Pre-requisite Reading before starting with Free Cash Flow Yield

Stop Looking at Profits. Start Looking at Cash.

Most investors in the Indian stock market focus on EPS growth, P/E ratio, and profit trends.

But here’s the problem: profits can be manipulated — cash cannot.

A company can report strong earnings and still be financially weak.
But if it consistently generates cash — it’s real.

That’s where Free Cash Flow Yield (FCF Yield) becomes one of the most powerful tools for investors.

What Is Free Cash Flow Yield (In Simple Terms)

Think of buying a stock like buying a business.

You should ask:

“If I buy this business at today’s price, how much cash will it generate for me every year?”

That answer is:

Formula for calculating Free Cash Flow (FCF) Yield

Where:

• Free Cash Flow (FCF) = Cash from operations – Capital expenditure

• Market Cap = Current price × total shares

Example

Let’s say:

• Company generates ₹1,000 Cr free cash flow

• Market cap = ₹10,000 Cr

FCF Yield = 10%

This means — You are earning a 10% cash return on the business at current price.

Why Free Cash Flow Yield Is Critical for Indian Investors

1. It Tells You What You Actually Get (Not What Is Reported)

Indian markets are full of companies with:

• High reported profits

• Weak cash flows

FCF yield cuts through that.

It shows real cash generation, not accounting profits.

This is especially important in sectors like:

• Infrastructure

• Real estate

• Capital goods

Where earnings can look strong but cash is weak.

2. It Helps You Avoid Value Traps

A stock may look cheap:

• Low P/E

• Low P/B

But still be a value trap.

Why? — Because it doesn’t generate cash.

If FCF yield is:

• Low or negative → business is struggling

• Declining → early warning sign

Many “cheap” Indian midcaps are cheap for this exact reason.

3. It Shows Financial Strength

A company with strong free cash flow can:

• Pay dividends

• Reduce debt

• Buy back shares

• Fund growth without borrowing

A weak cash flow company must:

• Raise debt

• Dilute equity

That destroys shareholder value over time.

4. It Helps You Find Undervalued Stocks

FCF yield is like an inverse valuation metric.

• High FCF Yield → Undervalued / strong cash generation

• Low FCF Yield → Expensive / growth expectations priced in

Quick Rule:

• >8–10% FCF Yield → Attractive (context matters)

• 3–5% FCF Yield → Fair

• <3% FCF Yield → Expensive (unless high growth)

5. It Works Better Than P/E in Many Cases

P/E ratio tells you: — Profit return

FCF yield tells you: — Cash return

And in the real world:

Cash is what drives survival and growth — not accounting profits.

Where FCF Yield Works Best in India

FCF yield is especially powerful in:

1. NBFCs / Financials / Banks / Insurance Companies

Not Useful for such companies — cash flow works differently (focus on ROA + growth also)

2. Manufacturing / Capital Goods

Helps detect:

• Working capital stress

• Capex-heavy businesses

3. New-age / Tech companies

Separates:

• Real businesses

• Cash-burning stories

4. PSU stocks

Often:

• High FCF

• Low valuations

FCF yield helps identify genuine value vs. cyclical traps

How to Use Free Cash Flow Yield (Practical Framework)

Step 1: Check FCF Yield

Start with:

• Latest FCF

• Current market cap

Step 2: Compare with History

Ask:

• Is FCF yield improving?

• Is cash growing faster than profits?

Step 3: Compare with Peers

A 6% yield means nothing in isolation.

Compare within sector.

Step 4: Link with Growth

Best combination:

High FCF Yield + High Growth

This is where multi-bagger potential exists.

Step 5: Check Sustainability

High FCF yield can be misleading if:

• Capex is temporarily low

• Business is declining

Always ask: — “Can this cash flow sustain?”

Biggest Mistakes Investors Make

❌ Looking only at P/E

❌ Ignoring cash flow statement

❌ Confusing profit with cash

❌ Buying “cheap” stocks without FCF support

Key Takeaways

• Free cash flow yield tells you real return from a business

• It helps identify undervalued stocks and avoid traps

• It is more reliable than earnings in many cases

• High FCF + growth = best investment opportunities

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1. Retail Focussed NBFC

piramalfinance.com | NSE: PIRAMALFIN

2. FY22-26: A period of transition

3. Q4-26: PAT up 390% & Net Interest Income up 41% YoY

PAT up 25% & Net Interest Income up 11% QoQ

4. FY26: PAT up 210% & Net Interest Income up 32% YoY

5. Outlook: 25% AUM Growth; 50% PAT growth

5.1 Management Guidance and Outlook

Bottom-line growth driven by improving profitability

5.2 FY26 Performance vs FY26 Guidance

No complaints — FY26 guidance delivered

6. Valuation Analysis

6.1 Valuation Snapshot — Piramal Finance

• Current Market Price — ₹1,837.9

• Market cap — ₹41,537 Cr

• FY27 PAT = 1.5 X FY26 PAT

• FY28 PAT =3% X average(FY26 AUM, FY27 AUM)

• Despite profitability improving, PIRAMALFIN still trades at 1.2 P/B (×) on FY28 estimates.

• For a company guiding to deliver ~66% PAT CAGR for FY26-28 — the P/B multiple deserves a re-rating closer to 2 P/B (×)

6.2 Opportunity at Current Valuation

• Increased Profitability: RoA improving from 2.1%(Q$ FY26 exit) to 2.5% in FY27 to 3% by FY28 creates the opportunity as bottom-line grows faster than the top-line

  • AUM growth: 22% AUM CAGR FY26-28 to support bottom-line growth

• Margin of safety: Even at a current P/B of 1.47(×) there exists a margin of safety in the perspective of the guidance for FY27 and FY28.

• Projections not discounted: Weak past record in the last 5 years — market does not fully discount the growth projection of FY28

• Deferred Tax Asset on books: A deferred tax asset reduces future tax payments

  • When Piramal earns profits it won’t pay full tax. Instead it will use past losses to offset profits

  • This will lead to higher future PAT & cash flows

  • The impact of DTA against tax losses: ~₹2,100 Cr is not fully discounted

  • Optionality of total assessed tax losses is not fully discounted

    • Total assessed tax losses= ~₹24,600 Cr ==> @25% tax rate = DTA of ~₹6,150 Cr (of which only ~₹2,100 Cr is recognized)

Added ₹10,110 Cr in assessed tax losses taking total assessed tax losses to ~₹24,600 Cr (o/s DTA against tax losses: ~₹2,100 Cr)

• Multiple Re-rating: Opportunity of being re-rated at around 2(×) P/B if FY27 guidance is delivered and PIRAMALFIN shows progress on executing FY28 guidance.

6.3 Risk at Current Valuation

Despite the visible turnaround, key risks remain:

• Execution Risk: PIRAMALFIN is on-track to deliver FY26 guidance. The challenge is to consistently deliver on the FY28 guidance.

• Residual legacy risk: ~₹2,807 Cr of legacy AUM still sits on the book; impairment or recovery delays could drag performance.

  • Asset quality while improving needs to be watched

Previous coverage on PIRAMALFIN

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Confused about AUM, ROA and ROE in NBFC’s? Gain clarity now.

1. NBFC — Supply Chain Financing

sgfinserve.com | NSE: SGFIN

Business Mix & Portfolio

Our core business is supply chain finance and the inherent strength of supply chain finance is that, it has a tripartite relationship between the anchor, borrower, and the financer. Across all the NBFCs and banks who are operating in the supply chain space, the matrix of credit cost remains the similar. For us, the advantage is this: our core business is supply chain, which is more than three-fourths of our business.

2. FY23-26: PAT CAGR 91% & Net Inerest Income CAGR 81%

FY25: A regulatory pause lending in H1 to comply with Type II NBFC licensing norms muted growth

FY26: Leadership transition (H2) + downward revision in guidance (after Q2 results)

3. Q4 FY25: PAT up 78% & Net Interest Income up 77%

PAT up 30% & Net Interest Income up 27% QoQ

4. FY26: PAT up 58% & Net Interest Income up 44% YoY

5. Business Metrics: Strong Return Ratios

Management guidance:

• ROA: 4.5–5% (sustainable)

• ROE: 14–16% target

On the ROA, I think 4.8% is a very healthy ROA. Anything more than this is not desirable, it can go up to 5%. But, ROA will range between 4.5% to 5% depending the leverage levels because if our leverage goes up, the ROA tends to go down, and the ROE tends to go up.

6. Outlook: 30-35% PAT CAGR

6.1 Management Guidance and Future Outlook

FY27 Guidance

For FY '27, our AUM growth may be not 25% to 30%, it will be more. But in a medium to long term, this will be the average of 25% to 30%. Our aspiration on the AUM for FY '27 is around 35%-40% growth.

INR 10,000 crores of AUM we can easily reach in three to four years without being dependent on any fresh equity, because we will accumulate profits also and there is a enough bank lines available and more bank lines will get added. So for INR 10,000 crores AUM with 3x leverage, we are not dependent on any fresh equity.

Q4 FY26 momentum to carry forward into Q1 FY27

• On the business momentum, we will continue to grow. The incremental equity we raised in Q4, going to benefit us to maintain this momentum in Q1 and in subsequent quarters.

6.2 FY26 Performance vs FY26 Guidance – SG Finserve

Guidance as of Q3 FY26

FY26 Performance Ahead of a Lowered Guidance

• PBT = ₹171.5 Cr in FY26 — ahead of ₹160 Cr target

• Leverage = 1.9x in FY26 — in-line with <=2x target

• RoA = 4.8% in FY26 — ahead of 4.4% target.

• RoE = 12% in FY26 — ahead of 10% target.

One needs to keep in mind that FY26 was revised downwards after H1 FY26 on account of a leadership transition.

• The silver lining is that the leadership transition has been smooth based on Q4 FY26 results and the long-term guidance.

