Notes from recent Q2 FY 24 concall

Business:

Revenue

• Revenue from operations: Rs 205.3 crore up 58% YoY
• Revenue in the previous quarter: Rs. 206.81 crore
• Compared to QoQ revenue, India segment revenue went up by Rs 20 crore but overall revenue declined by Rs 1 crore. Additionally, most of the increase in India revenue came from AMC re-pricing. I need to understand if the AMC revenue is recurring or one-time.
• Revenue from “Product segment”: Rs. 174 crore up 68% YoY (contributes 85% to overall revenue)
• Revenue from “project and services”: Rs. 31.2 crore up 31% YoY
• Revenue contribution from the top 5 clients for the quarter is 28.8%
• Order book: Rs 705.1 crore including Rs 648.2 crore of the products business and Rs 56.9 crore of the projects and services business. Since TTM revenue was Rs 788 crore, the “book to bill” ratio is 705.1/788 = 0.89
• Order book in the previous quarter: Rs 758.6 crores including Rs 689.1 crore of product business and Rs 69.5 crore of project and services business

EBITDA margin

• EBITDA margin: 25% up from 9% YoY but in Q1 the same was 30%

Net Profit

• Net profit: Rs 44 crore up 305% YoY!
• Net Profit in the previous quarter: Rs. 53.6 crore

Cash position

• Total cash including investments in mutual funds, bank deposits, tax free bonds, etc. is Rs 718 crore.
• Considering current market cap of Rs 3778 crore, the cash balance constitutes to 19% of the market cap.
• In other words, since 2.68 crore shares are issued, Cash per share value is ~Rs 268
• Enterprise value = 3778 + 0 – 718 = Rs 3060 crore
• Management stated that there is no intention of investing cash via acquisition. Board to decide about dividend or buyback

Management

• Management initiated re-pricing of annual maintenance charges across all contracts a few quarters ago.
  • Most domestic contracts have been revised with higher annual maintenance charges. Oversees contracts are in the process of renewal
  • Management believes that the product offering is high quality and is priced low. Hence they are optimistic about re-pricing going smoothly with international customers as well. So far the customers have agreed to renew contracts at higher prices. Most of the revenue increase in Q2 FY24 came from renewing annual maintenance charges.
  • It will take upto FY25 to complete the re-pricing exercise
• Bench strength is not applicable. After training employee starts on product or on project right away.
• The current employee strength of 1908 will go up by 300 in coming quarters. The addition will encompass all departments including engineering, sales, marketing, etc.
• Per management, business is lumpy but there is no seasonality. Need to understand better
• Spent 8 crores on marketing as management believes clients do not understand tremendous value addition. They declined to confirm that the marketing expense was to enter a new geography. However, they did say that the next leg of growth will come from international markets. The marketing expense will be a recurring expense.
• Want to focus on non-Indian customers. Expect growth from various geographies soon
• Expect an announcement of new deal wins in near future. Large deal for FinnAxia offering is still in pipeline
• Management is going to continue with marketing spend and hiring. However, since revenue is bumpy, the margin is also going to be bumpy
• Total addressable market as per management is $20 to $30 Bn since software cost for the lending business is between 0.5% to 1% of AUM
• Voluntary churn by customers is less than 5%
• There is going to be spillover of revenue in Q3 since certain orders in Q2 did not come through

Risk

• Due to the nature of the business, the revenue growth is bumpy – I need to understand better
• Data about customer churn, attrition and new product/feature development-related information is not shared by management
• 20% of market cap lies on the balance sheet in the form of cash with no visibility of how the management intends to use it

Ganesh Benzoplast finally announces their new LPG terminal in JV with Confidence Petroleum and BW LPG Holding. I have captured the notes about this below.

06.12.2023 LPG terminal @JNPT

• LPG terminal will be the largest cryogenic storage terminal at JNPT
• Malabar invests 27 cr. @160 share price and promoters infuse 3.15 cr. @175 share price
• LPG terminal will cost 550-600 cr. for 60,000 ton (~120’000 kl) static capacity which will contribute to 150-200 cr. sales (70-75% EBITDA margins). Will be funded by 350-400 cr. debt, with rest coming from internal accruals & fund raise of 30 cr.
• Terminal should be commercialized by Q1FY26
• It’s in a JV with Confidence Petroleum and BW LPG Holding (50% shareholding for Ganesh, 45% economic interest for Ganesh)
• Confidence BW will guarantee certain monthly volumes from LPG terminal
• Cargill uses their railway terminal at JPNT, this terminal will also be used for LPG
• Cochin and JPNT are running at 100%+ utilization, Goa utilization is 40-50%

Disclosure: Not invested (no transactions in last-30 days)

A VFX Engineer take on Generative AI [Starts at 59:00]

Deep Dive into VFX vs CGI vs GenAI

Hi Vikas, I had a question on NSE. I saw that it is quoting at < 25 pe in grey market. I have heard the buzz of its ipo that it will have huge subscription. I am a new investor with almost no knowledge of grey market. Wanted to know your opinion on why nse trades so cheaply. Is it because of the colocation scam ?

Hi Value Pickr

Back with the bulk deals log here.

6th Bulk Deals Log

Date: 7th December, 2023

Links:

NSE: https://www.nseindia.com/report-detail/display-bulk-and-block-deals

BSE: BSE Equity : Bulk Deals

1. Compucom Software

Entering Entity: Multiplier Share and Stock Advisors Limited

Entry Price: 33.85

Entry Quantity: 4,65,239

The final entity this business services is the Government of Rajasthan which doesn’t inspire a lot of confidence for me. The debtors cycle is extended, however the CFO/EBITDA conversion is plain weird. Not sure if I am interested in this company but Multiplier Share and Stock Advisors have gotten involved with successful businesses earlier, that is why I covered this business.

2. Cosmi CRF

Entering Entity: YUGA STOCKS AND COMMODITIES PRIVATE LIMITED

Entry Price: 371

Entry Quantity: 20,000 shares

This is a railways related business, so this might be late to the party, but does look statistically cheap at about 2X sales multiple. Definitely worth a look.

3. Dhyaani

Entering Entity: SRINIVASA RAO GODDATI

Entry Price: 103

Entry Quantity: 10,000 shares

The screener page of this company shows a sharp one day increase in price. I think this is because of the bonus issue date change and not the actual movement because the trading view page is completely different.

But all the traction this industry is seeing is validating my hypothesis on the marble industry. It is doing really well.

The number of good quality investments coming up on bulk deals are reducing. Is it a sign of a top? I’m not sure,I think I’ll be in a better position to judge this after a few months. But for this thread, I am considering talking about a few more things like:

1. Covering stocks which have seen extensive promoter buying
2. All stocks from certain sectors which can be expected to do well in the future.

Let me know if these sound like good ideas.