Allied Digital Services Ltd

Q2FY25 Earnings Conference Call Summary:

Strong Order Wins:

ADSL secured over Rs. 675 crore in new orders and contract renewals during the quarter.

Order across diverse sectors including

• Safe city and smart city initiatives order
• A leading life insurance company in India
• The world’s foremost specialty packaging company
• Global leader in the energy sector
• Public sector enterprise under the Ministry of Power
• India’s Central Bank
• Regulatory Authority in Maharashtra
• Prominent aluminum refinery in Odisha
• The largest bank in the UAE
• Global leader in silicon carbide and gallium nitride technology in the US

Financial Performance

• ADSL reported strong financial results for the quarter, with growth in both revenue and profitability.
• The company’s EBITDA margin was over 11% for the quarter.
• However, there was a slight dip in the margin year-on-year, primarily due to non-recurring expenses, such as an extra provision for ECL and expenses related to the company’s 40th-anniversary celebration.
• ADSL’s cash balance as of September 30, 2024, increased to Rs. 170 crore, up from Rs. 99 crore in September 2023
• The company is improving operational efficiency by reducing debtor days, which have improved from 87 to 72 days year-over-year

Guidance

• ADSL reiterated its guidance of achieving Rs. 1,000 crore in annual revenue in the next six to seven quarters.
• To achieve its goal of reaching a 15% EBITDA margin in the near future

Future Growth Opportunities

Cybersecurity Business

• ADSL sees strong growth opportunities in the cybersecurity space.
• The company is investing in its cybersecurity capabilities and is seeing increasing demand from customers.

Data Center Business

• ADSL is also focused on growing its data center business.
• ADSL is actively pursuing data center opportunities, leveraging its experience building and managing data centers for its smart city projects and pursuing contracts with enterprise customers for data center management and cloud migration services.
• The company is seeing opportunities in both the government and private sectors.
• ADSL is also working to get empaneled with the Ministry of Electronics and Information Technology (MeitY) for data center projects.
• There is big push from government’s on data localization

Key Takeaways

• The earnings call highlighted ADSL’s strong performance and positive outlook.
• ADSL is implementing strategies to improve margins, including focusing on more profitable service offerings, such as app support and AI, and improving operational efficiencies, such as reducing debtor days.
• The company is well-positioned to capitalize on growth opportunities in the cybersecurity and data center markets.

Disclosure: I am having exposure to this counter from long time(20 Rs level). My views can be biased.

Happy Investing,
Karthik