Guidance pre-revision

• PAT Revision: The full-year FY26 Profit After Tax (PAT) guidance was revised down to approximately ₹120-125 Cr. This is lower than the initial guidance of ₹150-160 Cr (which corresponded to 200 cr PBT)

• The exit loan book for FY26 is confidently projected to be around ₹3,500 Cr, with a possible positive surprise up to ₹4,000 Cr depending on economic performance in the final three month — toning down of AUM guidance

• The company aims for an AUM (loan book) of 6,000 crores by FY27, targeting a PBT of 250 cr (approximately 190 cr PAT)

7. Valuation Analysis — SG Finserve

7.1 Valuation Snapshot

• Current Price — ₹537

• Market cap — ₹3,538.56 Cr

For a stock promising 25-30% long-term AUM CAGR and 30-35% PAT CAGR over the long-term with nil NPA the forward valuations of ~1.9x P/B (FY28) provide an opportunity for re-rating of multiples closer to 3x P/B

7.2 Opportunity at Current Valuation

Strong head-room to grow

Next 3-4 years of growth towards an AUM of ₹10,000 Cr from the Mar’26 AUM of ₹3,900 Cr+ is covered. 2.5x growth in AUM will not require any equity dilution.

The scalability in this space is huge.

Out of top 500 corporates, if we talk about, not even 100 are active in a supply chain space. So there is a huge space for the new anchors to follow the trend of the successful anchors to come and start doing supply chain.

Number two, the anchors who are already doing supply chain, their entire sales is not yet covered. In my understanding, basis back of the hand calculation, only 25% to 30% of their sales is covered under organised supply chain programs. Still there is a lot of room left for those anchors to also deep dive and get their dealers onboarded under the organized supply chain programs.

So the space is humongous. There is no saturation I see in my sight, at least for next 10-15 years.

Valuations are not demanding

• The forward valuations are not demanding — have been able to sustain the downward revision in guidance in FY26

7.3 Risk at Current Valuation

Repeated “one-off disruptions”

• FY25 disruption

  • Lending/license issue → business slowdown/reset

  • AUM temporarily reduced

  • External + internal shock

• FY26 disruption

  • Leadership change

  • Guidance cut (conservative stance)

  • Yet FY 26 execution was strong — Internal transition, not business weakness

• FY27 = Make-or-break year

  • If FY27 has another “one-off excuse” → red flag

  • One would like to see a a arrowing gap between original guidance and execution.

  • More predictable execution is required

• The impact of this is seen in the stock performance which has gone nowhere and not delivered in-line with the business momentum

Previous Coverage of SGFIN

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1. FY26 Business Performance

Operational Scorecard (FY2026)

The following table summarizes the key operational metrics that drove business performance in FY26 of

• ICICI Prudential Life Insurance Company

• SBI Life Insurance Company

• HDFC Life Insurance Company

FY26 Performance Analysis

• The Growth Leader (SBI Life): SBI Life continues to be the only company delivering a “Double-Double”—double-digit growth in both sales (13%) and profitability (12%). Its massive distribution network (Bancassurance) allows it to maintain a industry-leading 27.5% VNB margin, showing that it can grow fast without sacrificing quality.

• The Efficiency Play (ICICI Prudential): ICICI Pru presents a fascinating story. Its top-line sales growth was nearly stagnant at 2.2%, yet its Value of New Business (VNB) grew by 10.9% and its Net Profit jumped by a massive 34.6%. This indicates a successful pivot: they are selling fewer but far more profitable products and aggressively cutting operational costs.

• The Defensive Fortress (ICICI Prudential): With a 227.3% Solvency Ratio, ICICI Pru is the safest “fortress” in the sector. This high capital buffer suggests they have significant room to increase dividends or reinvest aggressively when market conditions improve.

• The Resilience Story (HDFC Life): HDFC Life faced a tougher year, with VNB growth lagging at 2%. Regulatory impacts on their specific product mix (Annuities and Protection) acted as a drag. However, their 8% APE growth shows they are still successfully defending their market share.

2. Valuation Analysis: Market Cap vs. Intrinsic Value

Valuation Matrix (FY2026)

Analysis of the Valuation Gap

• The SBI Life: The most striking takeaway is that SBI Life is the cheapest stock despite being the best performer. It has the highest internal compounding rate (19.7% RoEV) but trades at the lowest multiple (1.32x P/EV). The market is effectively pricing it at a discount, likely due to its PSU-parentage perception, creating a classic “Growth at a Reasonable Price” (GARP) opportunity.

• The HDFC Premium: HDFC Life remains the most expensive stock at 2.07x P/EV. Investors are clearly paying a “brand and pedigree premium.” Despite lower RoEV than SBI Life, the market values HDFC’s sophisticated product mix and dominant retail presence, resulting in a high P/VNB of 31.87x.

• The ICICI Pru Stability: ICICI Pru sits at a fair 1.46x P/EV. Its valuation reflects its current status as a stable, high-solvency player with lower RoEV (11.9%). However, if its high PAT growth continues, it is the prime candidate for a valuation “re-rating.”

3. Identifying the Opportunities

SBI Life

SBI Life represents a absolute value play. A company compounding its internal value (RoEV) at nearly 20% while trading at just 1.32x its book value (P/EV) is an opportunity.

• This is not just “relative value” because it’s cheaper than HDFC; it is real value. SBI Life’s VNB margin of 27.5% is the highest in the sector, yet its P/VNB multiple (27.45x) is the lowest.

• For long-term portfolios, SBI Life offers the best “Safety Margin.” You are buying the industry’s most efficient growth engine at a discount price.

ICICI Prudential

The opportunity in ICICI Pru is a valuation re-rating play. While its current RoEV (11.9%) justifies its lower 1.46x P/EV, the massive 34.6% PAT growth suggests that the company has fixed its cost structure.

• There is hidden value here. ICICI Pru has essentially “over-capitalized” its balance sheet (227.3% Solvency). This extra capital is currently a drag on RoEV, but it provides the company with “dry powder” to either hike dividends significantly or fund an aggressive acquisition without needing fresh equity.

• This is a play for investors betting on a “Mean Reversion.” If that profit growth eventually drives RoEV toward 15%, the stock could re-rate from a 1.4x multiple to a 1.8x multiple.

HDFC Life

HDFC Life is currently a momentum and brand play, but the FY26 numbers suggest caution. Trading at 2.07x P/EV (a 56% premium over SBI Life) while its VNB growth has slowed to a mere 2% creates a potential “Expectation Gap.”

• This is relative overvaluation. While HDFC Life is a high-quality business with superior 61-month persistency (64%), the stock market is charging a “perfection premium.” For the current price to be “real value,” VNB growth needs to accelerate significantly to catch up with its high P/VNB multiple of 31.87x.

• HDFC Life remains a core “blue-chip” hold, but at current levels, it offers the least “valuation upside” compared to its peers.

Summary Comparison for Stock Investors

• Highest Upside Potential

  • SBI Life — Highest growth (20% RoEV) at the lowest price (1.3x P/EV)

• Downside Protection

  • ICICI Pru — Strongest capital buffer (227% Solvency) and massive profit growth.

• Brand & Stickiness — HDFC Life — Best long-term customer retention and premium product engine.

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1. Transformers & Rectifiers India

2. Bank of Maharashtra

3. Waaree Renewable Technologies

4. Groww (Billionbrains Garage Ventures)

5. Anand Rathi

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1. FY26 Performance Snapshot (What Changed)

The latest Q4 and FY26 results confirm what the market was waiting for:

• The balance sheet is repaired

• Asset quality is no longer a risk

• Profitability is improving

But the real question for investors is not about the past.

Does Yes Bank now deserve a higher valuation multiple?

2. Current Valuation (Where the Market Stands)

• P/B =1.25x

  • Market Cap =₹63,377.2 Cr | Current market price = ₹20.41

  • Book Value=₹16.3

• P/E= 18.2x

For banks, P/B matters more than P/E. Banks are valued on how efficiently they use capital (RoE), not just earnings.

3. The Valuation Thesis

Management execution → RoA → RoE → P/B → Stock Price

Where Yes Bank Stands Today

• Current RoA~0.8%

• RoE~7%

• P/B~1.24x

What Market Needs to See

• RoA≥ 1% sustained

• RoE≥ 12–15%

• Result ==> P/B rerating

4. Management Guidance → Valuation Impact

Growth Strategy

• Loan growth: 13–15%

  • Supports earnings growth

• Retail + SME focus

  • Improves margins

• Controlled corporate exposure

  • Reduces risk

CASA & Liability Strategy

• CASA~30% ==> Improve to 35–40%

• CASA ↑ → Cost ↓ → NIM ↑ → RoA ↑ → P/B ↑

NIM Expansion Strategy

• RIDF/PSL reduction ==> Improves yield

  • Priority Sector Lending (PSL) means banks are required to lend a fixed portion of their loans to specific sectors that are important for economic development.

    If a bank fails to meet PSL targets, it must deposit money into RIDF (Rural Infrastructure Development Fund).

  • RIDF/PSL are low-yield regulatory investments that drag returns. Reducing them directly improves profitability.

• Deposit mix improvement ==> Expands margins

• Target NIM3.25–3.50%

Asset Quality & Credit Cost

• GNPA: Stable at low levels

• Credit cost: Controlled

• Legacy stress: Largely behind

• This ensures RoA improvement is sustainable

5. Valuation Scenarios

Scenario Analysis

• Bear

  • RoA <0.8%

  • RoE<10%

  • P/B 1.0–1.2x

• Base

  • RoA =0.8–1.0%

  • RoE = 10–12%

  • P/B = 1.3–1.6x

• Bull

  • RoA = 1.1–1.3%

  • RoE = 13–15%

  • P/B 1.8–2.2x

• Stock is fairly valued today

• Upside depends entirely on RoA expansion

6. Why the Market Is Still Not Fully Convinced

Despite strong results, valuation remains moderate.

