Focus Lighting & Fixtures Limited (SME)

While we as investors have a way/expectations to look at performance, it would be worth to see promoter perspective and then validate two to see if there is synergy

There are broadly two sets of biz segments – established with good growth(retail B2b, exports etc ) and emerging with exponential growth (Railways and infra etc)

• Focus has been predominantly a retail(B2B – showrooms etc) focused co – FY 23 at 60%+ revenue( this was majority part in FY 22). This is supported by credentials, financial hygiene and a well oiled engine to generate predictable growth – if promoter were to pursue only this track – most of challenges will go away and we get a 20-25% CAGR biz with decent margin, cashflows etc.
• Railways – seem to have two parts and promoter is quite bullish in tnear term(supported by sector tailwinds)
  —- Standard tender based bidding they did sub 2 cr in FY 23(at 20% so 10 cr tender win) – FY24 at similar win rates but at 80% they aim to do 20 cr type (at 80% need 25 cr tender win as approved vendor) – logical to assume Q2 onwards when developed vendor approval comes.
  —– Exploratory – IoT based solutions – could be large but lets leave it out of calculations for now –
• Infra – this is the vertical which is making all lumpiness and also presenting enormous potential, they have done delhi ariport and two projects like bade baba/surat fort in hand (together ticket size near 30 cr) – mgmt intent is clear that ticket size will only go up and they are prepared for cash flow impacts.

This is a high growth story where jockey wants to run show its way and not be judged for v short term in return for mid term potential (akin to PE space), will have spikes to an extent where mgmt itself cant predict near term.

Would be watching out for (note below are pure speculation basis FY 23 base and base growth 20% in existing biz/mgmt guidance)

• Railway Dev approval, wins and rev run rate (Q2 onwards) = 20 cr FY 24
• Retail and exports run rate and margins (Fy 23 base of approx 125 cr together) = 150 cr+ FY 24
• Infra – Current order execution (Temple + heritage fort) + new wins quantum and WC = 30 cr+ ?

there is no doubt that stock has had one way move from 100 to 800 type and euphoria post Q3 call, and a 31% fib retracement puts it at near about 580-600 level – will also bring valuations closer to 750 cr/ 32X TTM basis or 23 X FY 24 basis (going by mgmt claim for 30% growth). Not cheap but not overvalued either for high growth.

D – invested and could be wrong in assumptions, mgmt may surprise on upside given optionality or struggle in cashflow /execution given nature of infra biz(though they know what they are getting into), heavy R&D disproportionate to size of biz is another risk