Hello Sir,

Hope you are doing well.

We have released our new stock recommendation for our Alpha and Alpha + Members and would like to share with you details on the same.

We focus on growth oriented, owner operated, leading companies in their respective segments that are trading at reasonable valuations and invest with a horizon of 3-4 years.

The one shared on Friday fits our framework as it’s a sub Rs 2,500 crore market cap stock, among the top 2 players in India in the building products it manufactures, introduced a new product line, completed a major CAPEX of over Rs 500 crore and available at only ~1.1 times sales.

Key points about the company:

  • 30 years + old company and among the top 2 in its line of business
  • Growth – Over the last 2 years the company has grown its sales by ~60% and PAT by ~50%
  • Product diversification – The company has just added a new product line, and this could help it potentially double its profit in the next 3-4 years
  • Capacity expansion – The company has spent Rs 500 crore + on adding a new product line. Further, in its existing product line, it has expanded capacity by 39% since Jun’22
  • Margin expansion – The company has taken a few price hikes and can benefit from operating leverage as the volume growth is expected to be in double digits
  • Expected reduction in debt – Recently, the company took some debt to set up the new product line. We believe, the debt may start reducing FY 25 onwards with strong cash flows
  • Promoter’s skin in the game – Promoter’s hold more than 50% stake in the company and since Mar’19 their holding in the company has increased by more than 100 basis points
  • Valuations – We do not like overpaying for a stock. Currently the stock is available around 1.1 times sales against the median value of 1.4 and on the higher end it also trades around 2.4 times sales

Normally, we don’t like to project numbers 3-4 years down the line. However, based on industry trends and some assumptions, we did some number crunching and believe there’s a high probability of company doubling its Profit to Rs 180 crore over the next 3-4 years from the current 80-90 crore PAT.

Company’s major peers trade around 15-30 times earnings and around 2-4 times sales.


You can get this new recommendation along with other recommendations, by subscribing HERE


Risks – Our investment thesis incorporates assumptions about growth; if the demand doesn’t grow at the expected rate or if the cut-throat competition results in price wars, the company might end up reporting lower numbers than our expectations.

We have assumed exit multiples in the range of 15-30. In case the market attributes lower valuations to the business, the returns can be lower than expectation.




Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


SEBI Research Analyst Registration No. INH100001690
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Name: Ekansh Mittal     Email Id: [email protected]    Ph: +91 727 5050062

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Disclaimer: http://www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to investors on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690

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“Investment in securities market are subject to market risks. Read all the related documents carefully before investing.”

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision

This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.

We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.

Disclaimer: You can access it here – LINK

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