Key Concerns

• CASA still below top-tier banks

• NIM expansion is guided, not proven

• ROE still sub-10% (FY26 average)

Market view → “Turnaround is real, but premium profitability is not yet proven.”

7. The 3 Triggers for Re-Rating

• Sustained RoA Above 1%

  • Not just one quarter — consistency matters

• NIM Expansion Toward 3.5%

  • Driven by better liability mix

• CASA Improvement

  Structural cost advantage

If these happen → valuation rerates

8. Final Verdict: Is Yes Bank Ready for Re-Rating?

Short Answer

Yes—but only if the bank sustains RoA above 1% and improves ROE into double digits.

Investment View

• Not a deep value play

• Not yet a premium bank

• A transition story with rerating potential

Bottom Line

Yes Bank is no longer broken. But it is not yet proven.

If RoA sustains above 1% → stock rerates
If RoA falls back → valuation stays capped

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ICICI Prudential Life is a private life insurer offering long-term savings and protection products

iciciprulife.com | NSE: ICICIPRULI

1. Key Reported Metrics

Performance update: FY2026

2. Valuation Multiples

Price-to-Embedded Value (P/EV) — the primary metric

EV = ₹52,989 Cr | Market Cap = ₹81,671 Cr

P/EV = ~1.54x

This is reasonable-to-cheap by Indian standards. Historically, quality private insurers have traded at 2–3x EV. At 1.5x, the market is pricing in modest growth, partly reflecting ICICI Pru’s ULIP-heavy mix (48% linked) which carries lower margins.

Price-to-VNB (P/VNB) — growth valuation

VNB = ₹2,629 Cr | Market Cap = ₹81,671 bn

P/VNB = ~31x

This needs to be read alongside VNB growth. With VNB growing only ~11% YoY and APE growing just 2.2%, 30x VNB is not cheap. Peers with faster VNB growth may command similar or higher multiples with better justification.

Return on EV (RoEV) — capital efficiency

RoEV = 11.9% (down from 13.1% in FY2025)

This is a concern. RoEV has been declining — from 17.4% in FY2023 to 14.1% in FY2024 to 13.1% in FY2025 and now 11.9%. At 11.9%, it’s barely above the cost of equity. The drag is coming from persistency variance (-₹2.64 bn) and operating assumption changes (-₹2.56 bn), both negative for FY2026. A P/EV re-rating to 2x+ would require RoEV recovering to 14–15%+.

3. What’s Working

• VNB Margin expansion is the highlight — from 22.8% to 24.7% (+190bps).

  • Expansion came primarily from new business profile improvement (+3.4%) and economic assumptions (+2.5%), partly offset by operating assumption changes (-3.9%).

  • This is driven by a better product mix shift toward protection (18% of APE, retail protection up 32% YoY) and non-par.

• Retail protection is the key bright spot — retail protection APE grew 32.3% YoY to ₹7.91 bn, partly aided by GST reforms. This is the highest-margin segment and its growing share is structurally positive for VNB margins.

• Solvency at 227.3% is very comfortable, well above the 150% regulatory minimum. Zero NPA since inception is a balance sheet quality indicator.

• Persistency — 13M at 84.5% (down from 89.1% a year ago) is the red flag worth watching. The decline in early-year persistency feeds directly into EV operating variance.

4. What’s Concerning

• APE growth of only 2.2% is weak. Retail APE was flat (-0.1% YoY). Agency channel declined 10.5% YoY. The ULIP book (48% of mix) saw weak demand. This means the topline engine isn’t firing, and VNB improvement is coming from margin expansion rather than volume growth.

• 13M Persistency deterioration — from 89.1% (March 2025) to 84.5% (March 2026) is a meaningful drop. The EV movement analysis shows this caused a -₹2.64 bn drag (persistency and other variance). If this persists, it will cap EV growth.

• RoEV at 11.9% is trending in the wrong direction. EVOP is healthy (₹57 bn) but the economic assumption change was a -₹7.78 bn drag, reflecting rising long-term interest rate assumptions (10Y reference rate moved from 7.2% to 8.4%).

• AUM growth of only 1.4% reflects weak ULIP market performance, since policyholder funds track equity markets.

5. Conclusion

At 1.5x EV with a 24.7% VNB margin, the stock looks optically inexpensive versus its own history, but the weak APE growth, declining RoEV, and persistency pressures explain the market’s caution.

The re-rating catalyst would be: APE growth accelerating back to 10%+, persistency stabilizing, and RoEV recovering above 14%. The protection mix shift (now at 17.9% of APE vs. 15.7% last year) is a structural positive that supports margin durability.

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Just Dial’s services connect sellers of products & services with potential buyers/ users

justdial.com | NSE: Just Dial

1. Just Dial Trading at Attractive Valuations

Just Dial today presents a rare setup in the Indian market — a company where the balance sheet alone appears more valuable than the entire market capitalization.

1.1 Cash-Rich Balance Sheet

As of FY26, Just Dial holds ₹5,852 Cr in cash and investments on its balance sheet.

Against this, Just Dial’s market cap is ~₹4,865 Cr.

The market is valuing the core operating business at close to zero (or even negative) after adjusting for cash.

1.2 Valuation Snapshot

• P/E ~10x → low for a profitable, debt-free business

• Free Cash Flow Yield ~5.4% → reasonable, with room to improve

• Debt: Zero → no balance sheet risk

• Enterprise Value: Negative → cash exceeds market cap

This is deep value for a profitable business, trading at low multiples, with excess cash.

1.3 A Profitable Business — Not a Broken One

Despite the valuations, the operating business is not distressed:

• FY26 Operating EBITDA: ₹357 crore

• EBITDA Margin: ~29.5%

It is a profitable, cash-generating platform that continues to add to its treasury.

1.4 What the Market Is Really Saying

When a business trades below its cash value, the market is effectively saying:

“We are not confident about the future of the operating business.”

So the real question is not — “Is Just Dial cheap?”

But: — “Why is the market unwilling to assign value to the business?”

2. Just Dial valuations: Value Trap or Deep Value?

2.1 Value Trap: Signs of Demand-Side Erosion

The thesis that the business is in structural decline and the “cheap” valuation is justified.

Traffic Is Declining — and Trending Down

The most alarming metric is the persistent decline in Unique Visitors.

• Total visitors fell to 182.4 million in Q4 FY26, a 4.7% YoY decline from 191.3 million in Q4 FY25.

• More importantly, this is not a one-off dip. Traffic has declined sequentially for multiple quarters, forming a clear downtrend.

In a marketplace business, traffic is the raw material. If it shrinks, everything else eventually follows.

• The company has lost roughly 15.6 million quarterly visitors in just six months. This suggests that the post-pandemic digital surge has not only cooled off but is actually reversing for Just Dial.

• This is the lowest traffic level in seven quarters, effectively erasing two years of growth. More concerning is the sequential “staircase” decline over the last three quarters, indicating that the drop is a trend, not a one-off seasonal dip.

The Real Red Flag: Weakness in Mobile

The decline is concentrated where it matters most:

• Mobile visitors dropped 6.0% YoY from 166.2 million (4Q FY25) to 156.2 million (4Q FY26).

• Mobile accounts for ~86% of total traffic

• That is a loss of 10 million mobile users in a single year. In an “App-First” economy like India, mobile traffic is the only traffic that truly matters for long-term survival.

• A decline here suggests users are shifting to alternative platforms, not just slowing down.

Monetization Is Losing Momentum:

• Active Paid Campaigns growth is Stalling

  • YoY Growth: 3.0% (631,530 vs 613,290).

  • QoQ Growth: 0.37% (631,530 vs 629,180).

  • While the number is technically at an “all-time high,” the velocity of growth has collapsed.

    • In 4Q FY25, the company added ~12,200 net new paid campaigns.

    • In 4Q FY26, they added only ~2,350 net new paid campaigns.

      • Quarterly addition has dropped by nearly 80% compared to the same period last year.

  • This matters because:

    • Merchants pay for leads & Leads depend on traffic

    • If traffic weakens, merchant ROI weakens — and that eventually shows up as higher churn or slower additions

What This Implies

Put together:

• Overall Traffic is down

• Mobile Traffic is down

• Campaign growth slowing

The demand side of the business is weakening — even as the company remains profitable.

2.2 Value Play: A Business with Hidden Strength

Despite these concerns, dismissing Just Dial as a value trap may be premature.

Extreme Valuation Discrepancy (Negative EV):

• Cash & Investments reached ₹5,852.2 Cr, while the Market Cap is only ~₹4,865 Cr.

• The market is valuing the core business at minus ₹1,000 Cr.

• Even if the business eventually dies, the cash alone provides a theoretical “floor” that is significantly higher than the current stock price.

High Profitability Provides Time

• While margins are weakening on a relative basis — they are strong on an absolute basis

• Just Dial is not in a crisis mode. It has the cushion to adapt, reposition, or integrate within a larger ecosystem.

Strong and Improving Supply-Side Assets

• Total Listings grew 12.1% YoY to 54.7 million.

• Listings with Geocodes (essential for map-based search) grew 25.4%.

• While traffic is down, the “inventory” of data is growing rapidly. This deep database of Indian SMEs is a unique asset that is difficult for a newcomer to replicate.

Reliance Backing Creates Optionality

• Promoter Reliance Retail Ventures Ltd (RRVL) holds 63.84% of the company.

• The long-term value may not come from Just Dial as a standalone app, but as

  • the backend infrastructure for SME commerce.

  • the “discovery layer” for the Jio/Reliance Retail ecosystem.

3. Conclusion: Cheap for a Reason or Mispriced?

Just Dial is not an easy stock to classify.

On one hand, it is undeniably cheap:

• Cash exceeds market cap

• The business is profitable

• Valuations are low across metrics

On the other hand, the core engine is weakening:

• Traffic is declining

• Mobile engagement is slipping

• Monetization growth is slowing

The Tie-breaker:

Two factors will determine whether this becomes a value trap or a value opportunity:

• Demand Stabilization

• Capital Allocation — If the board announces an acquisition to drive growth or return the ₹5,852 Cr via dividend or buyback to to shareholders.

