- Profits in H1FY25 at Rs 22 crs slightly more than FY24
- CFO in H1FY25 at Rs 94 crs is more than double of FY24
- Net cash of Rs 305 crs which provides ability to expand capacity
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My read is that numbers are perfectly in line with expectations and we can see years of high growth with capacity and client additions
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… bottom line of 19.79% is growing faster than top line growth of 15.03% might suggest e2e is beginning to see scale-advantages work in their favour. (in my prior experience in this business … ) This often appears in items like per-rack-datacenter-leasing-cost, deployment costs and other operating costs increasing linearly even if there is an exponential increase in number of racks deployed. Given the stack is fully built and model perfected, I fully expect this gap to increase in the future as they get more and more of this.
PS: Long term investor in E2E.
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this gives some comfort… but i didnt understand one thing - e2e has better numbers on all 6 metrics than google, yet google overall rating is higher. why?
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An article in today’s ET. Good round up on AI start up ecosystem , hyperscalers, local cloud GPU providers like E2E and their opportunities & weaknesses in competing with the big 3 hyperscalers.
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E2E networks just announced Another fund raise today. I think this time qip will be around ~ 500 cr , price could be 3500 ? double of the last QIP price . Lets wait for the Company to finalize the QIP details.
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"Preferential issue and allotment of 29,79,579 equity
shares having a face value of Rs. 10/- each for an
aggregate amount of Rs. 10,79,27,80,032.75 (Rupees
One Thousand Seventy-Nine Crore Twenty-Seven
Lakh, Eighty Thousand Thirty Two and Seventy Five
Paise Only)."
https://nsearchives.nseindia.com/corporate/E2E_05112024091652_Reg30OutcomeCleansigned.pdf 1079 crore at 3622/- for 15% stake by LnT
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Google cloud is their own?
What do u mean. Pl help with explanation. Thanks
Am I missing something or are the valuations absurd? Aren’t they a infrastructure business that requires capex to grow? The market seems to be factoring in a lot of growth, and definitely the opportunity is huge but can they scale up that quickly without equity dilution or significant debt?
Disclosure: Exited recently due to valuation concerns
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My view is that …As long as demand tail wind exists , even basic infrastructure provider will grow at rapid pace and returns will justify capex as margin profile is way way superior to cost of capex . As of now looks like demand shall stay for long in India considering data generation and on the go analytics trends
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Interestingly enough, in the latest concall, management was not ready to give any indication about their capex plans for the next couple of years, in spite of persistent questioning by the analyst from Lucky Investments. I quote:
“So we have no upper limits in our mind with regard to how the growth block should grow. It
completely is driven by the demand. So we are able to like set up our deployment in a way that
like we are prepared for large capacity expansion.
But obviously, we keep building the capacity as the demand keeps coming in and as the
customers keep getting signed up onto our platform. So based on that velocity, we keep on
building the infrastructure. Now, obviously, there is some sense to this fundraise.”
I understand being ambitious in wanting to capture as much of the demand you can, but in business you do plan your capex, fund raising, etc couple of years in advance right? Can’t be open ended! I found this part of the call interesting and perhaps a bit strange.
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@BuyRightSitTight I also found the management’s responses during the conference call very evasive - be it on capex plans or growth. It seemed as if they were trying to hide something.
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Sorry I thought this was a google review. My bad.
They are not a pure infrastructure play. This is evident from their margin profile which is quite contrasting with Netweb. They are compute provider. Their value addition happens one layer above infrastructure. They have productized all this infra to sell. For example, instead of just giving you server where you install your database, E2E will give you easy DB setup without having to think about the hardware level stuff. This is why they can dictate the margin they do.
The reason for the extreme valuation is the cash infusion they are doing to get more fixed assets(computer hardware), and they being focused on high density compute allows them to pack more compute in the same racks. Last concalls Dua said, the Data Center costs them approx 10% of the revenue which is quite low if you think about it.
They had 200cr fixed assets in March 2024. Then additional 400 cr. which is now operational (announced on Twitter). Finally the new 1400 cr. coming in bringing the total assets to 2000cr. (200 + 400 + 1400). They may not invest all the cash on computer hardware, so this 2000 cr is the upper limit. They will realize the money from L&T deal by 31st Dec, 2024 and take a quarter to acquire and install everything. If we take it to be true, that means from Q1 FY26, they can have up to 2000 cr assets vs 200cr in March 24. 10X assets → 10X sales → 10X profits. (assuming they can sell all of it.)
With the current PE of 300, if we assume correction to 150 PE for the next year, the 10/2 = 5X movement on the stock is possible. Of course, this assumes the stock will command 150 PE. If it commands 75, that gives 2.5X for FY 26.
I am concerned what the L&T partnership will entail and definitely need more info on it, but I think overall E2E has shifted gears and it’s still going to grow aggressively.
Correction:
Seeing they are not utilizing the entire amount as shown in the EGM Notice here → https://linkintime.co.in/website/Gogreen/2024/EGM/E2E_Networks_Limited/E2E_EGM_NOTICE.pdf
but utlising 729 of the 1079 for fixed assets. Further the 327 from the secondary transaction will go to Tarun Dua personally and not to the company, so the return will be more tepid. But a 1300 cr fixed asset is still 6.5 times of the fixed asset end of FY24.
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FW PE is 175. So if we take 10X growth then still lot of money can be made even if it comes to 100 PE.
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From your buying price it’s already 90x or so for you . so great to see such conviction and pretty detailed work with the understanding of the business.
Does it matter to you sir, even if it does not realize all the potential upside after this deal?
Thanks! I’m not a Sir though.
Of course it matters, I have substantial value in this. I’m expecting Dua to be reasonably good on the next phase but unexpected things could happen. Company has partially changed fundamental business model. They are licensing their software to be used either by corporates (L&T) and their clients in a non-exclusive deal.
Anything else will be pure speculation unless we have more info on what the specific plans are.
The potential here is quite high. It’s not even a mid-cap yet.
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