About the company -
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It got started in 1907, today business is in two vertical - (1) Material handling Equipment Manufacturing, (2) Engineered Product Vertical.
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Material Handling Division (Rs 110 cr revenue run rate per annum) - Offers a range of equipment’s and systems, such as Pygmy, Pallet Trucks, Platform Trucks, Stacker, Reach Truck, Electric Forklift, Order picker, racking systems, etc. mainly used in the automotive, warehousing, logistic, etc. (Product ranges looked similar to the MHE division of Action Construction Equipment).
(Josts Engineering Co. Ltd. :: Material Handling) -
Engineered Products (Rs 90-100 cr revenue run rate annually) - This vertical has a variety of product types - (1) Sound & Vibration measurement devices, (2) Measuring devices for nanoscale dimensions to help in scientific research purposes, (3) Transformer & Battery Testing Equipment, etc. (Josts Engineering Co. Ltd. :: Engineered Products)
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Financial Metrics - Over FY18-date, business has scaled from Rs 92cr revenue to Rs 227cr revenue scale, EBIDTA margins improving from 5% to 11%, mainly driven by operating leverage as GMs have been at ~40% across years on an average. TTM they are operating at EBIDTA of Rs 26cr, PAT of Rs 15cr (not much debt on BS), ROE profile of 20-25%.
- On the promoter side, there are two families who own - (1) Agarwal Family, also promoters of Agarwal Industries (Jai Prakash Agarwal is the common SH), (2) Jain Family (Vishal Jain, Shikha Jain, etc.). I don’t have much context on the quality of promoters. From the management side, Vishal Jain from promoter side is MD, and have respective CEOs of each verticals. Pls add more feedback about the promoters if someone has looked into the company or know about it.
Expansion plans -
- In Dec-23, company raised Rs 12cr (at Rs 253 Rs per share, have adjusted for stock split that happened later) - Purpose was to expand the MHE vertical. They have started (trial production May 2024) new facility in Murbad for producing 2100 MHE annually (2x of current capacity) - Potential Revenue of Rs 300 cr overall.
AR 2024 - MDA Section extract
- 50-50 JV with Kay Cee Energy for executing transmission line construction, total order value of Rs 362cr (50% share for them is Rs 180cr).
AR 2024 - MDA Section extract
Kay Cee Energy PPT
Valuations -
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At CMP (Rs 535), MCAP today is Rs 522cr (negligible debt on BS today). At 15cr trailing PAT, stock trades at 34x TTM PE.
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There are tailwinds to both the segment they are present in. Material Handling Equipment growth is linked to general manufacturing growth, and are basic use cases of any logistic, warehousing activities, etc.). On the EPD vertical, their measurement devices for various manufacturing & scientific use cases looks to be steady growth business. However, their role in transmission projects (through new JV) needs to be understood better.
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Growth rate and margins have improved in recent quarters, 2QFY25 annualized revenue run rate was 240+cr, and margins also improved to 13%, will need to track how that pans out in context that they will be capitalizing the newer capital expenditure (12cr CWIP as on Sep-24 book, on Net Block of Rs 22cr) which is for the MHE vertical new capacity expansion.
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With capacity for now larger units in MHE & execution of the transmission line construction business from FY25, growth pick up is expected.
Key Risks -
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Despite a long history (100+ years), scale of the company is not very high (just Rs 220 cr revenue), even though they look to be more active in expansion in last 5-6 years. However, vision of promoters needs to be understood.
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What is their value add in JV they have done for setting up transmission lines with Kay Cee Energy needs to be understood. While it can be a new growth opportunity, but unit economics, receivable management, etc. will have to be evaluated.
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Even though potential revenue from all their expansion plans look high (capacity in MHE vertical post expansion is of Rs 300cr per annum, EPD vertical is already doing Rs 90cr can grow well, Transmission line project can add 180 cr revenue over 2-3 years) - but sales & execution risks to be able to grow will need to be tested. Any disappointment on growth will be negative.
Disclosure - Evaluating as an idea, but still understanding more. Purpose of putting it on VP was to get feedback from broader group if someone has more idea on group & business. AR and website are only sources I have used to read on it, haven’t talked to company yet.