Cheers @Balki
I’m personally interested to see what they do with the cash they’ve racked up. 140 crores in hand for a sub 500 mcap company is a huge amount(assuming they don’t lose the contingent tax liability case of 90 crores). The new management seem very capable. What will be interesting to see is how they use that cash since previous management seemed to have run out of ideas. I don’t care about dividends or Buybacks. Just want to see how they allocate it towards growth.
The targets of 72 and 120 EPS… while I hope it pans out… I just don’t see where they’ll get such huge growth from currently…
However… based on the last concall the benefits the IT industry had recently will be seen here in a few quarters since there is a lag effect for expleo due to it being in the testing field(ie at a latter stage in the cycle).
Add the fact that they have 140 crores available… if they allocate it well we could see huge growth spurts in the mid term so there is huge scope for upside surprises and your predictions may come to pass.
My main point is there are a lot of unknowns here
ie capital allocation ability and capability of management, the full benefits of the lag effect, adoption of next gen testing by clients etc.
I am bullish, hence invested, but at current dirt cheap valuations of 7 times earnings (removing the net cash) for a company with no debt playing with above 20 percent margins I’d be happy if management come through with their promised “minimum double digit” growth next year and if they allocate their cash well to set them up well for the following few years
Dear Sujay , cigniti promoter holding is nothing to write about with a section of promoter looking to exit. The performance is nothing to write about, no dividend or buyback either.have taken huge impairment hits. Chakilam infotech, took over cigniti technology, a small testing firm in US , using huge debt ,& merged both firms with the name of cigniti.
I see no future for cigniti.you may switch to more promising scrips. The only future lies in acquisition of cigniti technologies by a MNC or indian firm unlocking value.
On the other hand parent ASSystem technologies SA France hold 56.7 percent in Expleo solutions, Rajasthan global securities holding 5 percent with HNI groups holding another 5 percent.
Both MD as well as company secretary have explained several times in past concalls , that as per expert legal opinion they have very high chance of winning the case of 90 cr contingent liability, which is in effect disputed service tax liability for previous years & therefore no provision have been made for it & further the hearing on this case will be a minimum of 3 to 4 years away.
Regarding cash of ₹140 crore, the explanation given by MD is that due to covid uncertainty,cash is being conserved & all options including dividend or buyback or going for acquisition etc will considered by the board, mostly in Q4 board meeting .
Usually Q3 is the most subdued quarter due to seasonal holidays & less number of working days, however this Q3 ,they have reported consolidated EPS of ₹ 12.30 , almost equal to Q2 EPS , though there is substantial increase in other income due to forex gains & Interest on cash of ₹100 crore plus
Q 4 is also another subdued quarter due to seasonal holidays in certain geographic locations, but the company has learnt to ramp up projects in Asia & middle East during this lean season ,to mitigate the effects of subdued quarter with success, even though the margins are less than those in Europe & UK.
Though I mentioned that Q3 & Q4 are subdued,it’s not always so & difficult to take a call ,as projects ramped down, freezed or postponed ,may spill over to these quarters , with surge in project based income.
Thanks to @Malkd i bought few shares just on technical bases ,now after I binge read the whole thread today i feel like this is a very undervalued stock, and will add half of my allocation size this monday and half more if there is dips or correction before q4 results
Reason being
1)Top line is 15% up TTM from its 2016 high levels and bottom line is up almost 80 to 90% up and the stock is trading at 1/3 of it’s all time high back in 2016.Which might improve further this quarter
2)I feel like all downsides as @Malkd said has been priced in and if the Q4 results are expected to be good going by the past records .That will provide margin of safety as stock might go up.
3)I also feel this could be long term bet ,if is able to breach the U.s market(biggest) then growth can continue further
things i dont like
1)poor utilisation of cash dividend payout ratio is pretty high ,I wish management could find better use of cash .
2)currency risk read an article about indian currency has depriciated the worst vs other southeast asian currency which is good for the company but the article also mentioned that it might have bottomed out(no clue but need to keep track of this.
This is a classic example of Heads i win tails i dont lose much.
Not a sebi investor just a long time lurker on the forum ,trying to contribute and help other as they helped me.
Take away from today’s concall of Expleo solutions in brief
Q4 will be good but next year will yield a bumper harvest.
MD indicated his vision of doubling revenues, over the next 3 years, of which around 50 percent over the coming 2 years & balance by the end of third year
Expleo has won a mega global deal covering various geographies including US , Europe, Australia, Asia & india from a Financial MNC ( the biggest deal win by size in the life time of Expleo) to be completed over the coming 2 years, which will necessitate hiring of 120 headcount exclusively for this deal.
Expleo also expects to bag ,more mega deals of this kind
Huge demand in the market.
While focused on BFSI segments, Expleo has also bagged 2 deals from non BFSI segments for Robotic process automation & security surveillance testing for automobile industry
Expleo is focussing on india as a digital transformation opportunities are immense as also in the USA market.
MD also mentioned that board will explore,all options on ₹140 crore in hand for capital expenditure, acquisition, dividend or buyback, by the end of Q4 .
unfortunately Rohit Balakrishnan, was conspicuous by his absence, in this concall,as also in the past few concalls
To sum up, my view is that coming 5 years would be the best ever, for Expleo & it’s investors.I anticipate EPS for the current year in the vicinity of ₹55 , while estimated consolidated EPS for next 2 years will be in the vicinity of ₹72 & ₹120.
