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Lets Dive into our next research Idea
Marine Electricals
Read Pick1, Pick2, Pick3, Pick4, Pick5, Pick6, Pick7, Pick8, Pick9, Pick10, Pick11, Pick12, Pick13, Pick14, Pick15, Pick16
I also talked about the same company in my YT channel in ALPHA LEARNER DAY 28Oct 23
About the Company and Business —
Marine Electricals is an integrated technical services provider in the fields of electrical automation and information and communication technology solutions.
Marine Electricals offers integrated and multidisciplinary total solutions that lead to better business processes and more efficiency for customers and the customers they, in their turn, serve.
Established in 1978, Marine Electricals serves the market for about 34 years in diversified areas like Ship Building / Navy / Industries / Commercial Establishments. We are one of the largest supplier of Electrical & Automation Equipment for Marine Applications in India and Middle East Markets
In electrical engineering Marine Electricals covers the entire range of electrical engineering solutions of every size, such as low and medium voltage, energy distribution, measuring and control technology, instrumentation, infrastructure technology, electrical propulsion, integrated security, building management, access technology, system technology, and power electronics.
Buildings: All types of buildings including data centres, distribution centres, offices, government buildings, high rise building, laboratories, airports, penal institutions, leisure centres, stadiums, stations, universities and colleges, shopping centres, hospitals and care institutions.
Industry: A focus on power plants, the automotive industry, pharmaceuticals, chemicals and petrochemicals, the energy and environment market, pharmaceuticals, machine building, oil & gas, and the aircraft industry.
Marine: Naval vessels (logistic support ships, frigates, corvettes, patrol vessels and submarines), special ships (dredgers, offshore support ships, diving support vessels, crane ships) offshore platforms, cargo vessels (container ships, bulk carriers and other cargo ships), passenger liners and inland waterways vessels.
Company provide innovative state-of-the-art system solutions and products designed to meet the most exacting requirements for ships of all types and sizes through the entire life cycle. These range from coastal and inland shipping vessels, ocean-going passenger vessels, bulk carriers, tankers, container vessels, luxury yachts, tankers to specialist offshore, environmental and research ships as well as naval vessels.
One of the few companies in the world capable of supplying from a single in-house source the following:
- Electrical Power Packages
- Electrical Drive Systems
- Automation Systems
- Maritime Services
- Navigation and Communication Equipment
Employee –1000+
Manufacturing plants -6 across Goa, Mumbai, Chennai and UAE & Italy
Service centers – 14 Service Centers across Coastal locations in India ensures shorter Service Time for Clients
Subsidiary and Group companies
Evigo Charge Pvt. Ltd a subsidiary of Marine Electricals India Limited established in 2018, is an e- mobility venture, operating across the country and is visible through its brand Bijlify®. The company is one of the vertically integrated companies in the EV charging space, with its core activity being Design, manufacture and supply of various types of Electric Vehicle Chargers and powering up sustainable mobility through its mobile application under the Bijlify Brand. The company offers the complete eco-system including software, hardware and service for the same. The software set comprises of a next generation CPMS Terminal that is scalable and can be customized based on needs of our customers. The hardware boasts of AC and DC types of fast chargers that can accommodate the needs of most electric vehicles. All of these are designed in-house and completely tailored to offer maximum convenience to the end-user and manufactured in state-of-the-art facilities in Goa of Marine Electricals India Ltd.
STI is a group company of Marine Electricals, which is recognized as ‘Global Expert’ when it comes to renewable energy, energy efficiency and energy management.
Based in Italy, STI has its own production facility to design and engineer suitable renewable energy solutions as per the clients’ requirements.
As a leading EPC (Engineering, Procurement and Construction) company, STI provides outstanding design and engineering services, onsite project management, execution, installation, testing and commissioning as well as maintenance services across the world.
Different Segments (Industrial, Data centers, Marine, Solar, EV chargers)
Electric power generation, management and distribution is becoming increasingly important on modern day vessels. Marine Electricals can offer the entire power systems starting from the generators right up the lighting distribution panels and sockets thus offering a complete system responsibility, using the latest engineering tools Marine Electricals is able to ensure that individual components forming part of the complete system comply with the requirements( short circuit levels, discrimination, cascading, harmonic distortion, failure mode effect analysis, vibration etc.)
Marine Electricals provides solar power solutions to the industrial, institutional and commercial sectors. Right from design, engineering to project development and maintenance, we provide a comprehensive range of services to the clients looking for a reliable and environmental friendly source of electricity.
