Techno Electric, Monthly - 1.5 years of downtrend under that trendline along with the business which has gone through Covid, commodity prices and execution problems, being predominantly a EPC player. Currently though all of them are easing and orderbook is at an all time high 3200 Cr and the management thinks it will end FY23 with an orderbook of 4000 Cr in the Q2 concall.
Execution in H1 has been tepid though the management has guided for 1200 Cr topline (conservatively, as per management) for the year, which means H2 will see about 800 Cr topline (Q3 to be better than last 2 quarters and Q4 will have bulk of it). The EPC margins guided are 12% (again, conservative) but if commodity prices ease, can be higher (Recession in Europe management says could be a positive for them). Considering H2 FY22 EBITDA of 82 Cr, the EPC EBITDA alone could be 96 Cr (12% of 800 Cr). On top of this, the Power segment could contribute about 25 Cr so H2 EBITDA growth could be ~50% if my guesstimates are right.
Those near-term positives should help the breakout.
On a long-term perspective, the valuation for the business is at ~9x EV/EBITDA. There is about 1200 Cr cash on the books and there’s a buyback going on for 160 Cr (~50 Cr buyback completed I think) which should lend support to the price. The management has guided for giving out 500 Cr as dividend as well. FY24 and FY25 topline could be in the order of 1750-2000 Cr as per latest guidance since the orderbook is timebound and has to be executed in the next 2 years.
The data center business is a nice optionality in the valuation and could positively surprise from next year. They have guided for revenue contribution from July onward next year. I don’t quite understand how this works but it looks like it could be a 250 MW data center and Techno Electric could get 10 Cr per MW. I am yet to study this bit and what term sheet they are getting into and so on since I haven’t considered this in the valuation but this could be a positve long-term surprise.
The chart and valuation and business prospects says there isn’t much to lose from here. Technically a monthly close above 320 will confirm a strong breakout which should happen in the next 2-3 months. This can be a very illiquid stock on some days and quite liquid on others - so staggering buys could be a better approach.
Disc: I have some positions around 290, initiated today. Not SEBI registed and I am a novice, please research and use your own judgement. This is my written thesis for clarity for the trade and nothing more.