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.

Thank you for clarifying the distinction between Yield to Maturity (YTM) and the annual coupon rate. You may be right regarding the current coupon rate being below the aggregate cost of borrowing at 10.7%.

However, I noticed that previous bonds were trading at less than 11% YTM, whereas these new bonds are now offering an 11.5% YTM. Doesn’t this indicate an increase in the cost of borrowing compared to past issuances? This higher YTM could reflect a shift in market conditions or perhaps a change in U Gro’s funding strategy.

Share has not increase even after stellar performance. Something is cooking up here.

Latest Update on Capex:

AIL has clarified that the ongoing capital expenditure (Capex) project is still under development, and the recently shared PPT contained a typographical oversight.

The target capacities for this CAPEX, which is expected to be operational by December 24, are as follows:

The elevator division :

Other Components: Supporting parts and accessories for cabins, doors, and frames, which form an essential part of their product line, cannot be measured in specific unit terms.

In Stainless Steel division :

Note on Capacity Utilization:

All are interconnected in production process. For example, sheets may pass through multiple steps—such as embossing, matt or mirror polishing, and then decorative SS finishing—before reaching the final product stage. Thus, each process step contributes to a cumulative production journey for a single end product, and as such, the capacity utilized in each stage cannot be simply summed up as an overall utilization figure.

The primary focus area of the company is matt polishing, mirror polishing, PVD coating, and decorative SS sheets due to increased demand and customer interest especially post installation of embossing machine (put to use in Feb ’24 update); which is now commercially operational. Company has delivered trail batches to key clients and once they confirmed their complete satisfaction with the product quality, production will start in full swing.

Way forward:

AIL is expecting at least an additional topline of Rs 150cr on conservative basis post commercialization of CAPEX and successful installation of Salvagnini machine. The company is expecting to maintain EBITDA margins at 20% plus. At present, company do not foresee the need for further long term debt.

There’s already a thread for cigniti please continue discussing there!!