Continuing further on my notes and views on the business –
Capital goods as a sector continues to have tailwinds. Historically the sector tends to have prolonged upcycles and down cycle. The cycle bottomed out in 2019-20, I think we easily have 3-4 years, before signs of a peak start emerging.
Don’t quite agree on this.
The company enjoys healthy cash on the books, has a manageable debt position, swelling order book and led by experienced management team. Base business / standalone entity has grown its revenue at CAGR of 40%+ in last 3 years. The order book has jumped by 51% from 212 cr to 324 cr. Enquiry pipeline has grown more than 2x YoY.
The management has a judicious and prudent approach when it comes to inorganic growth. The current factory unit with an asset turns of ~ 5x being a case in point. They believe in completing one acquisition at a time, stabilizing that business, and then pursuing the next one; rather than pursuing multiple acquisitions in a short span. Considering the healthy cash on books, won’t be surprised if they come up with another acquisition announcement towards the end of this FY / early next FY.
Synergies from the ME acquisition will start kicking in this FY; and we should see better margins too in coming quarters, aided by economies of scale and a better product mix. (Q1 FY 25 revenue for M.E was at 21 cr vs 5 cr YoY). Expecting M.E. to contribute approx. 65-75 cr in this FY. And around ~100 cr in FY26.
The newly acquired plant should start contributing to topline in Q4 (post completion of process by Q3). Going by the current run rate, expecting the consol FY 26 revenue to be around 730-750 cr (530~540 + 110 + 100).
Disc: Invested, biased
| Subscribe To Our Free Newsletter |
