Antony Waste – Long Term

Hi All,

I hold Antony Waste & I got a question after listening to the last concall. The current ROCE is 14% & the management says it’s not going to increase due to the capital intensity of the business. ROE is around 16% & the management stated that it will come down to 9% levels. Management is guiding for ~25% growth in the topline & said that the OPM will stay around 23% over the next 3-4 years. Debt levels as per my understanding of the past & their future guidance, management is consecutive & thus, debt should remain low to nill. In that case, can we model it like below over the next 2 years? Due to the return ratios either staying stable or coming down & the very high dependence on the small governments, the business may not be able to command higher valuations unless the revenue mix tilts more towards higher margin projects (waste processing, vehicle scrapping, waste to energy, etc).
Revenue after 2 years at 25% cagr comes to ~1450 Cr.
EBITDA at 23% margin, comes to ~330 Cr.
Interest + Dep ~110 Cr.
PBT ~220
PAT ~154
EPS (provided same share count) ~54
PE remaining between 15-25:
15 PE: ~770
20 PE: ~1080
25 PE: ~1350

So questions :

1. Does it make sense to have such businesses where the probability of better profitability, return ratios over 5 years is low, in our core portfolio?
2. CnT business seems a commodity & can face steep competition even from small regional players then does the management have the capability to venture into the new value added areas?
3. It seems that even valuation of sub 20 levels is not cheao for these businesses, what should be a good margin of safety?

Please reply as much as you all can to enlighten all of us.