Hello Sir,
Hope you are doing well.
Yesterday, we released our new stock recommendation for our Alpha and Alpha + Members and would like to share with you details on the same.
It’s a leading company from the Building Products segment. Company’s main growth and profit driving segment has grown more than 10x in terms of sales and profit in the last 10 years.
Based on our research and the details shared by the management, we believe there’s a strong likelihood of
- Company scaling up beyond Rs 1,000 crore sales and
- More than doubling its profit in the next 3 years
The stock is currently trading around 2 + times sales.
Key points about the company:
- 30 years + old company and the largest in its main business segment in India
- Growing market – The segment in which the company operates is expected to record 6% + volume CAGR in US over the next few years
- Growth – Main business segment has grown more than 10x and EBIT 13x since FY 14
- Capacity addition – Sometime back, company more than doubled its capacity and even now there’s good headroom for the capacity utilization to increase
- Technology upgrade – Company is working on technology upgrade to introduce innovative products with potential for 20% higher realization
- Balance sheet – In the last 12-18 months, the company has reduced debt on the balance sheet by around 100 crore
Normally, we don’t like to project numbers 3-4 years down the line. However, based on what the management has shared and our assumptions, we believe the company has the potential to cross Rs 1,000 crore sales mark in the next 3 years.
Further, assuming different EBITDA margin scenarios, there’s a good chance of company doubling its profit or even higher in the next 3 years.
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 15-25. In case the market attributes lower valuations to the business, the returns can be lower than expectation.
(End)
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/
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Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
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