Strength, Triggers, Order books, opportunities
Strong Management team with extensive experience
CDR RAJEEV MALHOTRA
Chief Operating Officer Cdr. Rajeev Malhotra has worked in the Electrical department of Indian Navy from 1984 to Mar 2006 in various capacities at varied units of the Indian Navy, which included serving onboard warships, Warship Design directorates, Naval dockyards and ship repair yards, Quality assurance departments of MoD and Head Quarters . Thereafter joined Marine Electricals in Apr 2006 as a General Manager, Marine division. Besides steering the Planning, production, inspection and after sale service of varied customized Electrical Panels, he expanded the scope of offerings to providing solutions for Navigation & Communication for both Defense and Commercial Marine by creating required partnerships with leading manufacturers of these specialized systems, thereby providing a complete turn-key solution for new ship build programs of Defense and Commercial Marine.
CDR SHAMMI PUJJI
GM – R&D and Product Development Cdr. Shammi Pujji is management graduate engineer with more than 40 years of rich professional experience in Defence, Marine & Telecom. He heads the R & D division in addition to providing management support in business solutions. Before joining Marine Electronics family, he was Managing Director & owner of Oriole Technical Solutions Pvt Ltd ‘OTS’ specializing in indigenous solutions like WSDS (Wind Speed & Direction System), AFAS (Addressable Flood Alarm System), Ops Room Trainer (simulator for Navigation Training School, Navy), Missile & Sonar Recording Systems, and a host of software & embedded software solutions for Indian Navy. OTS is now one of the group companies of Marine Electricals.
Mr. Shammi started his career in Jan 1975 with Indian Navy as a commissioned Officer. In his 20 years of naval service, he received commendations from Chief of Naval Staff & Flag Officer Commanding-in-Chief for his out of box & innovations solutions complementing meritorious service rendered to the nation. After taking premature retirement in 1995, he served with a number of professional organizations.
As a topper in B.E. (Elec & Telecom), he pursued MBA with IGNOU, and he is a certified Lead Assessor for ISO 9001:1994 QMS. Apart from the commendations in Indian Navy, he received Bronze Medal at National Defence Academy as well.
MR. SRIRAM KRISHNAMURTHI
Solar Business Consultant Sriram Krishnamurthi has been working in Electrical and renewable industry for over 30 years. He has a PGDMM degree, and has vast experience in strategic planning, profit centre operations, business development, key account management, project management, techno commercial functions, and management in the electrical and renewable space. Adaptation to any new business and delivering results with effective peer management is one of his core competencies. He is also an expert in managing sales and distribution of B2B and B2C products, key accounts management, and effective policy management on a strategic and operation levels.
Milind Dalvi, CTO (Chief Technology Officer)
30+ years of experience into Medium Voltage and Low Voltage Switchgear Design, Instrumental in R&D, testing of equipment with certifying laboratories like ASTA, KEMA, ASEFA and CPRI. Previously worked with companies like Schneider Electric & Crompton Greaves
Esteemed clientele with strong relationships
Order book size
From Dec22 to Sep23
Current order book position standing at Rs. 482cr approximately at end of FY 2022- 2023. Considering below orders from Mar23 onwards minus the Q1Fy24–Order book looks to be around 482+102-101= ~482 Cr at 24Sep23. Few more orders came after that —so around 500cr order book is expected
From Sep23 to Jun24
To Expand Capabilities in
- IPMS for Navy
- Complete Installation Package for Naval
- Service Contract for Weapon System
Defense Tailwinds + Shipping ecosystem emerging + Increasing order book of Shipyards
Exploring new opportunities in Metro, Railways, Ports, EV Charging
Expanding Solution Offerings in Marine
- Providing IPMS for commercial ships, working on expanding it to Naval Ships
- Focusing on complete installation package for Naval Ships
- Targeting to receive Service Contract for Weapon Systems Geographical Expansion in Industrials
Geographical expansion in Industrial segment
- Entering South India with acquisition of Eltech Engineers
- Exploring acquisition opportunities to enter North & Eastern India
Evigo charge, a subsidiary, is eyeing a rapid expansion in the next couple of years. It is aiming to contribute to the country’s fascinating growth story by taking this charging ecosystem to the last mile. Over the next two fiscals it is eyeing a double digit growth.
EVIGO offers featurerich EV charging software solution
- Manage EV charging network via OCPP, handle management of charging station, partnership relations, tariffs, billing & payments, CRM & Statistics
- Provide convenient way to access charging stations through a mobile app
Certifications and Awards
Quality Management System, compliant with the international ISO 9001:2015, ISO 14001:2015 & OHSAS 18001:2007 Quality Management Standard, is certified by Indian Registrar of Quality Systems.
