Disclaimer – Below Analysis is NOT a BUY/SELL/HOLD Recommendation. It is for educational purpose and it can be used for educational purposes further. There could be lot of things which might have been missed in my analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Valiant communications

Business —

Established in 1993., Valiant is a manufacturer and exporter of a wide range of communications, transmission, protection, synchronization and cyber security products to a wide range of sectors including Power Sector Infrastructure – Sub-stations, Distribution, Transmission, Utilities – Water, Oil and Gas, Solar and Wind Energy, Railways and Metro Rail, Airport Communication Networks, Corporate Networks, Financial Institutions, Mobile / Cellular Communication Networks, Defense Networks, Synchronization applications for autonomous driving technology – automobiles, providing cyber security to core services (Power, Railways, Airports, Utilities) and other emerging sectors and technologies.

It is an approved manufacturer to some of the major power utilities including Power Grid Corporation (India) and various National and State Electricity Boards, with track record of successful installations in more than 3000 power sub-stations worldwide including at 765kV power sub-stations, one of the highest functional power sub-station levels in the world.

Customers or target industries

Power Utilities

Cybersecurity

Government and Corporations

Moats —

Biggest moat is long term relationship with clients including home grown Tejas networks (a growing company acquired by Tatas)

Being the only Indian manufacturer for various products in select domains, the Company has a distinctive advantage over its MNCs
competitors. VCL is the only manufacturer of PMUs in India. There are a very few successful manufacturers of the PMU in the world with Valiant being among those few. The VCL PMU has been tested, validated, approved and Type Tested by CSIR‐National Physical Laboratory, New Delhi, India.

Strengths

An ISO 9001:2015, ISO 10001: 2007, ISO 14001: 2015, ISO 18001:2007 and ISO/IEC 27001:2018 certified equipment manufacturer of Communication, Transmission, Protection, Synchronization and Cyber Security solutions.
Successful installations in over 110 countries, worldwide.
Global footprint
Valiant has the technical know-how and expertise to integrate legacy communication equipment, that is already installed in the network, and to inter-operate with modern communication hardware

Region of operation

Global footprint with offices in U.S.A., U.K., Canada and India.
Regional Distributor offices in 25 countries

Company has three subsidiaries with one each in UK and USA

Valcomm USA, has now been an approved vendor with Hargray Communications Group and Anixter (a Fortune 500 company).
Valcomm USA made pilot project supplies of communications and synchronization equipment in the US to Power Utilities, Energy Cooperatives, Shale Oil & Gas, Hydro companies, regional Cable TV, Broadband Internet Service Providers and Government
organizations. Whereas, Valiant UK has also been approved now as registered vendor with Siemens for Lithuania and Latvia.

Some triggers and updates ( Market size, order wins etc)

Opportunity Size

Two research reports on different segments shows huge scale of opportunity in MPL router and Cybersecurity market size in next few years

Company is also engaged in emerging technologies and Next generation transmission equipment

IP/MPLS Aggregate Routers
• IP/MPLS Edge Routers
• 1G / 10G
• 40G / 100G
• 1G (optical and electrical)

TDM and IP/Ethernet communication for transmission for military/defence
PRP (Parallel Redundancy Protocol) Switch for zero packet-loss transmission-switching
Fail-Safe, Transparent Firewalls designed for IEC-104, DNP3 and MODBUS RTUs
Phasor Measurement Unit (PMU)*
Phasor Data Concentrator (PDC)
Data Encryption Equipment.

Recent order wins

Valiant has been recently won orders from EGAT Thailand to provide Synchronization solutions in the Thai Utility network.

Valiant has received orders worth 34cr for supply commissioning of its Communication, Protection and Automatic Ethernet Failover solutions from Tejas Networks to be executed in FY23

Valiant has also been short-listed by Emerson and Yokogawa for their requirement of Synchronization solutions.

Valiant has entered into 4-year rate contract last year under a frame agreement with the engineering major, Balkantel OOD for Bulgarian state-owned Power Utility ESO EAD, for supply and installation of its power utility products and solutions for the contract awarded to Balkantel OOD.

Make in India, Digital India Theme

Various initiatives taken by the Government of India, such as “Aatmnirbhar Bharat”, “Make in India”, “Digital India” and “PMA Policy”, are helping indigenous manufacturers of communications, transmission, synchronization and cyber security equipment in India. Various products of the Company have been approved by major corporations such as PGCIL (Power Grid) and almost all , ISRO State Electricity Boards (SEBs). Valiant is working on various opportunities to scale its products and technologies across various utility sectors and corporates.

The Company has recently completed fully indigenous design of Routers, Firewall, IEC 61850-3 complaint Ethernet Switches along with its exclusive range of related cyber-security products which it shall be offering for the forthcoming Bharatnet, Power Grid and Railway projects.

Addition of big names as customers

Valiant Communications Ltd. (VCL) has added the following prestigious customers to its customer reference list. These include Tesla (applications for Time Synchronization of high‐speed cameras for crash testing), Embark Trucks (Self-Driving Trucks) and GE renewables (Grid solutions)

Expanding Marketing and RnD network

The Company is expanding its marketing network in Europe and South America. The Company has appointed distributors in
France, Spain, Portugal, Peru and Chile for its recently introduced Cyber-Security and Power Utility products.

Valiant Communications Limited has opened its New Office, Research & Development Center in Bengaluru, India near Bengaluru airport

Promoter holding

Promoters have been buying and increasing stake

Risks (tried to see major risks, please do due diligence to understand more on this part)

Very Small company kind of nano cap ( < 100 cr Mcap) so many inherent risks for survival for such companies

Fast rampup in orders is key along with execution. Will fast orders and execution can lead to profitability, we need to see in coming quarters and years

The communication sector being part of a rapidly changing technology orbit, the level of risk increases due to high technology obsolescence.

The business has long gestation period and inherited execution delays, consequently causes volatility in revenue recognition

Company face challenges to meet the requisite financial criteria of tender based business, for which it needs to rely on bigger entities

Cash conversion cycle and working capital cycle has been really a big risk. Need to be watchful on these two parameters consistently. Major trigger is inventory levels, which should come down with normalized operations and betterment of chip availability

Valuations —

Valuations for such small company is difficult to judge as growth can happen exponentially and company one good year can turn the tables on valuations and vice -versa. As per experience small qty in such companies can be taken and then performance observed over a period of time and as and when orders emerge.

Looking at past, such companies look overvalued,

Looking at future opportunities, Company seem undervalued

Truth lies somewhere in between!! Hence Risk management and Portfolio allocation is the key

Another important thing is to give long rope to company to perform

Your strategy can be different than mine. Your selection of company might be different than mine. So let’s not be a BLIND FOLLOWER

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It is for educational purpose and it can be used for educational purposes further. There could be lot of things which might have been missed in my analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

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