  • If they keep the cash idle, it remains a “Value Trap” indefinitely.

Management Commentary on Capital Allocation in Q4 FY25 Earnings Call: So, at this point of time, this particular agenda on returning cash via, say, dividend has not been taken up. We expect the same to be taken up sooner, most likely by next quarter, hopefully, we should be freezing on a proper capital allocation policy via most likely by dividend because that is a more tax-efficient way rather than buyback at this point of time.

The "Watch-out" for Q4 FY26 Call:

The most important question for the Q4 FY26 earnings call not only about "Traffic"—it is "What is the specific date for the implementation of the Capital Allocation Policy?" If management remains vague again (as they were in FY25), the "Value Trap" label will likely stick for another year.

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Financial Highlights

• Anand Rathi Wealth presents strong financial momentum based on FY26 — in a year of macro weakness

• Highly impressive, industry-leading Return on Equity (ROE) of 46.74% for FY26.

• Delivered greater than 20% Profit After Tax (PAT) growth for 18 consecutive quarters, which management notes is a rarity among NSE 500 companies.

• To reward shareholders, the board approved a 1:1 bonus share issuance and a final dividend of 7 rupees per share.

High Earnings Predictability and Future Guidance

• Even after out-performing against the FY26 guidance, management operates on a philosophy to “under commit and over deliver”.

• FY27 PAT of ₹460 Cr PAT represents an 19% growth over actual FY26 figures — nothing extra-ordinary

  • Management clarified that it aligns with their historical 20-25% long-term growth trajectory when measured against previous base expectations.

• A massive advantage for revenue visibility is that 99% of the firm’s business comes from structured products with rollover options, allowing the company to plan its financials as far ahead as 2031.

• The miss on AUM was compensated by the outperformance on revenue & PAT

Business “Moats” and Operational Resilience

• Insulation from RM Churn: A major risk in wealth management is Relationship Managers (RMs) leaving and taking clients with them.

  • However, when seven RMs left the firm recently, Anand Rathi successfully retained 81% of those departing managers’ client assets.

  • Overall client attrition is exceptionally low at just 0.54% of AUM.

• In-house Talent Pipeline: Instead of paying exorbitant salaries to poach lateral hires from competitors, the company heavily relies on training raw talent.

  • In FY26 78% of their 45 new RMs were trained internally from colleges.

• Strictly Owned Branch Network: Future geographic expansion into tier-2 and tier-3 cities will be executed exclusively through company-owned branches managed by internally trained RMs returning to their hometowns, as management firmly rejects the franchise model.

The “Platinum” Growth Engine

• A major catalyst for future growth is the firm’s “Platinum Segment,” which caters to ultra-high-net-worth clients with an average ticket size of ₹50 Cr and above.

• This segment is highly lucrative, now making up almost 29% of the total business.

• Management is seeing strong organic inbound interest from individuals with ₹400-500 Cr portfolios and expects the number of Platinum client families to more than double from 211 to between 450 and 500 over the next two years.

Premium Valuations for Premium Execution

• Anand Rathi Wealth is trading at a market cap of ₹29,796.11 Cr against the FY27 PAT guidance of ₹460 Cr — FY27E P/E of 65x

  • These are premium valuations for a company promising 19% PAT growth

• Even if we adjust for a conservative guidance and assume a 30% PAT growth in FY27 — Anand Rathi Wealth would still trade at FY27E P/E of 60x which remains at premium valuations

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The AI Cannibalization Question: What TCS Management Actually Said

There’s a narrative building around IT services:

AI will kill the traditional model.

During the Q4 FY26 earnings call, Tata Consultancy Services (TCS) management addressed this question directly. Not with speculation—but with a structured view of how AI is already reshaping demand.

This note is based on the commentary of the TCS management during the Q4 FY26 earnings call.

1. Yes, AI Will Cannibalize Parts of the Business

TCS management did not dismiss the concern.

They acknowledged that:

• AI-driven productivity gains are real

• Certain legacy services will see reduced effort and lower billing

• Parts of the traditional revenue base will “slowly taper down” over time

The underlying demand mix is actually changing — this isn't the kind of dip that bounces back when macro improves

2. AI Revenue Is Scaling—but Not Yet Dominant

From the call:

• Annualized AI revenue has crossed $2.3 billion (on a quarterly run-rate basis)

• AI is embedded across large deals, not just standalone projects

However, management implicitly acknowledged that at current scale, AI is not yet large enough to offset legacy deflation

AI today is:

• High growth

• High impact

• But still sub-scale relative to the overall business

3. The Key Offset: Technical Debt

What caught our attention was the technical debt angle, not the AI headline numbers.

Technical debt has always existed:

• Legacy systems

• Outdated architectures

• Deferred modernization

Why it remained unaddressed:

• Too expensive

• Too slow

• Hard to justify ROI

What AI changes

Management highlighted that AI:

• Reduces the time and cost of modernization

• Makes large-scale transformation economically viable

• Allows enterprises to tackle backlogs that were previously ignored

Implication:

AI is not just replacing work—it is creating new categories of spend

4. The “Net Accretive” View

TCS management was explicit:

Over time, AI is expected to be net accretive

The logic is sequential:

1. Initial Phase
   AI reduces traditional services effort

2. Transition Phase (current)
   Growth appears muted

3. Expansion Phase
   AI-led demand (including technical debt work) scales

4. Outcome
   New revenues outgrow legacy declines

This mirrors earlier cycles like digital transformation, where disruption preceded expansion.

5. Demand Is Not Waiting

One of the more subtle, but important, points:

• Clients are not delaying decisions waiting for better AI models

• Instead, they are:

  • Building AI-ready systems

  • Investing in architectures that can evolve

This suggests:

AI adoption is already in execution mode, not experimentation

6. Three Parallel Demand Streams

Management described enterprise spending across three buckets:

1. Ongoing digital programs
   (cloud, ERP, cybersecurity)

2. Technical debt modernization
   (now accelerated by AI)

3. AI-led transformation
   (new business use cases)

The AI-only story is probably too simple — there's a lot of boring cloud and ERP work still funding the transition.

7. What Remains Uncertain: Timing

Nobody on the call would put a number on when this actually inflects. Which is the honest answer, but not a satisfying one

• When will AI revenues fully offset legacy declines?

• When will growth visibly accelerate?

No precise answer was provided.

Bottom Line

Based on management commentary:

• AI will deflate parts of the traditional IT services model

• AI will unlock new demand, especially via technical debt

• Over time, AI is expected to be net positive for growth

But:

The transition is already underway—and its timing remains uncertain

TCS is in an awkward middle period — old revenue compressing, new revenue not yet big enough to compensate. TCS is currently operating in the gap between the two.

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View previously covered companies

1. Transformer Lamination, Toroidal Cores, and CRGO Slitted Coils.

vilastranscore.com | NSE - SME: VILAS

2. FY21-25: PAT CAGR 60% & Revenue CAGR 28%

3. FY-25: PAT up 48% & Revenue up 15%

4. H1-26: PAT up 74% & Revenue up 39% YoY

PAT up 21% & Revenue up 19% sequentially

5. Business Metrics: Strengthening Return Profile

Margin expansion & capital efficiency amid capacity constraints

• Outlook: ROCE is expected to rebound once the new 36,000 MTPA capacity is fully utilized by FY27, with incremental contribution from high-margin products like nanocrystalline cores and radiators.

6. Outlook: 35-40% Growth in FY26

Driven by new capacity, product ramp-up, and demand tailwinds

6.1 Management Guidance

Vilas Transcore is guiding for a revenue CAGR of 66% for FY25-27 and as revenue scales from ₹362 Cr in FY25 to ₹1,000 Cr in FY27

The company is targeting volume growth of 45-50% in FY26E, though revenue growth will lag at 35-40% due to a 20-30% decline in CRGO prices. The company has set an ambitious revenue target of INR 10bn in FY27E, anticipating that a recovery in CRGO prices will provide a significant tailwind.

• Demand from transformer manufacturers remains strong, supported by the continued expansion of power transmission and distribution networks across the country.

• Government's focus on renewable energy integration, grid modernization, and the replacement of aging transformer plates is further driving production growth.

• Sector is also benefiting from the steady rollout of large solar and wind projects

  • This growth is translating into consistent order inflows from utilities and EPC players, who are ramping up procurement for upcoming transmission and corridors, green energy projects, and substation upgrades.

• With rising industrial power consumption, ongoing rural electrification, and strong investment from both public and private sectors, CRGO demand is expected to remain firm over the medium to long term.

7. Valuation Analysis — Vilas Transcore Ltd

7.1 Valuation Snapshot

Current Market Price: ₹385.05; Market Cap: ₹942.60 Cr

• At single digit multiple for P/E and EV/EBITDA for FY27 — the forward valuations are quite attractive

• Provide opportunities for re-rating of multiples from a FY27 perspective.