Financials
Time when I started buying Marine electricals
Improving sales , Stable OPM, Improving Cash conversion and Working capital cycle, Improving ROCE
Valuations
Looking reasonable considering the tailwinds in Navy and Ship building sector and upcoming Metros, Data center and EV charger industries
Technical Chart
Technical chart on 29-jun-24
Technical chart on 23Sep23 and Oct23
RISKS
Ongoing NCLT case — MEIL has purchased the property by making payment of sale consideration of Rs. 11.60 crore and stamp duty & registration fees of Rs. 1.11 crore towards registration of Sale certificate (ciemme jewels ltd liquidation)
Electrical business has high competition though their strong relationship should sail them through.
EV chargers business- Need to track this business carefully on how the margins, orders turn up in near future.
Solar panels business could be deworsification.
There is a GST notice which came in oct23 –which is also explained by company –that they have paid the GST earlier and its a mistake from Tax dept for the state in which they accounted it.
Update on NCLT case –Notification 4th oct23
Case is dismissed, Company expecting 11.6cr refund and it will be used for company own purposes, no acquistions planned in near future
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
In case you have any questions/ queries, please feel free to reach me through Contact Form
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Global Carbon credit market
LOHUM : Nepal connection
Moving ahead : Phantom FX
The visual effects of these films were done by an Indian company that has made these movies a thorough visual delight and provided millions worldwide with pulsating entertainment and ever-lasting memories.
Yes, We are talking about our next research IDEA
Phantom Digital Effect Limited (Phantom FX)
A Company that works passionately and diligently behind the Scene for hundreds of movies and documentaries to Bring Your Imagination Alive on screen
WHAT IS VFX?
Visual effects (VFX) refer to special effects that deeply reflect the story’s visual representation
VFX has evolved to deliver sights that cannot be filmed. This procedure involves the incorporation of live-action footage as well as the imagery created to create realistic scenes. It is expensive and requires considerable investment, which involves creating a large creative workforce, big state-of-the art studios and electronic instruments. Additionally, it needs an uninterrupted power supply and good cooling capabilities
Fun Fact
10% EVERY MOVIE IN ANY GENRE ACCOUNTS FOR 10% OF VFX USAGE
90% of all movies have some form of VFX involved
Before we move further , lets see what they do through a reel
About the Company and Business —
Incorporated in 2016, Phantom Digital Effect limited is a creative VFX studio that excels in creating jaw-dropping visual effects for leading movie/ documentary makers worldwide and in India. Company contribute to the production, pre and post production of feature films, web series and commercials. Besides working directly on a particular project, they take up subcontracts for large VFX studios.
PhantomFX specializes in various VFX services
- Completing a Shot with Final Compositing
- Creating 3D Elements, Photoreal creatures, and Environments
- Rig/Wire Removal, Paint cleanup, Rotoscopy
- 3D MatchMove
- 3D Animation (Story Board, Animation)
- Pre-visualisation
- Game Cinematics
- Fire/Water Fx and other natural phenomena
- 3D Ride films animation
Some stats
Geographical presence –Company has three state-of-the-art studios in Chennai, Mumbai and Hyderabad, India
And has marketing teams at Los Angeles, Vancouver and Montreal
Clients –500+
Employees/ Artists -500+
Office space 39000 Sq ft
Repeat clientele ~46%
Clients associated for more than 5 yrs –25%
International business vs Domestic business 40:60
Strength
Promoters have significant industry experience and have been instrumental in the Company’s consistent growth
Esteemed clientele with strong relationships
Good work done in past to showcase and bring new clients
Triggers
Phantom FX has recently acquired a new studio cum office space in Mumbai, Hyderabad and Chennai with the capacity to accommodate ~150, ~60 & ~50 employees, respectively.
Phantom FX plans to open office cum studio space in London and Dubai shortly
Latest update in 21Sep23
Planning to hire 2,000 more employees in the next two years.
Targeting significant contribution from the OTT sector and expects at least 50% of revenue from international operations.
The global VFX market is expected to grow from US$28.81 BILLION (2022) to US$65.45 BILLION (2030) AT 10.8% (CAGR)
According to an Indian I&B Ministry estimate, between 2023 AND 2024 the domestic VFX space is expected to GROW AT 30% (CAGR)
Increasing use of digital video streaming platforms and high-quality content has positioned VFX as an integral part of the OTT evolution
Expansion of OTT services: The proliferation of smart devices like smartphones, HDTVs, laptops, tablets and subscription-based video streaming services in both advanced and emerging economies are driving the growth in the VFX industry
Owing to the rapidly growing demand for OTT content driven by low data charges in mobile broadband, the Asia-Pacific region is expected to witness the fastest market growth till 2030. India and China are likely to surpass the continent over the medium term
Demand for highly realistic and super-quality content: Worldwide demand for high quality realistic content is driving the demand for the market. VFX alters, creates, replaces and enhances live-action media to include effects that are otherwise impossible to capture
To promote the animation, visual effects, gaming and comic sector in India, the I&B Ministry of India formed a task force likely to create nearly 2 million jobs in India. AVGC XR (Animation, Visual Effects, Gaming, Comics, and Extended Reality) Promotion Task Force recently submitted their plan with several recommendations to the Government.
