PDS Limited - A platform for entrepreneurs

Summarised PDS here . Also raised some concerns we should look forward going ahead

Disclaimer - Have a small tracking position

8 Likes

A very thoughtful analysis. I m watching this business and had similar questions in my mind. Their margin is very low that bothers and it’s decreasing Y-o-Y. I guess we should watch for improving.Aldo , Having 600+ supplier and partners makes it like a platform or integrating type business . Simply They are connecting every one and earning fee like marketing fee. Sometime brand’s would like to work directly or at the end no-one will make money .due to competition.

1 Like

Their sourcing as a service segment has higher margins, in design led sourcing the entire merchandise value is accounted to the topline and hence the thin margins, whereas in SAAS only the actual commission charges is reflected into the topline. Also operating leverage can kick in with SAAS as the existing employees and network can do more than what is being done now.
Game changer would be if somebody like a Walmart uses their SAAS segment for all their apparel(textile) needs.
Disc: Invested, patience has started to wear.

3 Likes

This is a very good write up on PDS.
Is there any timeline to achieve the 1000 Cr PAT that the co is targetting ?
Their PAT margins seem to be around 2%. So going by that they will need a revenue of 50K to reach a PAT of 1000 Cr. And I am talking about the overall PAT here not the one accrued to shareholders.
So unless some operational leverage plays out and their subsidiaries start contributing positively to the bottomline and push the EBITDA margins to early double digits and PAT margins to 5%, these nos seem far fetched.

Investing in FD would earn more than double of what PDS is earning if we go by their PAT margins.

1 Like

They guided for 50 dps of incremental margin expansion year on year, so by 2027-28, they should have 4-5% PAT Margin

1 Like

Did they mention what will lead the margin expansion? Anything apart from the product/service mix?

1 Like

It is combination multiple factors, such as operating leverage kicks in, fixed cost such as employee expresnes getting observed by higher revenue recognition, new vertical such as Brand management and SAAS are higher margin business which are growing and becoming bigger share of the pie. Interest Cuts are expected this year, which leads to low interest cost expense.

So basically they have guided for 2.5Billion(20K crore rupees) dollar revenue and margin of 5% PAT by 2027, that’s the basis for 1000cr PAT, and also so far the management has been walking the talk, about first half of prev FY being drag down, then the flat/recovery at the second half. Investing in business and talent while the industry was not buoyant. I liked these qualities in them

Them being a Platform business augur well for the shareholders IMO.

3 Likes

I would say PDS is operating in a cyclical industry that’s going through a downcycle. Demand is yet to be revived. Poor cycle brings with it a lot of opportunities as well. The company has been able to increase its stake in many manufacturing companies( esp in Sri Lanka. They have also been able to sign many sourcing agreements with major brands. I would say PDS is in a growth phase now and with the cycle turning so will its fortunes. Company has also published an investor FAQ which explains the business well.
PDS Investor FAQ.pdf (1.4 MB)

Discl: Invested. Have purchases in last 30 days

4 Likes

Based on latest quarter, Profit Growth of PDS is bit concern here. They talk about order book inflows more than 30% , but profit growth too less when compare to current year.

PDS have released their Investor Day Presentation

https://www.bseindia.com/xml-data/corpfiling/AttachLive/d7d4e6ae-3884-49ed-a6cf-8276a63278ee.pdf

What amazes me is this slide

If they are really able to pull this off in next 5 years then we are onto something big

2 Likes

Initially i was excited, about this, however, then i realised, the 5 billion GMV part might not translate in Revenue, especially in the sourcing as service part , so need bit more clarity on this, if any of our member(s) have any better understanding who has attended the Invester day conference, kindly give us some sense.

Second point is, By 2027, they were suppose to be 2.5B with 1000cr profit , atleast that was the thesis, i was working with, and as per their guidance, is that they plan to increase 50dps in PAT margin every year, which should amount 4-4.5% PAT margin. Now it was kinda feels like delayed.

Disclaimer:
Largest position in my Portfolio - biased to do well

3 Likes