7.2 Opportunity at Current Valuation

• FY27 valuations are not demanding

  • Provide strong opportunity for re-rating based on FY27 expectations

  • At single digit multiples for FY27 there is a strong margin of safety embedded in the valuations — useful in the current environment of weakness

• Strong Demand Visibility (Industry Tailwind)

  • Transformer industry demand remains structurally strong driven by:

    • Grid expansion, renewable energy (solar + wind)

    • Replacement of aging infrastructure

  • India demand strong; global demand even tighter (multi-year order books)

  • Management clearly highlighted:

    • No slowdown in transformer demand

    • Possible future shortage of transformers again

  • Demand risk is low → execution becomes the key variable

• Company is transitioning from single-product (CRGO) → multi-product transformer ecosystem

  • New segments:

    • Radiators

      • Revenue starts Dec-26 onwards — Strong demand + limited organized supply

    • Nanocrystalline cores

      • High-margin niche product — Gradual ramp-up

    • Copper conductors (CTC/PICC)

      • Capex: ₹25–30 Cr for Revenue potential: ₹150–200 Cr — Commercialization in FY27

7.3 Risk at Current Valuation

• Margin Normalization Risk (Most Important)

  • Margins due to: CRGO shortage and supply disruptions

  • If supply normalizes Margins can compress

• Execution Risk in Capacity Ramp-up

  • FY27 growth dependent on capacity expansion

  • Slower ramp-up, operational inefficiencies and delayed utilization could impact ₹1,000 Cr revenue target for FY27

• CRGO Price Volatility

  • Raw material is imported — price volatile

  • Impacts: Working capital + Margins (if pass-through lags)

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1. FMCG Company —

ganeshconsumer.com | NSE: GANESHCP

2. FY23–25: PAT CAGR of 15% & Revenue CAGR of 18%

Average performance - nothing spectacular in the past

3. FY25: PAT up 31% & Revenue up 12%

4. Q3-26: PAT up 57% & Revenue down 3% YoY

PAT up 8% & Revenue down 11% QoQ

• Revenue dip was a deliberate management decision to scale back low-margin B2B volumes.

  • B2B revenues declined ~12% YoY.

  • B2C volumes remained broadly stable (up ~1% in some categories) despite intense competitive intensity. This focus on B2C was the primary driver behind the lift in margins

• Q3 saw increased competition in the Eastern market, from Emami entering the staples category (Atta, Maida, Suji) with aggressive pricing.

  • Rather than engaging in a destructive price war that would erode margins, Ganesh focused on brand recall and its deep distribution network (3.5 lakh touchpoints) — protected its market share in West Bengal while delivering record-high quarterly margins.

5. Flat 9M-26: PAT up 7% & Revenue up 4% YoY

9M performance highlights the strength of the core and emerging categories:

• Atta (Core Base Category): Delivered strong 13% volume growth.

  • Atta serves as the “carrier product” that drives distribution for other high-margin items.

• Overall B2C Volume: Revenue from the B2C segment grew ~5% in volume and ~6% in value.

• Spices Growth: “Emerging” spices category grew nearly 31% YoY, confirming it as the primary long-term margin accretive driver.

• Quick Commerce & E-commerce: Grew by 58% YoY over the 9M period, indicating a successful shift in consumer purchasing behavior and effective digital marketing.

6. Return Metrics: Improving Return Ratios

7. Outlook: 15-20% Revenue CAGR for FY26-29

7.1 Management Guidance

Guidance for 15-20% growth till FY29 — strong turnaround from a flattish FY26

FY26 Guidance: We feel that there'll be a single digit growth on the entire year. Yes but Q4 specifically as I said in the January month we have delivered better volume growth, so we feel that in the entire quarter 4, there'll be a higher single digit volume growth

FY29 Revenue Target: Management believes they have the headroom to reach a revenue of ₹1,400-1,450 Cr within the next three years by increasing capacity utilization from the current 55-57% to 85%.

And going forward, we will maintain a growth rate of around 15% to 20% on the revenue side. And on the EBITDA side, we feel that anywhere between 9.5% to 11% we’ll be able to deliver.

7.2 9M FY26 Performance vs FY26 Guidance

Guidance at end of Q2-26: So we feel that we’ll be able to have an annual growth rate of 12% to 15% this year.

Guidance at end of Q3-26: We feel that there’ll be a single digit growth on the entire year.

• Overall performance has been weak — growth guidance has been slashed.

• Q4 saw a January Rebound: The “B2B reset” of Q3 began to pay off in January, which saw a ~9% volume growth in B2C.

• However the weakness is restricted to FY26

  • The 15-20% revenue CAGR target intact till FY29 with a revenue target of ₹1,400-1,450 Cr

  • Margin performance has been strong despite the weak top-line growth

8. Valuation Analysis — Ganesh Consumer Products

8.1 Valuation Snapshot

Current Market Price: ₹165.65; Market Cap: ₹669.4 Cr

• Valuations based on 17% growth rate in line with the 15-20% growth guidance.

• Valuations are attractive from an FY26 perspective.

• 20% of the market cap of GANESHCP is in cash — provides a safety cushion to the valuations

  • However the management intent of rewarding shareholders through dividends or buybacks is a big red flag — the management at scale of less than ₹1,000 Cr market cap does not have ideas to deploy the cash as growth capital.

Cash Reserves: ₹130-135 Cr in bank balances and is evaluating rewarding shareholders through dividends (target payout >20-25%) or buybacks.

• Opportunity of re-rating of multiples if growth guidance is delivered

8.2 Opportunity at Current Valuation

• Unorganized to Branded Shift: In West Bengal, 82% of wheat and gram derivatives are still sold in loose.

  • As consumers move towards brands, Ganesh—as a local leader—is best positioned to capture this conversion.

• Dominant Market Share in Core Hub: Ganesh holds a commanding position in its home market of West Bengal — this provides a stable “cash cow” to fund expansion into new territories.

• High-Margin Product Pivot (Spices): Management is aggressively pushing into the Spices segment which offer significantly higher gross margins compared to basic flours. Success here could lead to a permanent rerating of the company’s overall margin profile.

• Geographic Expansion (The “Next Bengal”): The company is replicating its West Bengal success in Bihar, Jharkhand, Odisha, and the Northeast. Early signs are positive, with Bihar showing 36% growth in a single quarter. The new Agra and Varanasi units provide the logistical “near-to-farm” advantage needed to serve these states profitably.

• The hurdle for success is low — for the investment thesis to play out the required run-rate is 15-20% which looks reasonable considering the base of GANESHCP.

  • Additionally valuations are not demanding allowing for a margin of error in the growth projections.

8.3 Risk at Current Valuation

• GANESHCP did not deliver on its original FY26 guidance — what if the trend continues forward.

• Intense Competition: Ganesh faces a two-sided battle:

  • National Competitors like ITC (Aashirvaad), Adani Wilmar (Fortune), and Patanjali have massive marketing budgets.

  • New Regional Entrants: Entry of Emami into the staples category led to a “price war” in Q3 FY26, which forced Ganesh into a “tactical reset” and slowed its revenue growth.

• Geographic Concentration: Despite expansion efforts, ~93% of B2C revenue still comes from West Bengal. Any regional economic slowdown, regulatory change, or intense local competition in that single state could disproportionately impact the company’s entire performance.

• Commodity Price Volatility: As a staples business, the company is highly sensitive to the prices of wheat and gram. While they have a strategic inventory-buying policy, a prolonged spike in raw material costs can squeeze margins, as seen in the previous fiscal year (H2 FY25).

• Seasonality Risk: High-margin products like Sattu are heavily weather-dependent. A shorter-than-expected summer (as in Q2-25) can lead to significant revenue misses in those specific categories.

• Execution Risk in New Markets: Building brand trust in states like Bihar and Odisha requires significant upfront investment in distribution and marketing. There is no guarantee that the “Ganesh” brand will have the same pull in these regions as it does in Bengal.

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1. Coach Interiors + Wagon & Rail Components

orientalrail.com | BSE: 531859

2. FY21–25: PAT CAGR of 17% & Revenue CAGR of 29%

Average performance - nothing spectacular in the past

3. Weak FY25: PAT down 3% & Revenue up 14%

4. Strong Q3-26: PAT up 84% & Revenue up 10% YoY

PAT up 30% & Revenue up 26% QoQ

• Q3FY26 revenue grew by 10.3% YoY on improved execution

• EBITDA margins expanded by 381 bps in Q3 supported by better product mix and operating leverage.

5. 9M-26: PAT up 28% & Revenue down 9% YoY

• 9MFY26 revenue declined by 9% YoY due to order driven revenue recognition, dispatch timing and temporary wheel supply constraints.

• EBITDA margins expanded in 9M, supported by better product mix and operating leverage.

• PAT margins improved by 328 bps in Q3 and 207 bps in 9M, driven by stronger operating performance and improved cost absorption.

• Order book stands at Rs 1,960 Cr comprising Rs 1,779 Cr for OFPL and Rs 181 Cr for ORIL, providing strong revenue visibility

6. Return Metrics: Average Return Ratios

7. Outlook: 25% Revenue CAGR for FY25-28

7.1 Management Guidance

Guidance for strong growth in FY27 and FY28 — strong turnaround from a flattish FY26

• Revenue Growth

  • FY27: Revenue of ₹850 Cr.

  • FY28: Revenue of ₹1,000 Cr.

  • Revenue guidance for FY27 is conservative as it only includes the legacy seat interior and wagon manufacturing businesses; it does not yet account for potential revenue from the new ”smart wagon” technology

While past-performance has not been spectacular — the strong order book provides revenue visibility and confidence that the FY27 and FY28 guidance is realistic

7. Valuation Analysis — Oriental Rail Infrastructure

7.1 Valuation Snapshot

Current Market Price: ₹118.2; Market Cap: ₹793 Cr

• Very attractive from the perspective of forward valuations — given the strong tailwinds supporting governmental spend in railway infrastructure

• Orient Rail Infrastructure generated ₹28.5 Cr in H1 FY26. At current market cap of ₹793 Cr, its trading a free cash flow yield of 3.6% (not annualized) which makes it quite attractive from a current valuation perspective

• Suggests limited room for further multiple expansion in the near term

  • The opportunity emerges over the longer term beyond FY27

7.2 Opportunity at Current Valuation

• The guidance is not in the price

  • A company growing to ₹1,000 cr with 25% CAGR and 15% EBITDA margin is available at a FY28 P/E of 10x and EV/EBITDA of 6x

  • Opportunity of re-rating in multiples a realistic re-rating to a PE of 15x for FY28 creates significant opportunity in the stock.

  • Management has re-iterated that the guidance of ₹850 cr is conservative

• Freight Wagons & Wagon Components

  • 50% Capacity Utilisation: Significant headroom to scale wagon production and capture rising procurement demand.