Plans to foray into animation services space and tap allied field of gaming which requires extensive VFX by leveraging its capabilities and experience.
VFX Tailwinds emerging
VFX grew 30% to reach INR50 billion in 2022
- From delivering back-end services only, India has now emerged as the provider of turnkey services – from pre-visualization to final rendering. This also means an increase in both value and volume of work coming India’s way
- Indian creators investing in Advanced VFX and virtual production companies
- Domestic players expanding their base
- Tentpole movies like Avatar etc have always been heavy on VFX, and continue to be a major draw for audience across theaters as well as on OTT platforms globally
- The major draw in OTT today is episodic content across platforms. This content draws heavily on VFX and is the second-largest addressable market today
- There has been a 100% increase in high-budget films (INR100 crore or more) in India in 2022 over 2021, which increased the demand for domestic VFX services
- Large budget films tend to spend 25% to 30% of the entire budget on VFX. The corresponding number for a low to mid-size film is 10% to 15%
- Top global VFX players are turning to India to leverage the cost arbitrage that India continues to offer as sequels are generating a lower return in many cases. This will further increase the revenue from service exports
- Studios are embracing technologies like virtual production, machine learning and artificial intelligence. This is helping streamline the workflow with quicker iterations, thus improving efficiencies further
- Availability of capital for infrastructure and technology, and skilled talent are the two major challenges for growth in the segment
Top global VFX players expanded into India to leverage the cost arbitrage that India continues to offer
► For a global VFX player having operations in India, Indian VFX artists cost only one-eighth of the cost incurred on hiring artists in the UK or North America16
► In the last two years alone, the Indian visual effects industry has created 60,000 jobs, with studios like MPC in Bengaluru going for an extensive hiring spree
► In 2022, five global VFX players, including ILM, have either started operations or announced their entry into the Indian market
New subsidiaries, Offices, Capex plans, Orders, QIP
The company has recently been awarded a prestigious contracts worth Rs. 62.5 Mn which includes a significant deal valued at Rs. 40 Mn, in the field of international movie production.
Company has received work order from Netflix (Netflix Worldwide Entertainment, Netflix US and Netflix India Originals). VFX for Project includes Netflix-branded audio-visual content, whether produced directly by Netflix or licensed from a Licensor for exhibition on Netflix OTT. Time period of the order is 4 years with extension option for another 2 years. Estimated order is INR 120 Cr over 4 years.
Total order book from May23 onwards is 200cr approximately (100cr is estimated execution order for FY24)
Added 50cr more in Jan24 in order book from KJR studios after recent success of movie Ayalaan
Jun ‘23: BoD has approved the incorporation of a wholly owned subsidiary of the Company in London, UK. This will leverage the growth opportunities in the international market and avail the maximum benefit of the resources available. The business of subsidiary is in line with the main object of business of the Company.
Dec ‘22: Company has been endorsed as an Amazon-approved VFX studio. The same is notified to all Amazon productions. Due to this development, it will be able to provide various VFX services for Amazon’s production.
It has also been qualified for the Walt Disney Vendor Evaluation Program. It is authorized to receive content from Walt Disney Studios and/ or Television groups. There will be an increase in the total number of OTT Projects with the active participation by Amazon and Walt Disney for the same.
DNEG, one of the world’s leading visual effects and animation studios for feature film and television, has approved the Company as an Outsourcing Vendor to handle various assignments pertaining to their feature film, television, and multiplatform content. This association with DNEG will further boost Company’s order book and further enhance the quantum of projects.
Dec ‘22: Company announced its opening of a third office with the ability to accommodate 50 employees in Chennai.
Nov’22: Company is on the verge of completion of establishment of a new studio cum office in Bandra, Mumbai. Once operational, it will be able to accommodate 250 employees and will be equipped with infrastructural facilities for VFX studio to expand the services of the Company.
Openings recently in the company
QIP of 80cr done with renowned fund houses at 412Rs/share. What caught my eye is expansion in Gaming and Animation space
Success of Movie Ayalaan
15Feb 24 update on process of acquiring a company
Certifications and Awards
Phantom FX is TPN Certified, among the few in India with this coveted watermark.
This certification means that we are a ‘data-secure ecosystem’ that meets the rigorous standards of the MPAA.
- Excellence In Animation and Visual Effects In Times Business Awards 2022
- Company of the Year In Outlook Business ICON Awards 2023.
