Macfos Limited- A niche E-commerce Company

Stock Opportunities Untested - but worth a good look
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Abstract of Presentation

1. Company Overview

  • Core Business: Operates as an e-commerce platform specializing in electronic and robotic parts, including components for drones, E-bikes, IoT devices, DIY kits, and more.
  • Key Stats:
    • Over 30,000 SKUs.
    • Partnerships with 210+ vendors domestically and internationally.
    • A dedicated 35,000 sq. ft. warehouse with a staff of 200+ (both in-house and contractual).
  • Growth: Consistent growth in turnover, EBITDA, and PAT with a CAGR of 67%, 77%, and 88%, respectively, over the last three years.

2. Financial Highlights (H1 FY25)

  • Revenue: ₹147.62 crore (+176% YoY).
  • EBITDA: ₹15.11 crore (+150% YoY).
  • PAT: ₹10.29 crore (+166% YoY).
  • Revenue includes a contribution from one-time corporate orders, which are non-recurring. Excluding these, core business revenue grew by 43% YoY.
  • Profit Margins:
    • EBITDA Margin: 10.23% (compared to 11.28% in H1 FY24).
    • PAT Margin: 6.97% (compared to 7.23% in H1 FY24).

3. Key Operational Metrics

  • Customer Engagement:
    • Total customers served: 80,838 (H1 FY25).
    • Average monthly website and app visitors increased from 4.57 lakh (H1 FY24) to 5.27 lakh (H1 FY25).
  • Category Revenue Contribution:
    • Key categories: Development boards (19.59%), Drone parts (14.85%), 3D printers & parts (13.11%), and batteries & chargers (9.37%).
  • Inventory Efficiency:
    • Only 3.08% of inventory is very slow-moving (compared to 3.68% as of March 2024).

4. Strategic Priorities

Robu 1.0 (Core Distribution Business):

  • Focus on delivering tech products at affordable prices with minimal lead times.
  • Expand SKU offerings (added 6,000 new SKUs in H1 FY25).
  • Enhance IT infrastructure and optimize supply chain cycles.

Robu 2.0 (Proprietary Products Development):

  • Long-term focus on building proprietary brands, particularly in drones, mechanical products, and other electronics.
  • Recent developments:
    • 53 new SKUs for sensors and modules.
    • 46 new SKUs across four new product categories.
    • Expanded offerings in tools and drone components.

5. Future Outlook

  • Growth Drivers:
    • Increased adoption of electronics in daily life and supportive government policies (e.g., Make in India).
    • Expanding the customer base, particularly among corporates.
  • IT and Operational Enhancements:
    • Leveraging ERP systems for operational efficiency.
    • Scalable in-house IT infrastructure to support growth.
  • Commitment to balancing regular business growth with new opportunities while maintaining sustainable profitability.
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There is much speculation that China will attack (or at least try) Taiwan in 2025, US govt is also going to change and the new govt won’t help countries like Taiwan and Ukraine. I am also thinking about the correct PE of this company, 70 seems very high for such risks.

What do you guys think, as far as I can see this company depends heavily on China and Taiwan.

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Trump has a clear stated policy that he will not support Ukraine but will protect Taiwan BTW

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Well, the company is not about China or Taiwan. Of course, as China and Taiwan is major low cost manufacturer of electronic goods, the e-commerce operator do import those items from there and sell. Even if say tomorrow, China or Taiwan cease to exist or Government prohibit any import from those countries… still the e-commerce operator will procure the goods from somewhere and sell it. Thus, China or Taiwan is not very relevant.
What is relevant is electronics and drones. Recent middle east crisis has shown the power of electronics and drones in warfare. I think that now drones are not merely hobby items, it is serious business. Macfos has some edge in those areas as e-commerece operator and if they are lucky, they can maintain the lead.

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120

Our govt won’t ban imports but sanctions on China will make difficult to import such things. And I don’t think there are many options beyond China, it will heavily hit revenue for many quarters as getting alternatives and having agreements with them will take lot of time (if they get alternative). Plus, the supply chain will put much strain on those alternatives making it difficult to procure.

Disc: Invested from 450 levels

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Hi @Divyanshu_Parganiha Robu has penetrated to the higher education sector in India. I did a random sampling and most of the students with whom I had interacted, know about the brand and they purchase from Robu. Along with this, the National Education Policy is pushing for more projects and student lead startups in which they use Robu for sourcing and prototyping. The spending can be from a few thousand up to a lakh rupee in value. The post on Holmarc has a great discussion on NEP for reference and applies here. Like Holmarc Opto Robu is also active on GEM ( Eg: https://www.iiserpune.ac.in/storage/media-library/43d3815a-2003-406c-8e30-6143efcffe62.pdf). As I understand it, a strong customer base and brand building is happening during this process.

I consider Robu as the Indian equivalent of McMaster Car or Grainger. The growth can be compared for study purposes.

I can see valuable discussions on other aspects in the forum and thank you for the perspectives.

Nb: Invested at 400 levels

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Could you clarify how we compare growth of Grainger to Macfos, Macfos is electronic/embedded tech seller. I want to estimate TAM SAM SOM so that we can estimate revenue at saturation, this will also give us insight how much max PE ratio is acceptable.

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Hi @Divyanshu_Parganiha, Hi @Divyanshu_Parganiha,

I appreciate your perspective on this topic. I want to share my thoughts, which might differ slightly. Many of these companies have a significant customer base in the startup sector, sitting at an intersection between B2B and B2C. Typically, the purchases made are geared toward prototyping, which accelerates their development processes.

It’s worth noting that many startups unfortunately do fail, making way for new ones to emerge. U.S., reached a level of maturity in this ecosystem, but in India, the startup scene is still in its infancy and shows immense potential for growth. I genuinely believe that Macfos could thrive alongside this evolving landscape.

I hope my insights add some value to the discussion!

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Number of shareholders are growing at healthy rate. Including increased holding of DII. DII are buying from public rather than promoter which is another good thing.

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I was observing regular upper circuits for the past month suspecting big player entry but didn’t knew it was actually DII :grinning:

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