Views from other boarders are welcome.
Disclosure , Substantial investment in Expleo over the years, with a maiden token entry of a few shares around ₹900 levels in latter half of 2016. It has been
Expleo has been a non performing stock since Q3 of 2016 ,on plethora of factors like Brexit, forex losses, recession in the industry, with clients, freezing, postponing & ramp down on projects
Covid pandemic has brought in a plenty of opportunities & digitalization, RPA ,AI , Automation,QA , Agile , security surveillance, Cloud computing, Data analytics has been pushed ahead by a decade.
Expleo solutions,a niche small cap MNC stock with 56.17 percent held by unlisted ASSystem technologies SA France, jointly owned by ASSystem service & French PE firm Ardian.
Around 5 percent is held by Rajasthan global securities, another 5 percent by HNI investors & 1.2 percent by institutional investors.
Thanks @Balki
Concall was very optimistic and investors seemed happy as compared to the previous few concalls where you could make out a couple of nerves were frayed and at end. After hearing about their mega deals and hiring and new verticals I’m now cautiously optimistic that your bullish predictions could come to pass over the next 2 to 3 years.
I commend your perseverance in keeping faith through the troubled times since 2018. Now it’s just a matter of tracking each quarter to make sure the story stays on track.
Yes management seems to be very confident on the business…if they double the revenue in next 3 yrs then nothing like that…
For me the big thing is they have tied up with a big client and only for them they will be hiring 120 plus employees…this would be there biggest client and should contribute 10% to 15% of total revenue
Even debtor days improved to 61 days that is even better then precovid times.
As per latest info,on top 100 shareholders as on 19/3/21 , I find that 76 percent of it is held by promoters (56.17 percent) & balance by HNI groups,
& Institutions. The main inference is
76 percent is with promoters ,HNI & institutions,shares are moving from weak to strong hands.
free float is only 24 percent of which a few lakh shares ( I don’t have exact figure) is held by Marcellus investment advisory , Saurabh Mukherjea in little champs PMS ,in individual demat account of PMS holders & buy & sell effected by fund manager using POA
Good news is institutions are invested in this small cap MNC , with Rajasthan global securities holding 5 percent, Trustline AIF & holdings 1.5 percent, ICICI securities around 10,000 shares , IIFL securities 14,000 , Banyan capital 15,000 ,& several others.
Largest individual shareholder is Aparna jain , holding 114,000 shares ,followed by Zaki Abbas55,000 & Sachin kasera with 55,000 ,who are both regulars at investor concalls.
Nihar Nandan Nilekani, son of Infosys director, Nandan Nilekani holds 50,000 shares.
Most important, Expleo director Rajiv kucchal, a venture capitalist.& Former Infosys director, holding 64,000 shares
IT sector is on the cusp of growth & Expleo solutions looks set to outperform over the coming 5 years.
Disclosure holding substantial quantity in Expleo for the long haul.
The Bad news ( ?) Is Legendary investor , Kalpraj Dharmsi family has fully exited this stock. The stock price has gone up by 30 percent, post his exit .
I don’t know why he exited now , perhaps kalpraj needed funds for other needs . The best time for kalpraj Dharmsi family to exit was in 2016 , when this scrip was at ₹1296 level & Several analyst like Ashish Tater called it a 5 bagger , along with another analyst Daljeet singh Kohli.
However the decline was steep from 2016 & this multi year decline ended at ₹112 level in 2020, over a plethora of factors starting from brexit ,forex losses , Recession in IT sector, Ramp downs etc.
Share is currently playing at ₹525 level & future looks great, over the coming 5 years .
Q4 Results are due around April 28 ,2021 .I can only guess contours of Q4 . Usually Q3 is weak due to seasonal holidays, while Q4 is also weak , again due to seasonal holidays in certain geographies.
Now Expleo has patented the art of execution of business in Asia & middle East during Q4 , so that weakness is mitigated to a certain extent. However profit margins are less in this geographic area , compared to Europe.
Also business ramp downs can spill over to Q4 , creating surge in profits , hence not predictable.
Before closing, going back in history on April 29 ,2016 , this scrip ( then SQS BFSI) surged 12 percent due to strong Q4 results, following 7 fold rise in net profit to ₹ 10.60 crore on consolidated basis ,due to additional revenue from Europe & strong growth in cards & payment division.
Well it’s time for Q4 results , by last week of April 2021 .
@Balki could you share the source of where we can see the top 100 shareholders? Specifically Marcellus investing since I can’t find anything online. Is it available in public domain?
Edit: Thanks Balki
I have provided latest list of top 100 shareholders sourced from the company . you can find that 76 percent of shares is in strong hands of promoters , institutions & HNI.
Balance floating stock is 24 percent. Of this around 1 to 2 lakh shares is held by saurabh Mukherjea run Marcellus investment advisors , Little champ PMS.
The quantity & purchase is not in public domain. I reckon around 1000 to 2000 shares of Expleo are held in individual demat accounts & buy & sell is effected by the fund manager, using power of attorney. So these holders or PMS does not figure in Top 100 shareholders list.