- VAM Awards 2022 for Best VFX Shot Award for the Movie, Dangerous
- VAM Awards 2023 – Best Simulation Effects for the Movie, Beast
- VAM Awards 2023 – “Best use of Previsualization” for the movie Beas
Financials
Management Guidance
Revenue is expected to grow by ~75-80% in FY24 led by inflow of demand for our services and effective execution of order book.
EBITDA margins is expected to stay within a corridor of 33-35%
Jun23 results shows management walking the talk
Skin in game along with FII and DII increasing stake
Valuations
Management guides 100cr revenue approximately leading to bottom line of approx. 22-27Cr
Estimated EPS 20-23, PE range 20-50 leading to price range of 400-1050
That means we are very close to low valuations
Technicals
on 27th Oct23
Interesting Pattern on 5dec23
Support demand zone seems to be respected in recent downturn
RISKS
Increasing assets and employees, if not ably supported by orders, can turn out to be a problem
Increase in trade receivables as business grows is an issue which needs to be monitored very closely
Just 1-2 bad reviews, bad work can lead to downfall of company faster than we can imagine. In simple words, clients will come because of work quality
Valuations –Company though looks undervalued considering the growth potential, but if growth stalls or new orders don’t come at an anticipated pace, then these valuations may turn out to be a trap
Heavy Dependence on Exports–Company and industry in general is dependent on International assignments. Recent strike by artists in Hollywood crippled the revenue in second quarter of H1FY24
Risk of talent poaching— The attrition rate in the VFX segment in 2022 was 25% to 30%. High poaching of mid-level talent was also observed in the segment. Almost all industry leaders were concerned about the inability to find technically skilled employees to meet the opportunities provided by the high global and domestic demand for content –Companies are working in it by implementing training programs to acquire, retain and up-skill talent
Competition: The high-margin business and its growing opportunities is attracting a number of players into this field which is increasing the competitive intensity.
Technology: VFX studios require cutting-edge technology and software to produce high quality visual effects, which can be expensive to acquire and maintain. Additionally, keeping up with the latest technological advancements can be a challenging task.
AI tools are posing a threat where with use of AI tools, movie can be created without much effort and labor. We see this as an accomplice for the company where such tools help to add value along with human creativity, Read few such article on AI impact and usage in VFX
Timeline issues: The VFX industry faces is the increasing demand for visual effects combined with tight project timelines. As clients demand high-quality visual effects in less time, VFX studios often have to work overtime to deliver the final product on time. This can lead to employee burnout and a decline in the quality of work produced, ultimately impacting the reputation of the studio
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
In case you have any questions/ queries, please feel free to reach me through Contact Form
Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.
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Astra Microwave
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
Astra Microwave
Business
Astra Microwave Products Limited (Astra) was incorporated in 1991 by a team of distinguished scientists with experience in RF/Microwave/Digital Electronics and management of projects with high technology content. Astra Microwave Products Limited, engaged in the business of design, development and manufacture of RF and Microwave Components, sub-systems and systems used in defense, space, meteorology and telecommunication
With over 30 years of experience in microwave radio frequency (RF) applications, AMPL has moved up the value chain from sub-systems to high value-added systems
Astra has 3 Automatic assembly lines for PCBA assembly, 5 class 10K cleanrooms, functional test infrastructure that extends from 30MHz up to 40GHz, in-house Environment test facilities including EMI/EMC facility and a first for any Indian Private Industry – Near Field Antenna test and measurement range.
Total workforce (as on March 31st, 2023) – 1,290
Subsidiaries
In fiscal 2014, AMPL floated the 100% owned BEPL as a captive supplier of raw material for overseas orders. In fiscal 2015, AMPL floated the 100% owned ASPL in Singapore, as a supplier of MMIC products for semi-conductors. In fiscal 2019, AMPL set up a joint venture, Astra Rafael Comsys Pvt Ltd, with Rafael Advanced Defence Systems for production of communication systems and sub-systems for defence.
Product Portfolio
The company’s product portfolio spans across Defense, Space, Meteorology, Homeland Security and Systems Vertical
Has a diverse range of microwave products like filters, transmitters, receivers, antennas etc.
Manufacturing facilities
5 facilities in Hyderabad, Continuous investment in World Class Infrastructure for Assembly, Functional and Environment testing. Astra’s facilities are approved by several foreign companies for production
R&D Capabilities
Track record of new product development; now graduated to a SYSTEM integrator in Radar. Dedicated R&D facility at Bengaluru to manufacture radars
Strong in-house capability in the microwave radio frequency (RF) applications domain.
