Came across this company on couple of custom screens on Screener.in much before this mega order win but never gave it much thought. Alas
To me this looks HUGE both from opportunity and challenges standpoint, therefore need to dive bit dipper:
Annual report 201516 page 20 lists:
The order comprises six basins out of the 11 basins considered for seismic data acquisition (one remains un-awarded) aggregating 26,905 line kms of 2D seismic survey to be completed within three years.
Further, page 27 of the investor presentation lists:
The current requirement of data acquisition under NSP is about 50,000LKM.
•Out of this contracts have been awarded for approx. 42,000 LKM. Against this awarded approx. 30,000 LKM. ALPHAGEO has been
•Potential tenders from balance work in the North East approx. 1000 crores
Putting these two factors together, is it correct to conclude that award for 5/6 basis is yet to be awarded? I most likely think so. @raj1968 , @bandlab1 can you please confirm if my understanding/conclusion is correct. Else, who are the competitors who has won the rest 5 blocks. Always helps to look at it from competitors lenses
Current order itself has a projection of EPS INR 125/per year for each of the next 3 years. (assuming 15%* net margin on INR 5000 Mil /annual revenue with ~6 mil share outstanding). against current EPS~ INR 20/25 . I understand the stock has ran up quite a bit ( a lot actually), however, even after this run-up the CMP appears to be reasonable if we look at the potential. need to understand what Mr. Market knows that I dont?
* Net margin% for year ending March 2015 was 19.94%
is it more to do with the fact that there is no visibility AS OF NOW on the order pipeline post FY'19? going by the general day to day market behavior I don't think that. So, the core question is, what Mr. market knows that I am missing?
Understandable that currently company balance sheet is fairly de-leveraged, however, I am sure there must be some general limit/rational upto which company can have debt financing. In this case, currently total balance sheet size of ~ INR 125 Cr. and company is seeking for new Capex of ~100 Cr via 'low cost long term fund' (verbatim page 21 of AR) . What that option could be?
Even a combination of debt + equity infusion seems tricky and can impact P/E adversely since current share outstanding are only 6 Million.
Lastly, what is the update on the Quippo (SREI) case. Has ONGC fillled an appeal against the Delhi High court order? Essentially, has that issue been put to rest or we can see any further ghost coming out of closet.
@bandlab1 hope you can help understand the current landscape and implications well around this particular issue.
Disc: Not Invested