The current CEO/MD Mr. Bharat Vageria is more down to earth and nose-to-the-ground compared to his predecessor (and co-founder) who was very flashy. Current management takes all questions in the con-call seriously and answers them properly even if questions are repeats/answers are available in the PPT.
While the overall growth numbers in the last few quarters speak for themselves:
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Company has tendency to get into niche areas whose growth/TAM is difficult for outsiders/investors to understand – I haven’t been able to understand even by asking questions in multiple recent conf-calls about how big the oxygen cylinder opportunity is and if it’s rewarding enough for management attention.
- If it is for ambulances, are there a handful of businesses that equip an ambulance with oxygen cylinders and may be convinced of their efficacy ?
- Not sure how big a sport is mountain-climbing in India for a Rs.4000+ cr revenue company to concentrate as a business vertical.
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Overseas manufacturing (~34% TTM revenue) is mostly regular legacy products (with very little composite/value-add) but still has almost same EBITDA % as India manufacturing, and better PAT %. It also grew revenue at ~24% last year and ~13-14% this quarter.
- India manufacturing (legacy products) revenue is stagnating with probably ~100cr annual growth on a base of ~1850cr.
- Even among value-added products (EBITDA 17-17.5%) the only growth driver is CNG products (cascades) with revenue doubling every year and expected to atleast double annually for next 2-3 years.
- All non-CNG value-added products (~810+ cr FY23 revenue have been growing at 10% for the last 2-3 years), with LPG opportunity not panning out as expected. With the IOC order last year (repeated this year) LPG is running at ~90% realizable capacity of 1Million cylinders and company is not confident enough of both local/exports demand to expand LPG capacity.
Thankfully CNG cascade/cylinders demand is growing rapidly and auto-cylinders are probably a good optionality after next 2 years or so (from FY26). Tata motors have mentioned that 1 in 3 cars they sell would either be an EV or CNG fueled.
LPG remains a far away optionality but left to distributors like IOC. Hydrogen needs to cross the hype stage.
Discl: Invested/following the company since 2018.
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