow shouldn’t be an issue & company should continue to have a solid balance sheet & scale revenues.
→ In the interview company mentioned having capacity to do 250 cr manufacturing revenue. Given that own manufacturing in Q3 was 37 cr there is ample operating leverage. Still,even assuming current margins company can easily do 60 cr EBITDA at peak utilization,ex-trading alone.
Overall the concall re-iterated my belief in the management. There is a constant urge to improve on all parameters with a desire to grow at high rates.
Management has also seen adversity during Covid days & should ideally continue to be prudent.
Disc.: Invested. Views are biased.
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