Neil bahal investment thesis about satia
1 stock idea - we haven’t had this for a while. So here goes…
Satia Industries: (Mcap 1335cr, CMP 133/share).
In short, Satia is not a Special Situation as such. It comes under the value investing category where significant Capex has just taken place and if ramp up happens as per plan, stock is available at 6.6x P/E, which is a considerable discount to historical multiples this company has got of approx 10x P/E.
(It has even seen 12-14x P/E at times in the past, but we should always conservatively take target multiples).
What I like here?
I really like that its big capex has finished already and now the ramp up should happen in the remainder of FY23. Hence, the risk is lesser in this case.
It is always a risk to buy a business when a ‘significant’ capex is just announced.
~~~
Also**, Satia is a backward integrated player which makes it a safer proposition compared to many of the listed peers who are at the mercy of ‘imports’ of raw material.**
Relying on imports can make margins unpredictable.
Hence, an integrated player like Satia offers some comfort.
~~~
In our estimates (extrapolating from official management guidance),
FY23 revenue could be 1500cr with 300cr EBITDA.
In FY24, EBITDA could increase to 400cr.
This translates into PAT in FY24 between 190-200cr.
And based on current mcap of 1335cr, stock is currently available at 6.67x P/E on FY24e.
Ps- Satia Industries is one of the rare companies which remained profitable even during the Covid pandemic which indicates a strong business and able management.
**~~~**
*Disclaimer: Negen Capital PMS owns Satia Industries. This post is our research note on Satia Ind and not investment advice. We can sell our positions at any time. We have not been paid by anyone to write this newsletter. Kindly consult your financial advisor before acting on the contents of this newsletter. The estimates mentioned could go wrong. The views could be biased.*