Executes orders through BTS (Build To Specifications) and BTP (Build To Print) route
Customers and Regions of Revenue
- Clientele includes Indian Government Laboratories, Indian Defense
- Public Sector Undertakings, Indian Space Research Organization
and many foreign OEM’s
Revenue mix
Geographical spread of total revenue stands as follows: India – 60% and Exports – 40%
Applications
Defense
- Radars
- Electronic Warfare
- Missile Electronics
- Telemetry
- Counter-Drones
Space
- Flight Model Application
- Ground based
Application - INSAT MSS Terminals
Hydro/Meteorology
- Water Level Measurement (Bubbler/
Radar Sensor) - Automatic Weather Stations (AWS)
- Agromet Met Stations (AMS)
- Automatic Rain Gauge (ARG) X
Band Doppler Weather Radar
Other areas of work
- Antennas
- MMIC
- Contract Manufacturing
- Homeland Security
Awards and Certifications
The company has various certificates such as AS9100D & BS EN ISO 9001:2015, ISO27001:2013, ISO9001:2015, ISO14001:2015, ISO45001:2018, ISO/IEC17025:2017.
Awards
LAToT Ceremony for Coastal Surveillance Radar
Excellence in Innovation, Design Technology, R&D 2021
Counter-Drone System LAToT Handing over Ceremony
Award for Excellence in Aerospace lndigenisation-2021
ELCINA EFY Award for Business Excellence
Fundamental Ratios, Cash, Loans, EBITDA,PAT etc
Debt to equity is under control < 1
ROCE> 17
Pledge 0%
Short and long term liquidity under control
Recent Q1FY24 have been weaker than expected
Opportunity Size
Various tailwinds in the defence sector are creating a wide range of opportunities for Indian firms. Company expected to hit 6000-8000cr cumulative revenue in next 5 years if TAM is correctly addressed
Triggers
Defence spend in India has received a mega boost
Opportunities to develop and supply products which are published as negative import list by GOI
Government of India’s Atma Nirbhar Bharat initiatives
Favorable policy initiatives like Buy (IDDM – Indigenously Designed, Developed and Manufactured),MAKE-II, MAKE-Ill
Expansions and Acquisitions for future growth
QIP has been done at 270 rs for Reducing working capital and corporate purposes
Operating margins can improve further
Focusing on domestic defense order can lead to 20% OPM in coming years.
We aim to achieve 70% Domestic 30% Export Revenue distribution over next 2-3 years. Domestic business on an average carries 40 to 45% of gross margin as against 8 to 10% gross margin in exports.
Order inflows
Orders are worth an aggregate amount Rs. 158 crores for supply of Software Defined Radio (SDR) by Astra Rafael Comsys Private Limited (Joint Venture) Company has received an order from India Meteorological Department (IMD) for Supply of C-Band Dual Polarized SSPA based Doppler Weather Radars for a total value of Rs.32.97 crores. Order is to be executed within a period of 18 months.
Orderbook as of March 2023 is Rs. 1,544 crores. This order book consists of only 24% of export orders rest 76% are domestic orders. The BTP segment is a major contributor of our export orders, which are executable in the next 24 months. The sales mix is anticipated to be skewed towards domestic, high margin business.
Orders are worth an aggregate amount order(s)/contract(s) awarded in brief; of Rs.16.8 crores for supply of Satellite sub-systems and weather data processing system from ISRO
Company has bagged orders worth Rs.158 crores for supply of Satellite sub-systems, Airborne Radar and sub-systems of Radar and EW projects, from DRDO, ISRO and DPSU’s
Targeting JV and exploring fields like
Through JV or strategic alliances, offer improved technology and products.
Target the offset requirement in large defence procurement programmes of Gol.
In discussion with our JV partners to develop EO (electro-optics) product line. Bidding for the whole system – the complete radar system – for both DRDO and for future MoD requirements
Risks
Lumpy nature of domestic defence/space programs –Orders come in bulk and so are the payments.
Large working capital requirement: Gross current assets (GCAs) improved to 346 days as on March 31, 2022, from 398 days a year before, led by reduction in debtor days. GCAs are expected at around 400 days over the near to medium term with increased execution of domestic orders. The group primarily caters to domestic defence research and space establishments that usually have a long production cycle and longer working capital cycle compared with overseas orders. Though export revenue may be realised faster, it will be offset by stretch in receivables from domestic orders as domestic order execution is expected to increase in the future and thus working capital intensity would be a key monitorable. Furthermore, the group must maintain sizeable inventory to cater to all segments, as products are customised, and thus, requirements vary across segments.
Susceptibility to risks inherent in a tender-based business, and long gestation period for projects: The business depends on success in bidding for tenders invited by defence public sector undertakings and research establishments. Establishments such as the DRDO invite tenders from qualified vendors for their R&D requirement and commence bulk production on successful completion of product development. Long-term revenue visibility is primarily driven by the success of R&D projects at DRDO and the subsequent mass production of products.
