yes, and this acts as a switching costs for oems, there is no substantial savings for them in changing suppliers.
hence unless there is inferiority in quality of product, suppliers aren’t changed.
high customer stickiness
1 Like
Look for promoters who are managing the actual business. Here, the stake is sold by Evergraph Holdings which is a PE Fund. PE Fund by virtue invests at bad/turnaround/very high growth phases and exits a decent chunk at their good times. Here, Evergraph has invested pre-IPO and took an exit in IPO and post-IPO.
KA Joseph, Sanjay Thapar, and its team are intact with their interest in the business. It’s just a change in the shareholding of those who were sitting for returns and not for long-run business. I think nothing material has changed in the business.
Regards,
Invested as a techno-funda bet.
7 Likes
I have been following SJS only recently but generally, mgmt seems to be over promising and under-delivering so far. They guided for 20-25% organic growth in F23 and missed it (blaming weak exports) and have once again guided for 20-25% organic growth in F24 (delivered 10% growth in H1 F24) while maintaining it despite weak H1.
Commentary continues to be strong though and WPI numbers should start improving from Dec-23 quarter. Based on my numbers, company can deliver peak revenue of 1000 Cr (assuming Exotech’s capacity expansion to 300 Cr topline goes through in C24) over the next 3 years with potential PAT of 145-150 Cr. Will have to wait and see.
3 Likes
Will share my understanding of overall how SJS has unfolded so far:
From the beginning, Management has shared a high growth guidance.
The prospects for the Industry (i.e. Decorative Aesthetics) have been shown as quite high - I believe the basis of this is only 1 report that was published at the time of IPO.
The IPO has been completely OFS.
In the second quarter’s Investor presentation, they have mentioned about actively seeking to hire a new CEO & CFO.
There was no information shared on why the CFO (at the time of listing & 1st quarter as public co) was no longer with the company from the very next quarter.
While the case for promoter buying shares has been made, Mr KA Joseph – hasn’t been a hands on promoter/ he hasn’t been actively running the operations.
I believe the driving force that has gotten SJS so far has been the professional CEO that came because of the PE firm’s investment.
And the stakes have been sold by the following:
Evergraph Holdings - the PE fund - reduced the stake from 35% to 5%
Sanders Consulting – Sanjay Thapar’s firm (aka CEO) and Ashish Kacholia.
Imo, this is a cue that the smart money is out of here.
Digging a little deeper on to the timing of their guidance,
This quarter – they’ve lowered the guidance.
This comes right after the CEO’s firm as well as the PE sold stakes.
During the concall, it sounded like WP acquisition might also not be a great one.
Again the higher growth guidance was due to Acquisition/s.
All of these are significant corporate governance Red Flags to me.
And I’m sceptical about the minority investor’s interests.
All said, it’s quite possible SJS might do well going ahead.
It’s a dominating business in a growth segment in a growing market like India.
Important disclosure – I have sold my shares right after the last quarter’s results.
Views likely biased.
Info sources – all public info - Investor Presentations, Concalls etc.
All opinions - have tried to distinctly mention as I believe
4 Likes
Just to add to your points, while they did replace the CFO, a new professional CEO has never come (Sanjay Thapar wanted to remain as a Director and take up a more strategic role, with KA Joseph focusing only on new product development). Wonder what made them reconsider their decision of a new CEO. This also says about the drive of the current CEO who doesn’t want to run day to day operations and me more hands on. Agree with you that the mgmt. (Mr Sanjay in particular) sound overly optimistic despite generally missing expectations for multiple quarters since listing.
My only counter point here is - Evergraph has sold its holdings to FIIs and DIIs. A very little portion of the sold holdings has gone to retail investors. Now assuming that the FIIs and DIIs have done their due dilligance, there still might be some potential which we are not able to see.
Disclosure - Invested since lower levels
2 Likes
Q3 results have shown an uptick. Waiting for the concall to get a better sense of guidance to see if it stays intact or revised…Any view so far?
SMIFS has given a Buy Rating post Q3 results.
https://twitter.com/SmifsLimited/status/1753687525015838748?t=nyfb0IfeT1RLPENuVuKUdg&s=19
With the addition of 9,00,000 shares, promoter Mr. KA Joseph’s stake rises from 16.92% to 19.82%. The deal was made “off market” on February 29, 2024 as per data available on BSE Insider trades.
Disc: Not invested
1 Like
Nuvama, JM seems bullish on the company since long, Ashish kacholia holds stake, company is guiding for 20-25% revenue growth and 30-35% PAT growth. Still the stock commands an average PE(around 27) and valuations. Can someone tracking the company tell what might be the reason? Read above someone saying that company has the history of over-promising and under-delivering. Am I missing something?
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@omsingla Ashish kacholiya has sold most of his stake. He may hold less than 1% or fully exited. Company is not executing according to the guidance. In Q1 and Q2 company margin got decreased and they said it’s due to acquisition impact but they have indicated earlier. Need to see how company matches the guidance.
Disc: Invested
2 Likes
The results were stellar and company was able to achieve its guidance on both revenue and profits. Just waiting for the concall transcripts as I wasn’t able to listen to it. Anyone who has prepared any notes?
Transcripts are already available
77b60446-9c1b-4070-b74d-c941203df1c5.pdf (bseindia.com)
AI generated future growth drivers.
- Cover Glass Technology: The company is making progress with its complex cover glass product, with RFQs received and prototypes well-received by customers. They anticipate business awards in the first half of the year and significant turnover contribution in the next three to four years.
- Walter Pack Stabilization: The Walter Pack business is showing improvement, reflected in increased EBITDA margins. Continued growth is expected in both domestic and export markets.
- Revenue Outlook: The order book covers 85% of the revenue outlook for FY25, with an expected industry growth of 8% to 10%. SJS Enterprises aims for higher growth due to increased content per vehicle.
- Product Margins: The company is focusing on high-value products with less competition, leading to sustainable higher margins. Chrome plating is the only product with mid-teens margin profile.
5 Likes
They told they will grow 1.5 x of industry. Anybody has idea what will be the number?
From the conference call, management indicated they expect 8-10% OEM volumes. SJS expects to do volumes 1.5x of market volume growth, so i’d guess around 15% volume growth. On account of price growth, I think it should be safe to assume 20-25% revenue growth going forward. I wish the management communicated volume growth, price growth, and CU in a much clearer way.
3 Likes
Could someone help me to understand the below. I was intending to raise this question with management during concall but I didn’t log into call due to some personal work
SJS claims that cover glass opportunity is a game changer for them and opportunity size is huge moreover no other company available to manufacture such product. I wanted to understand what is SJS Moat here ? If the opportunity is huge, definitely more companies will jump into this space to capture the market. And it doesn’t require huge investemnt as well.
So what is SJS moat here ? Is the technology complicated and no one can replicate it or they have got any copy rights on the technology ?
Dis : Invested at lower levels.
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Thats a valid point. As far as i understood, at expense of over simplifying, glass cover here is same as say gorilla glass used for mobiles, just that given its used for in vehicle display it has to be more durable, anti glare etc.
Quick google search throws few companies already doing it : agc, micro tc, corning etc. May be none from India yet.
Would be interesting to know the moat here.
Evergraph has exited completely. KA Joseph has increased his holding to 21.55%
The company is a potential candidate for rerating.
1 Like
