Hi Aditya,
Here is how I think about the result and here are few questions which I have open to all
Let me just put out the numbers segment wise below plz note they do lot of inter corporate stuff hence there can be few error.
- FLEXO
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Not much to comment on this segment, there is 3-5% GM compression here, on top of that we have 2.5 to 3% EBITA compression as well (employee cost being the major increase)
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This is a 120cr business, with banglore now operational and Oman (yet to soon, functionally ready but not operational yet for known reasons) I think 15-20cr incremental revenue form this segment, with 11-11.5% net margins (just adding EBITA level improvement, lower employee cost as a % also on dep and interest looks achievable with current GM) so 15 - 16cr PAT form here FY27 looks achievalble
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WAHREN
- Significant GM compression with following reason attributed
a) Excess order booking to retain customers, with shorter purchasing cycle with customers and longer price commitment, increase in price effected margins
b) Suppliers not honouring contracts, longer delivery period, repricing form past pricing commitments but not able to do the same with customers
c) Of cource exxissive increase in RM prices in a very short time
Question to ask = Which reason attributes to what % of total reduction of GM form 28% to 14% almost 14% is anyones guess, becasue if these numbers are known then any impact for A and B looks reversable pretty fast
My take is with new capacity almost live and the learning curve of this situation (as they say in concall) these are bottome GM, any further deterioration form here looks very difficult, in fact a immediate 2-3% improvement looks possible.
Other triggers form margin improvement are PVDC (Higher GM than alu alu, lesser supply chain disruption than alu alu). Exports of Alu Alu, also look 2-5% GM accretive (Management in the call has said 20-25% export target on incremental capacity of 12000 Mt)
At a post GM level no major impact, slight employee cost increase, but over all economis of scale is visible with 50bps to 1% improvement possible with further scale.
Questions to ask = 1. No Major impact on top line on a HOH basis despite stating supplychain issue and Management stating 80% utilization in H2 for Alu Alu. Also last concall and this concall price hike was taken was stated with 350-360 to 500-550 of price moment in alu alu. So given that we has similar utilization, sales numbers look pretty low
Either volumes are impacted or price pass on effect has not yet reflected
Management has also constantly been stating on no demand side disruption and supply side is what has been impacted.
Over all my take is any further net margin deterioration form these levels look very difficult, infact consedering all the above discussion consedering current environment persist (relif form point A & B and other triggers should lead to 2-3% immediate improvement)
So for the current FY a current environment PAT margin of 3% and a business potential PAT margin of 10% (stedy state) is what the key take aways is
Given that no deamnd side problem a 30% utilization in both PVDC and incremental alu alu should add incremental (160+90 = 250)cr of pharma revenue (450,250) as the respective price assumption.
So 135 flexo 250 incremental pharma 225 current Pharma (this can also increse by 15% if we are assuming 450 as the new price) so 610cr of Revenue consedering current state presist is what they should achieve (this does not include Tandem).
Overall all at the current state the numbers which I am getting is 600-650cr top line and 30-35cr bottome line. Though my personal expectation is slightly higher
Overall as said earlier I would value this company at sales, 700cr looks very much achivalbe this FY so at less than 0.5 PS, in good time I would give them 1.5 to 2 times sales
Disc - Invested, added in last 30days
Below are console numbers incase anybody wants them