Margins Volatility is high. Export vs domestic order execution changes margin profile and needs to be seen closely in coming quarters
Technicals on 25th Aug23
Disclosure –Invested. Do your own diligence before buying/selling
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
In case you have any questions/ queries, please feel free to reach me through Contact Form
Do spread the word among your peers, family members or anyone who can benefit from this blog and asked them to subscribe. But be selfish and take care of yourself first by subscribing before they do.
Enjoy the day and your life. Don’t forget, we are alone in this grand universe and may not get a chance to live again.
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Smallcap Contribution towards 2 decade high
Give me 1 hr of yours!
Semiconductors in Renewables
EV Charger Chaos
Advertising spend vs Sales
Affordable Jewellery
Renowned Bengal Karigars
Protected: Positional Stocks – 3-Sep-23
Portfolio Risk like a ball of play-doh
UPI : Mega Trend
JSW into EV
New Capex cycle!!
Textile Comparative costs
Indian Real Estate
Worthless VCM
Energy Trilemma
Only Indian Retailer
Protected: Premium Stocks : 28-Aug-23
Protected: Positional Stocks – 27-Aug-23
Solar panels
Smart vs intelligent
If you’re merely intelligent, you might focus all of your effort on finding precise truth. If you’re smart, you’ll focus just as much effort on delivering an effective message around that truth, realizing that the most powerful truth does no good if you can’t get people to pay attention to it.
Hydroponics
Great Migration!! Not of Masai mara
Second biggest E-commerce EXIT
Daily sea surface temperatures : Climate
Protected: Positional Stocks – 20-Aug-23
E-Buses : Time is coming for them finally
Efficient heat transfer : Ammonia
Retail Jewellery Market share
Integration of advanced electronics
Amused!!
RDSS : Medium Term trend
Smart meters : Mega trend
Waste Management Industry : Long term trend
Protected: Positional Stocks – 13-Aug-23
Sectors to focus in 2020-30 decade
Investments in these sectors moving fast
Opportunity size in MPLS
Global Drone market
Indian Lighting Market
Global Travel Health Index : Short term trend
ALPHA TECHNICAL SETUPS 7-Aug-23
This is a new Segment introduced in 2023
ALPHA TECHNICAL SETUPS on weekly basis
Charts are shared for educational/Study purposes
Do your own due diligence before buying selling
Sample is shown below
Those who want to get associated for short term or long term for such QUALITY TECHNICAL SETUPS (along with targets and Stop loss) can drop me a message on alphaaffairsf2f@gmail.com
or followme on Twitter @alphaaffairsf2f
Approximate commitment of 20 high quality bullish setups every month (approx 4-5 every week)
Past setups
https://alpha-affairs.com/2023/03/13/alpha-technical-setups-13-mar-23/
https://alpha-affairs.com/2023/03/06/alpha-technical-setups-6-mar-23/
ALPHA TECHNICAL SETUPS 27-FEB-23
Protected: Positional Stocks – 6-Aug-23
Greener way of SDA
ADD on Optical Fibre Imports
Triple attack on textile industry
Average 6.7% only
NSE ka Dukh kab khatam hoga
Navy Indigenous content trend
Recycling : Long term trend
2023 : 2032 : NTPC
Fertilisers : Drone friendship
Protected: Time for sunrise
Protected: Proxy to Sunrise Industries
ALPHA TECHNICAL SETUPS 30-July-23
This is a new Segment introduced in 2023
ALPHA TECHNICAL SETUPS on weekly basis
Charts are shared for educational/Study purposes
Do your own due diligence before buying selling
Sample is shown below
Those who want to get associated for short term or long term for such QUALITY TECHNICAL SETUPS (along with targets and Stop loss) can drop me a message on alphaaffairsf2f@gmail.com
or followme on Twitter @alphaaffairsf2f
Approximate commitment of 20 high quality bullish setups every month (approx 4-5 every week)
Past setups
https://alpha-affairs.com/2023/03/13/alpha-technical-setups-13-mar-23/
https://alpha-affairs.com/2023/03/06/alpha-technical-setups-6-mar-23/
ALPHA TECHNICAL SETUPS 27-FEB-23
Protected: Positional Stocks – 30-July-23
Winds of change
Coppock’s curve
5G Opportunities and TAM
CBG ecosystem
Electricity Growth drivers
Tyre Exports
Fluctuating signals
Average speed is not so average!! Tour De France
Protected: Positional Stocks – 23-July-23
Time to Forge bonds : Ramkrishna Forgings
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.