  • Smart & Modular Wagon Platforms: Leveraging technology partnerships to develop advanced wagon solutions and unlock new revenue streams.

  • Wagon Leasing Platform: Entering wagon leasing to capitalise on growing private freight demand and build recurring logistics revenues.

• Rolling Stock Interior & Allied Products

  • Interior Systems and Seats & Berths: Growing new train additions and passenger coach modernisation to drive sustained demand.

  • ORVIN® (Artificial Leather): Strong revenue growth supported by expanding industrial applications.

  • Backward Integration: Continued focus to enhance cost efficiencies, margin resilience and supply chain control

• Strategic Technology Partnerships

  • Smart Wagon Systems (Hum International, USA): The company has a tie-up to introduce sensors and algorithms that predict bearing and wheel failures up to 50,000 kilometers in advance.

    • Market Opportunity: Management estimates the total market scope for this safety technology in India to be approximately INR 100,000 million.

    • Tender Status: A pilot tender for 400 wagons is opening on March 26 to prove the concept.

  • High-Capacity Wagons (United Wagon, Russia): A collaboration to develop next-generation 25-ton high-axle load wagons. This technology is expected to increase carrying capacity from the current 80 tons to approximately 82–83 tons per wagon.

7.3 Risk at Current Valuation

• Risk associated with tender based business: Oriental Rail receives majority orders from Indian railways based on tender.

  • Revenue depends on the company’s ability to win tenders.

  • Profitability margins come under pressure because of this competitive and tender-based industry.

  • This risk is seen in the past performance of Oriental Rail given that revenue wins are lumpy

  • The primary customer of Oriental Rail is the Indian Railways

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1. Power Electronics Equipment Manufacturing

hirect.com | NSE: HIRECT

Our core customer is Indian Railways, contributing 90% of our revenues

2. FY21–25: PAT CAGR of 63% & Revenue CAGR of 21%

3. FY25: PAT up 197% & Revenue up 27%

4. Q3-26: PAT up 27% & Revenue up 64% YoY

PAT down 14% & Revenue up 22% QoQ

EBITDA margin moderated by 120 bps year-on-year, primarily due to expansion-led investment in the copper conductors plant at Sinnar and increase in input cost of key raw materials arising from supply chain disruptions.

• Strong top-line growth of 64% YoY indicating

  • Strong execution of the order book

  • Continued demand from railway electrification projects

  • Increased traction equipment supply

5. 9M-26: PAT up 48% & Revenue up 53% YoY

6. Return Metrics: Improving & Strong Return Ratios

7. Outlook: 30% Revenue CAGR for FY25-29

7.1 Management Guidance

• Revenue Growth

  • FY26 and FY27 growth: And we expect a growth of 30% year-on-year, and we continue to maintain that going into the next year as well.

  • We will be crossing that 30% on the year to year basis at least for next three years

    • 30% growth is from existing business, existing product lines, products that have already been released into the market, and we expect to get a larger share. It's from existing business.

    • Anything that is in R&D today, which adds value next year will be on top of that.

7.2 9M FY26 Performance vs FY26 Guidance

Revenue: We don't provide any guidance, but Q4 is looking upwards. It's going very well, going as per the plan that we had set out originally.

Margin Guidance: In fact, it will be better for Q4. And be even better than Q4, which will be in Q1. But the real upside will come from Q2 onwards and the CTC factory will be in full swing

HIRECT H1 FY26 Performance Ahead of FY26 Guidance

• Revenue: 9M revenue ahead of the 30% revenue growth guidance.

• Margins: Weak performance on margins — Improvement from Q4 onwards. Stronger margins once in-house copper conductor facility reaches full scale in Q2-27

• Order-Book: HIRECT indicated that railway tenders expected in Q3 were delayed by a quarter, but order inflows are expected to pick up in the coming quarters.

  • Expecting order book growth of 30%

During this quarter, the railway tenders, which were expected to be closed had kind of moved out by a quarter, but the requirements are building up, especially for the transformers that is mainstay of our product line. We are expecting the orders to come in next quarter. So from an order buildup point of view, the trajectory is going to be positive and upward.

We mentioned earlier, we are looking at a 30% growth year-on-year, and we expect a similar kind of growth on the order board

7. Valuation Analysis — Hind Rectifiers

7.1 Valuation Snapshot

Current Market Price: ₹1,425; Market Cap: ₹2,461 Cr

• Valuations reflects its high growth and improving margins

• Even after the recent correction — multiples already discounts the guidance till FY27.

• Suggests limited room for further multiple expansion in the near term

  • The opportunity emerges over the longer term beyond FY27

7.2 Opportunity at Current Valuation

• 30% Guidance is in the price

  • The 30% growth guidance is discounted in the price

  • Opportunity exists as the R&D pipeline gets commercialized and takes growth above 30%

• Propulsion System — A New Revenue Engine

  • Entered the locomotive propulsion system segment, which is significantly higher value than its traditional component business.

  • Current status:

    • Propulsion system installed on locomotives

    • Trials underway on Western Railway

    • Expected completion: 3–4 months

  • Initial order book — ~40 propulsion systems already ordered (~₹50 Cr)

  • Once the trials are successfully completed, the company could participate in larger propulsion tenders from Indian Railways.

• Margin Expansion — Backward Integration in Copper Conductors

  • Commissioned a copper conductor manufacturing facility at Sinnar.

  • Benefits:

    • Lower raw material dependence

    • Improved supply chain reliability

    • Higher gross margins

    • Potential external sales to transformer manufacturers

  • Full margin benefits from Q2 FY27 onward.

• Global Expansion Strategy — Acquisition of BeLink Solutions, Europe

  • While BeLink is currently loss-making,

  • HIRECT believes a turnaround could lead to significant profitability over time.

7.3 Risk at Current Valuation

• High Execution Bar: Delivering 30%+ revenue CAGR for FY25-29 will need strong execution even though supportive demand tailwinds are in place

• Valuations are demanding: Valuations for FY26 and FY27 don’t allow for any margin of safety. Impact of even a single weak quarter will be seen in the stock price

• Supply Chain Risks: 9M FY26 has already seen lowered gross margins on account of supply chain issues — margins remain sensitive to copper price fluctuations.

  • Until the in-house copper conductor facility reaches full scale, this risk remains.

• Concentration Risk: Railways accounting for ~90% of revenue of HIRECT

  • Although railway capex remains strong, order timing can be uneven.

• Propulsion System Execution Risk — include trial & approval delays and competition from existing propulsion suppliers

  • The growth opportunity depends on successful certification and tender wins.

• BeLink Integration Risk — BeLink is currently loss-making.

  • If the turnaround takes longer than expected, it could impact consolidated profitability.

Previous Coverage of HIRECT

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1. Manufacturing of Gold Jewelry

shantigold.in | NSE: SHANTIGOLD

2. FY23-25: PAT CAGR 68% & Revenue CAGR 28%

3. FY-25: PAT up 108% and Revenue up 56% YoY

4. Q3-26: PAT up 128% and Revenue up 110% YoY

PAT down 9% and Revenue up 48% QoQ

• Volume Growth: Sold 535 kg of gold, a 31% Y-o-Y increase.

  • Fueled by the peak wedding and festive season (October–December)

  • Shift in consumer behavior toward large organized retailers (like Kalyan and Joyalukkas), who are outsourcing more manufacturing to Shanti Gold.

• Margin “Normalization”

  • Q3 results saw sequential dip in margins compared to Q2 FY26.

  • Lower Inventory Gains: In Q2, SHANTIGOLD benefited from a massive rally in gold prices on stock they bought at low pre-IPO prices.

    • In Q3, gold prices stabilized, so the “speculative gain” was much smaller.

  • Product Mix Shift: SHANTIGOLD introduced machine-made plain gold jewellery. It sells faster but carries lower margins than their specialized bridal/CZ-studded collections.

  • Active Hedging: SHANTIGOLD began hedging its gold positions. While this protects them from price drops, it also limits the “windfall profits” seen in Q2.

5. 9M-26: PAT up 204% and Revenue up 68% YoY

6. Business Metrics: Strong Return Ratios

• Very attractive for a manufacturing business that has a demonstrated ROCE of 25.7% (from FY25).

7. Outlook: Solid Growth Guidance till FY27

7.1 FY26 Guidance — Shanti Gold

• FY26: I am going to close at 2,000 this year,

• FY27: Next year, maybe around INR2,800 crores to INR3000 crores, we will achieve. INR3,000 crores looks more likely.

Financial Guidance and Growth Targets

• FY26: Revenue of ~₹2,000 Cr — total gold sales volume ~1,900-2,000 kgs.

• FY27: Revenue of ~₹2,800-3,000 Cr — volume growth of 60% to 70%.

• Long-term Growth: Historically grown at a CAGR of 40% to 50%, — confident in maintaining this growth trajectory in the coming years.

• Margin Outlook:

  • EBITDA margin 7-8%

  • Gross margins of 8-10%.

  • PAT margin of 4% going forward.

• Capacity Expansion

  • Move from 2,700 kg to 7,900 kg total capacity by May 2026:

  • Jaipur Facility: New facility — will add 1,200 kg pa capacity.

    • Expected to be operational by May–July 2026.

  • New Mumbai Facility: New unit is — to add 4,000 kg pa capacity.

  • Utilization: 75-80% utilization for the existing factory in FY27.

    • For Jaipur unit — process 800-1,000 kg in the first year of operation

• Product Diversification Diversifying its portfolio beyond its core 22-carat CZ-studded bridal jewelry:

  • Machine-Made Plain Gold: Jaipur facility will introduce machine-made plain gold jewelry aimed at the mass market and affordability-led demand.

  • Mangalsutra Category: Planning entry into the Mangalsutra jewelry category to participate in this culturally significant and luxury segment.

