The long-term performance is even more remarkable, with the shares gaining 992% over three years. On May 14, the shares reached a new record high of ₹468 apiece.
The company has been serving India’s infrastructure development and industrial capacity expansion needs for four decades through its three verticals: warehousing & multi-modal transportation, construction equipment rental, and turnkey infrastructure and project execution.
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In the transportation and warehousing segment, the company efficiently manages and transports various steel products, including long, flat, and structural items, while also overseeing stockyards for major PSUs such as SAIL and Rashtriya Ispat Nigam (RINL), handling a load exceeding 10 million metric tons per annum (MTPA).
As of May 1, 2024, the order book for this segment stood at approximately ₹76 crore, slated for execution by the end of FY25. In the equipment hiring segment, it boasts a state-of-the-art fleet comprising 312 machines, encompassing heavy cranes, rubber tyre gantry, hydraulic piling rigs, aerial working platforms, and steel processing and concrete equipment, with handling capacities ranging from 10 MT to 800 MT.
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The total handling capacity surpasses 3,000 MT, with an average fleet age of five to six years. The company follows a strategy of retiring machines after 9–10 years of service, generating approximately 60% of the capital value for reinvestment in new machines, as outlined by domestic brokerage firm Nuvama Professional Clients Group in its recent report.
A play on the capex cycle
Given the robust demand outlook in the equipment hiring segment, the company has outlined plans to invest ₹160 crore between FY25 and FY26, translating to ₹80 crore annually. This strategic capital expenditure will facilitate the addition of 12–15 machines with larger capacities, typically yielding margins of 55–60%.
With the current yield standing at 2.85%, Nuvama anticipates this segment to generate incremental revenue of ₹55 crore per annum at peak capacity.
In FY25, the company is set to venture into the renewable energy (wind) segment, leveraging existing equipment capabilities. By FY25-end, it aims for a 5-6% revenue contribution from renewables.
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Additionally, the company aims to reduce its reliance on revenue from the rural and urban infrastructure segments to enhance its working capital efficiency, said Nuvama.
Bolstered by capacity expansion and diversification, Nuvama projects a 29.6% CAGR in segment revenue over FY24–27, reaching ₹165 crore. It anticipates the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin to expand by 50 basis points to 51.5% by FY27, driven by increased revenue share from larger machines. While it expects EBITDA to grow at a 30% CAGR over FY24–27, reaching ₹85 crore.
It said that the company plans to capitalise on its existing relationships with private-sector steel manufacturers to pursue transportation and warehousing contracts, offering stability, revenue visibility, and shorter working capital cycles.
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Furthermore, the company remains committed to securing new orders, particularly with SAIL and RINL, and aims for a 15% and 13.3% CAGR in revenue and EBITDA, respectively, from the transportation and warehousing segments over FY24–27, supported by order wins and improved realisation.
Optimistic on long-term growth
The brokerage is optimistic about the company’s future due to several factors: a favorable capex cycle, significant expansion of its equipment fleet to meet increasing demand, entry into specialised EPC sectors, and a shift towards higher-yielding, larger machines.
These factors, according to the brokerage, are expected to enable the company to expand its presence significantly across the industry while maintaining profitability.
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It expects the company’s blended revenue to grow at a CAGR of 24.3%, rising from ₹172 crore to ₹330 crore over FY24–FY27. It projects the revenue share from the equipment hiring segment to increase to 50% in FY27 from 44% in FY24, driving a 327-basis point expansion in blended EBITDA margin to 35.5%.
Consequently, it projects the EBITDA to grow at a CAGR of 28.4%, from ₹55 crore to ₹117 crore by FY27.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 21 May 2024, 06:01 PM IST
