Company held it’s first con call. Some of the risks are now non-risks based on the explanation from Mgmt.
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“valuation is steep, 65 PE”. PE won’t be appropriate measure at this stage because major part of the earning is from interest out of 1200 odd cr. in the bank. This money and what they make next few years will get utilized in the service centers which they want to setup. A back of the envelop calculation of their core earning for FY25 would be (going by their guidance) 7000-8000 cr. topline and 2.5% EBITDA margins. So, 175-200 Cr. EBITDA, They plan to spend about 400-500 cr. in setting up these service centers per year @ 25Cr. per center and 20-30 centers per year. So some appropriate depreciation and the most of the EBITDA + interest income should should go to PBT. 3400 cr. of EV for 175-200 cr. of EBITDA looks decent ?
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With a call behind us, the 2nd risk is now taken care.
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Risk to expansion and question on business model - This should monitored.
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Risk of dilution : Mgmt. clarified this point in the call. They don’t need much additional money for nearly 20x growth in next 5 years. In fact that’s what makes this an exciting opportunity.
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Thin Margins : Most often inventory losses & operating deleverage are the enemy of thin margin business. Mgmt. tried to argue against the possibility of inventory losses in this business. It will be a very interesting battle to learn form.
Disc: Invested after the concall.
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