Pix showed resilient financial performance this quarter where every other Mfg companies are facing headwinds due to sluggishness in demand in exports.
QFY25 performance
Sales stood at INR 159 Crores, up 30% YoY.
Operating Margins at 32% all time high.
PAT excluding other income up 75% YoY.
OCF of INR 66 Crores for H1 FY25
The reason for this performance is still not clear, but I have tried to connect dots.
Gates, one of the peer of Pix in exports has shown same earning surprise in their latest quarter.
Gates has raised the midpoint of its adjusted EPS guidance to $1.35 for 2024. Approx 80% growth if they achieve it from FY23 levels. Market has taken this as positive stock is already up 35% after announcement and trading at 16 Times P/E FY25.
In NA Pix major focus is on replacement market, here’s what Gates management has to say on replacement market. That’s maybe the reason for the sudden spike in EBITDA margin for pix.
Even though Gates Q3 sales is down by 3%, EBITDA has increased by 170 bps mainly attributed to pricing and favorable channel mix. Agriculture and Construction still showing demand weakness.
If this type of earning surprise sustains then we can say see this stock is perfect candidate for GARP category.
Pix is slowly turning into a cash cow they need to find avenue for deploying this cash otherwise it have no use rather than to return it to shareholders in the form of dividend/buyback
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