A great thread on this unique business in India. Many people have contributed diverse views and its helpful for others to understand the business as one go through the thread.
I have known about PDS for some time now. However, today I decided to read more about it. I went through the above 98 comments in this thread. The thread started in Oct ’21. As I went on reading, parallelly I also used screener to see how (financial) performance has moved and how share price has moved.
I always liked the business model of PDS. A unique business in India providing platform to global customers and suppliers. So I wanted to study this company before I decide to invest. (I was almost certain I will invest in this company). After studying this company for past 3 hrs. I am certain, I WON’T invest in it. Why? Because there is no margin of safety in current valuation (downside is not protected) and upside is in imagination. Errr… Management guidance.
My first suspension developed when I read company will start manufacturing operation in Bangladesh. But why? PDS was demerged from Pearl Global to focus on SAAS model whereby manufacturing business remained with latter. Then why go back into the same capital intensive, labour intensive diversification? The logic of “state of the art factories” doesn’t justify starting a vertical from which they were separated in the first place.
For the past 3 yrs (since this thread has started), share price appreciation of ~100% is only because of rerating. There is no increase in profit (profit has actually reduced).
Rerating seems to be because of management guidance of $2.5Bn revenue by FY27 $5bn revenue in 5 yrs (5-5-5 guidance). A game of guidance works wonder in bull market.
For FY24, PAT margin to a laymen investor will look like 2% (i.e. 203 / 10373). However, it seems management think this is 3% after doing some financial calculation. I wonder what will be actual PAT margin when management will say 5% in FY29 (provided they reach there).
In US, they will grow multiple from 0 revenue in FY25 to $800 mn revenue in FY28. I never knew doing business in US is so easy.
A simple business that started as SAAS has spanned out into multiple verticals having too many moving parts.
As a reader, I am sure you will sense sarcasm in this post. My point is, this investment looks good because we are in a bull market. When the tide turns, there might be nothing but memories. I am sure many will not agree with me (and they shouldn’t). But that’s the whole purpose of this forum to have diverse point of view.
Disc: I am a devil’s advocate.
| Subscribe To Our Free Newsletter |
