Listed Microcap- Frog Cellsat- Opportunity

Stock Opportunities Untested - but worth a good look
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Notes from Frog Cellsat Limited from the Annual Report 2022-23

  • Frog has ventured into defense projects

  • Its new manufacturing facility in Noida marks an increase in capex, enabling full-fledged operations by Q1 FY2024

  • Certified by the Department of Science and Industrial Research (DSIR) Government of India.

  • New CEO appointed - Mr. Pankaj Gandhi as the CEO of Frog Cellsat Ltd., effective May 2023. ( Professional Management - a positive)

Capex:

  • Phase 1 construction of the new manufacturing facility in Noida, covering 100,000 sq. ft., signals increased capex.

  • Full-fledged operations begin in Q1 FY2024.

  • Phase 2 construction (60,000 sq. ft.) is ongoing and expected to complete by Q3 FY2024.

  • Increased hiring expenses as they see growth in the next few years

  • No Revenue Growth but 100% debt free company

In FY2023, Frog clocked revenues at 1,33 Cr, which is relatively at the same level of 132.9 Cr million in FY22

  • FY24 Guidance -

Revenue is expected to grow in the range of 45% to 50% in FY2024,

EBITDA margins are expected to be in the space of 16% to 18% for FY2024 vs 16.48% in FY23

  • Employee benefits: ( 151 employees as of March 2023 / 197 as perLinkedIn 5th Oct 2023)

The Company extends assistance for education of children of the employees. Shiksha Sahyog Policy

Median employee tenure ‧ 6.2 years (LinkedIn)

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Red Flags:

  • Promoters has issued shares to themselves for almost free before the IPO: 225 (Two Hundred and Twenty-Five) new equity share for every 1 (One)

  • Production Linked Incentives are recognized as income when on the basis of the judgment of the management

  • There are several litigations pending for the inventory filed by the Company

  • TDS default for previous years amounting to Rs 5.99 lacs

  • They are getting into defense/government projects so the payment cycle will increase

Things to monitor:

  • Revenue Growth guidance that management has given can be achieved , very aggressive

  • Track related party transactions as they do have a few

  • They are eligible for and get PLI incentives from the government in the next FY

  • Progress and deliverables from the new Noida plant from Q1 FY2024 onwards

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