Geographical and Export Expansion

• Domestic Expansion: Have a stronghold in South India,

  • Targeting expansion in Western and Northern India, specifically in states like Maharashtra, Haryana, and Chandigarh.

• International Reach:

  • Opening a subsidiary office in Dubai to strengthen its global footprint in markets such as the UAE, Qatar, Singapore, and Malaysia.

  • Export revenue to jump from current 2-4% to 10% by FY27.

Strategic Hedging Policy

• Benefited from inventory appreciation by holding gold on its own risk

• Strategy to shift towards a Gold Metal Loan (GML) hedging mechanism.

  • Eliminate the risk exposure to gold price volatility and allow to operate with simple, predictable business margins.

7.2 9M FY26 Performance vs FY26 Guidance

• Revenue — On-track ₹2,000 Cr guidance for FY26.

  • Asking rate looks reasonable

  • Asking rate of ₹640 Cr in Q4-26 vs ₹637 Cr delivered in Q3-26

• EBITDA Margins: 11.71% over-performing against guidance of 7-8%.

  • However, management has been transparent that the 9M margins were artificially boosted by inventory gains (buying gold low before a price rally).

On-track to deliver FY26 guidance

8. Valuation Analysis

8.1 Valuation Snapshot

• Current Market Price ₹206; Market cap ₹1,485.2 Cr

• Compare valuations of SHANTI with SKYGOLD

• P/E (10×): Attractive — given the growth projected till FY27.

  • PE is not demanding a high growth rates beyond FY28 to sustain valuations

• EV/EBITDA (6.5×): Attractive.

• PEG: <0.5→ very attractive

• If SHANTIGOLD transitions to its 7,900 kg capacity and stabilizes its PAT at the guided 4% margin, the current valuation provides a significant “Margin of Safety.”

• Rerating possible based on FY26 earnings. Re-rating to P/E (15×) easily possible.

Near-term valuation comfort is strong.

8.2 Opportunity at Current Valuation

In a “Value-Growth” sweet spot.

• Extreme Valuation Undershoot (Relative to Growth)

  • Shanti Gold has a PEG ratio of roughly 0.12 to 0.20, which is statistically considered “deep value” or significantly undervalued for a high-growth company.

• Future Potential not yet discounted

  • For a company expanding its capacity by 3x (from 2,700 kg to 7,900 kg), these multiples suggest the market has not yet priced in the successful execution of the new facilities.

• Structural Catalysts for Re-Rating: “Re-rating” possible if the following occur:

  • Capacity Execution: Once the Jaipur and Mumbai facilities go live in May 2026 and show high utilization.

  • Shift to Hedging: Moving to Gold Metal Loans (GML) will make earnings more predictable and less dependent on “luck” with gold prices. Markets award higher multiples to predictable earnings.

  • Organized Retail Tailwind: As a B2B supplier to giants like Kalyan, Joyalukkas, and Malabar, Shanti Gold is a “proxy play” on the formalization of the Indian jewellery market.

8.3 Risk at Current Valuation

• Corporate Governance & Business Overlap

  • The promoters (Pankajkumar Jagawat and Manojkumar Jain) also run and own Utssav CZ Gold, another listed entity in a similar line of business.

  • The Risk: Conflict of interest. Investors worry about:

    • Order Diversion: Which company gets the most profitable orders?

    • Resource Allocation: Where is management spending most of their time?

    • Related Party Transactions: Are funds or resources being moved between the two companies?

  • Note: Management addressed this in the Q3 earnings call, stating Shanti is for “mass production” and Utssav is “design-focused,” but the overlap remains a psychological barrier for investors.

• Execution Risk of “Hyper-Scaling”

• SHANTIGOLD is attempting to triple its capacity from 2,700 kg to 7,900 kg in a very short timeframe

• Scaling a handmade or even semi-automated jewellery business by ~290% is operationally complex.

  • Karigar (Artisan) Management: Finding and managing hundreds of skilled artisans.

  • Quality Control: At these volumes, maintaining the “design leadership” they claim becomes much harder.

  • Utilization: If they build the 7,900 kg capacity but can only fill 50% of it, the fixed costs (depreciation, salaries, rent) will eat into their already thin 4% margins.

• Working Capital & Interest Rate Sensitivity

  • To generate ₹2,900 Cr in revenue, the company needs to hold massive amounts of gold inventory.

  • Even though the company’s Debt-to-Equity is low (0.3x), the absolute amount of debt required to fund a 7.9-ton capacity is huge.

    • If interest rates rise, their Finance Costs (which were ₹19.22 Cr in FY25) could balloon, further squeezing the 4% PAT margin.

    • Any tightening of credit by banks toward the jewellery sector (a common occurrence in India) could stall their growth completely.

• Client Concentration Risk

  • 45% of their sales go to top retail chains like Kalyan, Joyalukkas, and Lalithaa.

  • B2B manufacturing for large retailers is a “low-moat” business.

  • If a retailer like Kalyan Jewelers decides to squeeze Shanti Gold on “making charges” or moves its orders to a competitor (like Sky Gold), Shanti’s margins and volumes would take an immediate and severe hit. They are currently “price takers,” not “price makers.”

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1. Motors & Generators Manufacturer

tdps.co.in | NSE: TDPOWERSYS

2. FY21-25: PAT CAGR 41% & Revenue CAGR 21%

• Scale of Operations Doubled: Global market expansion, product diversification (motors, hydro, geothermal), and revival in domestic demand.

• Margin Expansion: Increased export share, better product mix, leaner operations, and selective participation in higher-margin projects (e.g., data centers, geothermal, traction motors)

• Exports Became the Growth Engine: Focus on clean energy, grid stabilization, and AI-linked infrastructure in export markets transformed the business

• Product Portfolio Expansion: From Steam turbine generators to Gas & geothermal generators, Motors (synchronous, induction), Traction motors (NPCIL, export markets), Grid stabilization & data centers

3. FY-25: PAT up 50% and Revenue up 28% YoY

4. Q3-26: PAT up 25% and Revenue up 27% YoY

PAT down 6% and Revenue down 2% QoQ

Record Q3 Order Inflows & Order Book

• All-Time Record Inflow: Q3 saw 61% year-on-year increase.

• Export Dominance: Exports drove the Q3 performance, making up 84% of the quarterly order inflow. For the nine-month period, exports accounted for 79% of total order inflows.

Q3 Operational Developments

• Third Plant Operationalized: The company declared its newly constructed third plant operational on December 18th. Because this occurred late in the quarter, the new capacity did not yet impact Q3 sales.

5. 9M-26: PAT up 37% and Revenue up 36% YoY

6. Business Metrics: Strong & improving return ratios

ROCE > ROE = Capital-Light Model — self-funded and not reliant on leverage to generate returns.

7. Outlook: Solid Growth Guidance till FY27

7.1 FY26 Guidance — TD Power Systems

• We maintain our top line guidance of 18 Billion INR for FY 26.

• Additionally, we give a revised guidance for FY 27 at 22 Billion INR .

  • This is a conservative guidance based on the ramp-up of the order booking that we're seeing, which is around INR 575 crores to INR 600 crores per quarter, we see an extremely high probability to increase our guidance further.

• The order inflow from exports continue to be the driver for growth .

  • The company has a diversified product range serving global markets for steam turbines, gas turbines, gas engine, geo-thermal, motor, and other special applications and wide range of global OEM’s ~45 spread over all business segments .

• The key driver for growth is EXPORT — The order inflow clearly reflects the strength of the company’s business in International markets .

• Export growth will continue to drive the company’s business in FY 27 & FY 28. With the third plant commissioned, the ramp up of the production and sales will be seen from Q4 FY 26 onwards .

To meet pipeline demands, production will ramp up to ₹550-575 Cr in Q4-26, and then move to around ₹600 Cr per quarter from Q1-27 onwards.

Segment Growth and Demand in Place till FY30:

• Gas Engine and Gas Turbine Generators:

  • Strong visibility with firm forecasts from OEMs — showing a huge year-on-year increase up until 2030.

  • Driven largely by data centres moving to captive power to avoid grid dependency, as well as demand for grid stabilization and synchronous condensers.

• Hydro:

  • FY27 projected to be the highest in the company’s history for hydro.

  • Strong visibility for at least the next two to three years — driven by a growing refurbishment market in India and abroad.

• Steam Turbines (India): The domestic market is experiencing steady, moderate growth of around 10% to 12%, driven by captive power plants, biomass, waste heat recovery, and the steel industry.

• Motors: Currently taking a backseat to the booming generator business, motors will grow at a steady 10-15% per year.

  • To become a major thrust area for the company from FY28 onwards.

• Railways:

  • Expected to remain in a “steady state situation” for the next couple of years.

  • Existing Indian Railway contract is set to expire by FY28

  • TDPOWERSYS transitioning to exports — US, European, & Russian markets.

Capacity and Margins Outlook:

• Capacity Expansion:

  • To maximize the utilization of its newly operational third plant and existing assets up to FY28

  • No capex until revenue reaches ₹2,600-2,800 Cr.

  • Will evaluate the need for further major capacity additions around Q4-27.

• Profitability:

  • Gross margins are expected to sustain around 35%.

  • Bottom line will see significant benefits starting in Q4 and Q1 from the depreciation of the Indian rupee against the Euro and Dollar.

  • Stopped hedging its foreign exchange roughly six months ago to fully capture these depreciating spot rates.

  • Commodity cost increases (like copper) are being successfully passed on to customers through renegotiations.

7.2 9M FY26 Performance vs FY26 Guidance

• Revenue — On-track ₹1,800 Cr guidance for FY26.

  • Asking rate of ₹525 Cr in Q4-26 vs ₹445 Cr delivered in Q3-26

• Margins: Delivered 18.8% vs guided ~18% — execution ahead of plan.

• Order Inflow: ₹1,572Cr (+48% YoY) — healthy momentum; 79% export-driven.

