I have written below my investment thesis on Ceinsys tech

Since the risks are high when I invest in small & micro caps ,I personally like a company with the following attributes :

1)Good management with strong execution skills & skin in the game (bcos we are betting on the jockey )

Sagar Meghe’s (Promoter ) political career has been marked by his involvement with multiple political parties and his efforts in both politics and business. His career has been shaped by a blend of familial influence, a strong commitment to education, entrepreneurial initiatives, and a vision for regional development.

After joining BJP in 2014, Sagar Meghe’s political career has been influenced by his family’s strategic shift and their connections within the party. The move to BJP was largely driven by the influence of Nitin Gadkari, a senior BJP leader and personal friend of the Meghe family, who played a significant role in welcoming them into the party .

Sagar Meghe does not appear to hold any active responsibilities within the BJP . After facing political setbacks, including a significant defeat in the Lok Sabha elections from Wardha, Sagar Meghe reportedly moved to Dubai with his family.

Apart from him the management team is professionally managed with diverse experience. Ex .Mr. Prashant Kamat – WTD, Vice Chairman and CEO Mr. Kamat is the Whole Time Director, Vice Chairman, and Chief Executive Officer at Ceinsys Tech. He was previously the Chief Executive Officer at AllyGrow. As a techno-commercial professional, Prashant has a progressive career of over 28 years which is characterized by significant accomplishments and increasing responsibilities. He has a proven track record in operations, finance, strategic marketing, business expansion, and new product development.

Skin in game -The company raised 235 cr (at 559/- share price )recently where Rare capital came in as strategic partner .The promoter themselves invested close to 100 cr !

Rare capital (main partners ) brings in Ceinsys’ data center capabilities (not physical but tech enabled , scale of Amazon & Google ).They have built a 3200 Cr revenue company in 10 years and sold it for $217m .

2)A company which has competitive edge /Right to win and have clear focused “strategic intent “ for years .I can clearly see “sustainable profitable growth “atleast for next 5 years –all the 3 words are very important for me –sustainable ,profitable and growth !!

Ceinsys tech is a technology-driven organization that specializes in offering Geospatial and ER&D solutions by providing independent opinions, actionable insights, and efficient solutions across private and government enterprises across the utility, infrastructure, natural resources, and Manufacturing sectors .

KEY INISGHTS – Current predominantly in government tender business where their hit rate of tender to order is 90%+

.I think its because of political connections , first mover advantage ,good team with width and depth of knowledge (well qualified team 82Engrs,PhD.M.Tech.MS,18%- MBA,ITI-Diploma holder ) having been there for long with VERY LOW 1% attrition rate and a very lucrative retention rate of repeat customers of 40%+

From where growth will come From :

The company is leveraging on India’s projected geospatial market growth which is expected to grow at CAGR of 13.5% by 2025.

The company is focused on capitalizing on substantial funding opportunities provided by government initiatives such as National Infrastructure Pipeline (NIP), Jal Jeevan Mission, and Namami Gange program, with a proposed budget of approximately USD15 Billion for water-related projects .Companies order book is now 1000 cr + L1 bid of another circa 300 cr majorly in this area (Present large Geography is Maharastra + UP ,seed geography is Bihar ,Jharkhand and Rajasthan –hence growth will come from Geographical reach also)

Focused on tapping the growth avenues in smart water management and renewable energy sectors, as India’s aims to add over 340 GW of renewable capacity by 2030.

The acquisition of Allygrow allows Ceinsys Tech to broaden its service portfolio by incorporating Allygrow’s expertise in core engineering design, development, and manufacturing engineering services. This expansion is particularly significant in the automotive and aerospace sectors, where Allygrow has established proficiency

In 2018, Grammer AG, of Germany(USD 2.5 Bn revenue company ), specializing in automotive interiors and commercial vehicle seats, teamed up with AllyGrow, to form a joint venture in India (70% Ally Grow, 30% Grammer). The JV is functioning as an extension of Grammer AG’s R&D Centre and providing high end engineering services to Grammer global locations.

Establishment of a new vertical MEG-Next which focuses on innovative product development activities related to Metaverse, Ed- Tech, Gaming (not right strategic fitment as per me,lets see ) and Mobility

3)Company should have pricing power

Operating margin beyond 15 % + with increasing sales according to me is a good sign of pricing power .

4)Available at reasonable valuation ,which we all want .

Its not cheap but reasonably valued through reverse DCF method .If we expect 20% share price cagr return for next 10 years the implied PAT growth is 24% cagr which I think this company can achieve given sales growth would be above 15% cagr because of sector tailwind hence operating leverage would play in and PAT growth would be above 25% cagr (see past track record below for 5 years ,sales growth 7% ,PAT growth 59% ) .I expect this to be like Tata Elxsi in Geo Spatial sector !

5)Risks:

• Political risk
• Cultural integration (not sure of Organization structure )
• Debtors risk in Govt outstanding

6)Key things to watch out for me :

• Top line growth according to me would be above 25% pa for next 3 years with improved Operating margin %
• Mix of revenue split between Govt. & Private orders (expect to be 50:50 over 2-3 years )
• Geo spatial and ER&D revenue mix (would be 50:50)
• Geographical penetration beyond Maharashtra and UP
• Data Centre revenue

Discl : Invested and hence views may be biased

Listen to the podcast from 32:00, he explains it pretty well and quite satisfactorily. You’ll find your answer there. He has walked the talk. It’s like a concall before a concall, to be honest, with the management.

NES had the infrastructure. They have the background with their experience in executing office projects. Cost minimization is where they are focusing on, esp. the “low-side” which he mentions, i.e. the ancillary expenditure like wiring, pipes, etc. Made sense to me. Rest, the numbers will only show.