I recently started tracking this company and based on initial looks, there seems to be many points in company’s favour. However, my biggest concern is future growth potential when the overall FMCG market will grow in single digits in terms of volume especially when big FMCG players would always strive for efficiencies with their fixed assets.
Also, it looks like their customers are majorly big FMCG brands like Mondelez, Nestle, etc. who will have superior pricing power against a 1000 Cr company, so significant margin expansion also seems less possible.
One sectoral tailwind that I feel should benefit Axtel is the emergence of new age D2C brands and if only a few of them turn out to be big players of tomorrow, Axtel with its good quality and better pricing than European players could get their business. I don’t think a scenario where significant growth will come on the back of traditional FMCG giants.
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