Ramkrishna Forgings
Business
Ramkrishna Forgings Ltd is primarily engaged in manufacturing and sale of forged components of automobiles, railway wagons & coaches and engineering parts. Company mission and vision is to be the most preferred supplier of forged, rolled, machined, fabricated and cast products for all end use industries like Railways, Automotive, Earth Moving, Mining, Farm Equipment, Oil & Gas and General Engineering globally by supplying products meeting highest quality standards at highly competitive costs
Manufacturing facilities
RKFL’s facilities in eastern India are located in close proximity to automobile manufacturing hubs and key suppliers of of raw material
- Less chance of supply interruptions
- Lower logistics cost
- Reduced working capital requirements
Customers and Regions of Revenue and Product verticals
Products
Company focus is on de-risking business from few customers or few segments or few geographical areas
They have succeeded quite well in last 4 years
When a company has to grow to large company, many such things will give stability to company to perform well
Experienced promoters and established track record of the company
Promoters have 40 years of experience in forging industry
Fundamental Ratios, Cash, Loans, EBITDA,PAT margin, Shareholding pattern
PAT , ROE, ROCE, PAT margin showing improved profile
8x sales growth and 35x profit growth in 10 years
Stock price is also 20x in 10 years and its quite possible to become 2-3x in next 3 years with CAGR of 24-30% approximately
Debt to equity has come down considerably and now close to 1 while Debt to EBITDA also is planned to reduce to 1 by FY25
Cash conversion cycle has improved to 100 days and Working capital days has also improved
Topline and bottom-line has improved significantly in last 3 years and trajectory is expected to continue in similar fashion
Shareholding pattern
Good promoter holding, skin in game, FII are increasing stake, Public domain have few strong holdings as well
FY23 Fundamentals ratios
ALSO READ : Company at Y2K moment
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Strengths
Manufacturer and supplier of a variety of auto and non-auto components
Global presence with footprints in North America and Europe
2nd largest forging player in India with over 40 years of experience Promoter possessing multi-decade forgings industry experience
Continued focus on diversification with foray into EV components
Longstanding relationship with marquee customers
Outstanding Credit ratings –perfect recipe for large cap progerssion in coming years
Triggers
Opportunity size in exports and domestically
There is a huge requirement in India and in various overseas countries. Compant exports are grwoung well
Capacity Enhancement and future growth from internal accruals
Commissioned 7,000T Press Line in 2021 and also commissioned a Warm Forging Line and a Fabrication Facility in 2021
The company has commissioned 23,800T of capacity as on 18th July 2023 and the remaining 32,500T will be commissioned by September and overall Increasing to 2,10,900T (current installed capacity 187000T)
In addition, the company has planned to setup cold forging capacity of 25,000T. The Company has sufficient capacity for the next phase of healthy & robust growth. Capacity ramp-up along with operating leverage will result in faster improvement in profitability
Cold Forging Press line to be commissioned by Q1FY25
Entire 100% capacity has been booked by an OEM, the contract of the same is valid for 7 years
Management guidance in Q1FY24 Call
Subsidiaries and Strategic Acquisitions
Company has done a JV with Titagarh rail company for manufacturing and supplying of forged wheels for Indian railways
Ramkrishna Forgings announces strategic acquisition of Multitech Auto Private Limited and its wholly owned subsidiary Mal Metalliks Private Limited along with Mal Auto Products Private Limited. This can lead to 20% of current revenue addition
Also company has done some acquisitions in ACIL , JMT auto and Tsuyo. This push will help company to foray into tractor, PV segments, Heat treatment, gears, BLDC EV segments
Industry growth rate
Various forecast showing industry will grow between 6-10% for next few years. Important to understand here is the industries the company caters to
All these segments have Government focus and will grow heavily in next 5-7 years. So I believe company is present in right segment and right regions (fastest and biggest regions)
Recent Order wins
Just listing few wins in last one year
Risks
Susceptibility to raw material cost could affect Company profitability.
US landing into recession may also trigger less future orders in short term. Stock may consolidate before moving up
Stiff competition from peers like Bharat forge but this risk is bit mitigated with many order wins recently and consistently
Higher revenue concentration from Auto segment and CV domain in that is a risk–though company is taking utmost steps to remove this risk as highlighted above
High capital working requirements remain a risk
JV falling off with Titagarh rails for reasons is a small risk
Railways not going ahead with orders and new tenders in coming time is another risk which we need to consistently monitor
Technicals on 22 July 23
Conclusion
If you have understood the triggers and industries it cater to + RISKS which can materialize and have patience then think of buying this company in every dip market offers else Ignore the stock
Stock might be up in short term and then give a chance to buy around 400-450 range for long term investment purpose
I am holding it from lower levels and I reserve the right to add more or exit as per company performance without a followup /update here
Also Read : ICEMAKE Refrigeration : Time to Chill
Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in 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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