E2E is not a company that is to be judged or invested in based on screening filters. This is evident by the fact that this stock never got talked about much or hyped. It just didn’t meet anyone’s criteria based of its unique circumstances and so didn’t show up on most screeners.

The PE that you are seeing is momentary. A doubling of earning would lead to halving of the ratio. The question is would that take 1 year, 2 years, 10 years? So, the discussion of it is not really from the perspective of today. E2E’s proposition is from a future perspective.

Talking about the future, anyone who does a deep dive into the company’s product and offerings, will know that this is a capex heavy business, despite the fact that the value generation happens at the software layer: the custom software the comp. has been building over the past decade. It is due to this that the debt also comes into play. Tarun Dua is a not a business magnate. He’s a tech guy who happens to run an IT firm. Fiscally, he’s been pretty conservative till now. Also, the way the company pivoted from a cloud player to a AI first cloud player is understated and under-applauded, showing his firm understanding of the industry and a nose to sniff out the directions the winds are blowing.

It is due to this upcoming obscene demand stemming from AI workloads, company needs to expand quickly. The cash reserves are not sufficient and raising equity is an option, just like debt. The question is not the high/low debt. The question is whether you think the comp. will be able to pull off the large risk it is taking.

To answer that question, I turn to 3 things:

1. The asset turn – which for E2E is awesome
2. Whether the comp. will use the fund judiciously – to be seen. Will raise eyebrow if c-suite gets big bonus cheques this year
3. whether the demand for the assets purchased (mainly GPUs) is good. – In recent concall, Dua estimated that their top GPU H100 has 90-95% capacity utilization though they have reserve GPUs and can acquire more if need on a short notice.

#1 is a number thing that is verified.
#2 is a time thing. Let’s wait and see
#3 is a trust thing. Whether you believe this statement or not.

IMO, the recent quarterly results are a good indication of what’s to come in the next few quarters. I think we’re looking at a multiple times EPS growth in the next 4-6 quarters. How that works for the valuation will be dictated by Mr. Market.

I have been invested since E2E had a 65cr market cap and still believe the company is walking the talk and will continue to hold. I am probably biased.

Disclaimer: I am invested. This is not investment advice.

Here are the key points from the Q1 FY25 concall:

1. Capex Commitment: The management clarified that they are not committing to an 800 crore capex. In the previous concall, they mentioned that ideally, they would need to invest 800 crore capex, which was misunderstood by investors. This quarter, they have denied providing that guidance.
2. *Demand and EBITDA Margin: Despite not committing to the 800 crore capex, the demand remains very high. The management expects to maintain the same EBITDA margin going forward.
3. Strategic Shift The management is shifting their strategy to focus on high-end players, whereas previously, they were onboarding all small players. They believe the market size is sufficient to accommodate more players like them.
4. International Business: Their medium-term goal is to achieve 30% of their business from international markets.
5. Technology Implementation: Coming quarter, they plan to implement 256 H100 chips, bringing the total to 700 H100 chips.
6. ARPU Improvement: The management is optimistic about improving their ARPU from 7.5 lakh.
7. Current Quarter Capex and Utilization: The current quarter capex is 23 crore, with a 90% capacity utilization rate. Their MRR is 14.5 crore.
8. EBITDA Margin Sustainability: The management is optimistic about sustaining the EBITDA margin even with the emergence of more players.

1. good revenue visibility for this year , should aggressively bid for projects that govt looks to accept bids for the first 100 days , and election year is going behind so order inflow should only increase
2. debt reduction , reducing finance cost
3. overall govt focus on infra, TDP led andhra to mostly receive large `infra package and alliance should remain committed to the sector
4. reasonable valuations on dips to accumulate as well
   key risks
5. execution risk
6. slowness in debt reduction might lead to back ended value unlocking
7. lack of clarity on the overall business mix and how that will emerge in the next 5 years , due to the coal business

Hi dpk,
I am invested in Samhi for a horizon of two to three years but the discussion was going for fy25 year end valuation scenario and i joined in and i kept the same exit multiple.

Yeah Current multiple can be considered for fy25 end valuation. I don’t foresee any major change for the multiples to change -negatively.

Beware of any company which is giving exponential guidance… The company is yet to establish brand presence… Cannot find its products in any retailer shop in hyderabad… No operating cash flows!