The company is well-poised for growth and there are multiple variables which are likely to support:
- Increase in capacity utilization from current lows of 55-60%. With no major capex planned, expect operating leverage to play out.
- Scope of margin expansion from current 9-10% to 12-13% in the short to medium term
- Deleveraging (to repay debt of 140 crores in next 15 months). Could be even higher if company generates better CFO
- Integrating manufacturing facilities for better operating efficiency
- Topline is expected to grow at 20-25% and with all the variables playing out, the bottomline could easily grow by 30%+
- Likely to generate CFO of 350+ cr in FY24 which values the company at 8x of CFO (very reasonably priced)
Obviously, there are risks in terms of higher customer concentration and external vulnerability to slowdown in 2-wheeler market. But on an overall basis, the risk-reward ratio is quite favourable at the moment. Any thoughts?
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