• Order Book: ₹1,845.2 Cr — provides visibility till H1-27

• Tariff Risks: US tariffs may impact 4–5% of sales, mitigated by Turkey plant; execution will be closely watched in H2.

8. Valuation Analysis

8.1 Valuation Snapshot

• CMP ₹900; Mcap ₹14,110 Cr

• P/E (64×): Very Expensive; justifiable — only if growth + margins sustain till FY30 based on the strong demand outlook

• EV/EBITDA (45×): Market pricing in durable growth; comparable to high-quality capital goods leaders.

• PEG: ~2→ expensive,

• Rerating beyond FY27 depends on export demand, guidance upgrades, and smooth tariff mitigation.

Premium growth story — long-term opportunity — near-term valuation comfort is limited.

8.2 Opportunity at Current Valuation

Opportunities are limited

• The price has run far ahead of its fundamentals.

• The demand environment is strong and presents a lot of opportunities for the business but at current valuations:

  • No opportunity for fresh buying in the stock unless there is some market correction without changes in the business outlook

  • Opportunity to continue and ride the momentum as long as it lasts for those who already have a position in the stock

• The next window of opportunity may open up when the management gives a guidance which is firmer than the minimum 20% growth in FY28

  • However growth will be constrained by the max revenue potential from the planned capacity expansion

• Guidance Upgrade Likely: Guidance upgrade expected in FY27— not baked into the valuations

  • Even if ₹600 Cr per quarter from Q1-27 onwards is delivered — FY27 Revenue of ₹2,400 Cr implies P/E 44× and EV/EBITDA 31× which is not cheap either.

8.3 Risk at Current Valuation

• FY27 Already Discounted — No room for disappointment

  • At FY27E P/E 49× and EV/EBITDA 34×, the strong demand environment, capacity expansion and all the optionality from the large generator product is all discounted.

  • Little room for disappointment in terms of business execution.

• Tariffs:

  • Uncertainty around US tariff hikes add execution complexity.

  • Yet no let-up or hesitation in order inflows.

  • Customers are actively absorbing the tariffs, and none are insisting that TD Power Systems shift its production to Turkey to mitigate “risk perception” or reduce lead times.

• Commodity Price Volatility:

  • Cost pressures from drastically rising commodity prices, specifically copper.

  • Utilizing a previously booked pipeline of lower-priced copper inventory to insulate near-term margins.

  • For future orders — renegotiating contracts to pass all increased costs on to customers.

• Sector Concentration Risk:

  • Surge in demand driven by data centers — potential risk of over-reliance on this single sector.

  • Management dismissed concerns that a slowdown in U.S. AI investments would impact their order book, noting that tech companies are actually increasing their AI expenditures.

Previous Coverage of TDPOWERSYS

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1. Supplying springs and forgings for Indian Railways

frontiersprings.co.in | BOM: 522195

• The company primarily produces Hot Coiled Compression Springs and forging items, catering especially to the needs of Wagon, Locomotives, and Carriage sectors. Registered with RDSO since 1990, Frontier Springs is a trusted supplier to the Indian Railways

• Indian Railways – Our Primary Customer

2. FY21–25: PAT CAGR 45% & Revenue CAGR 31%

3. FY25: PAT up 167% & Revenue up 71% YoY

4. Q3 FY26: PAT up 64% & Revenue up 40% YoY

PAT down 9% & Revenue down 2% QoQ

• Sustained demand across all business verticals.

• The Company continues to operate with a healthy order book

• On the profitability front, margins witnessed a marginal compression during the quarter, primarily due to the increase in steel prices, which constitute a key raw material for our products.

• Despite this cost pressure, overall operational performance remained stable.

5. 9M FY26: PAT up 94% & Revenue up 48% YoY

6. Business Metrics: Strong Return Ratios

7. Outlook: 35%+ Revenue CAGR for FY25-27

7.1 FY26 Guidance — Frontier Springs

Order-book provides visibility to FY26 target of ₹375 Cr

• The Company continues to operate with a healthy order book

• Remains firmly on track to achieve its stated gross revenue guidance of approximately 375 crores for FY26.

• Frontier Springs remains confident of achieving 500 crores in gross revenues in FY27 and sustaining its growth trajectory.

7.2 9M FY26 Performance vs FY26 Guidance

• Revenue: On-track to deliver FY26 guidance.

  • Maintained FY27 guidance

• Margins ahead of plan: 9M EBITDA margin of 26%+ is well above guidance Q1 guidance of 21-22%.

FY26 Targets → Possibility of beating guidance if Q4 is same as Q3

8. Valuation Analysis – Frontier Springs

8.1 Valuation Snapshot — Frontier Springs

• Current Market Price ₹4395.25; Market cap ₹1,731 Cr

• Frontier Springs at 29× FY26 P/E is near full value and at 22× FY27 P/E is reasonable

• Frontier Springs generated ₹11.93 Cr free-cash flow in H1 FY26 and is available at a free-cash flow yield of 0.7% (not annualized) — highlighting the ability of the company to generate free cash-flow

• Frontier Spring offers strong earnings growth but limited scope for re-rating from a FY26 perspective.

  • The opportunity emerges from FY27 and beyond as long as the momentum is maintained

8.2 Opportunity at Current Valuation

• Strong Demand: Outlook for next 5-10 years is strong

Don’t see that demand is going down for next 5-10 years, and it will keep on increasing every year. So, almost 6,000 to 7,000 coaches are being manufactured. So, they require at least next 15,000 coaches to replace ICF coaches. And then again, they need more coaches. So, the demand is going to be there for next 10 years or so. So, there is no problem in that. Demand, is no problem.

At current valuations, the margin of safety for fresh entry appears limited.

• The opportunity may still appeal to investors who have strong conviction in the industry’s 10-year structural tailwinds.

• For those who seek the reassurance of management guidance

  • Existing investors can continue to ride the ongoing momentum

  • New investors may consider reassessing the opportunity around FY26-end, when clearer visibility into FY27 and FY28 earnings should emerge.

8.3 Risk at Current Valuation

• Valuations Already Reflect FY26: At ~29× FY26E and ~22× FY27E P/E, the stock is discounting management’s guidance, leaving limited room for re-rating unless earnings momentum continues into FY28.

• Reliance on Indian Railways: Management confirmed Railways will remain the primary customer for the next 5 years. High customer concentration is an inherent risk.

• Limited immediate traction in non-railway segments: Management acknowledged limited margin and demand visibility in:

  • Automotive air springs

  • Bus/truck applications

  This constrains diversification.

• Product Range not broad enough to take Frontier to 1,000 Cr revenue

  • Execution around introduction of new products and acceptance by market needs to be watched for growth beyond FY27

Going to INR 500 crores to INR 1,000 crores, we will definitely require a big jump. So, we have to increase our product line to go up to that level. But going to INR 1,000 crores, bigger jump, we need more product into our kitty.

Previous coverage of Frontier Springs

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1. Renewable power generating company in Gujarat

kpigreenenergy.com | NSE: KPIGREEN

2. FY21–25: PAT CAGR of 111% & Total Income CAGR of 67%

3. FY25: PAT up 101% & Total Income up 70% YoY

Guidance Out-performance: Revenue growth at 70% vs guidance of ~60%

4. Q3-26: PAT up 48% & Revenue up 45% YoY

PAT up 8% & Revenue up 5% QoQ

5. 9M-26: PAT up 60% & Revenue up 64% YoY

6. Business metrics: Steady Return Ratios

What we have usually been around 20% to 24% kind of return on equity that we are seeing here. We will be in the range of 20 to 24.

• FY25 Return Compression: Returns moderated in FY25 due to higher capital employed, with equity tripling YoY as the company scaled.

• Healthy Profitability Maintained: Even with equity dilution, KPI delivered high-teen ROE and double-digit ROCE, reflecting efficient asset monetization.

  ---

7. Outlook: Revenue CAGR of 60%

7.1 Management Guidance

KPI Green Energy Ltd. aims to clock an annual revenue growth of up to 60% till FY 2030 on the back of a strong order book, according to Faruk Patel, chairman and managing director (CMD), KP Group.

FY27 Revenue Guidance: But as we have told in our various public forums, we expect 50% to 60% growth year-on-year.

Continuation of Guidance set for FY26

• Capacity Goals: Vision of achieving 10 gigawatts (GW) of capacity by 2030 — confident of achieving the milestone earlier than the targeted date.

• Independent Power Producer (IPP)

  • Target: 1 GW of capacity by September 2026

  • IPP segment (offers long-term annuity income) to contribute 25-30% of total revenue by 2030,.

  • Margins: 85-90% EBITDA margins.

  • Once 1 GW capacity is stabilized (by FY27/FY28) — expected to generate ~₹300 Cr in recurring revenue annually

• Captive Power Producer (CPP/EPC)

  • Order-book grew to 1.96 GW in Q3 vs 1.60 GW in Q2 — at over ₹5,500 Cr.

  • Margins: 18-20% EBITDA margins.

• Blended EBITDA margin to remain stable around 30-35%.

Sun Drop Energy (Subsidiary) & IPO Plans — in H1 of FY27

• Sun Drop will function as a separate vertical focused on

  • Battery Energy Storage Systems (BESS)

  • smaller projects (under 35 MW) catering to MSME and retail clients,.

• Sun Drop to achieve ₹500-600 Cr revenue in FY27 — EBITDA margins of 25-30%,.

International Expansion (Botswana)

• Signed an MOU for 5 GW IPP project in Botswana — to commission 500 MW in the next 1 to 2 years

7.2 9M FY26 Performance vs FY26 Guidance

• Revenue: On-track to deliver 60% growth

• Margins: 9M-26 EBITDA at 36.3% — ahead of the 30-35% guidance given

• 60% growth of FY26 to carry over to FY27

8. Valuation Analysis

8.1 Valuation Snapshot – KPI Green Energy Ltd

Current Market Price = ₹403 | Market Cap = ₹7,932.4 Cr

• Assuming 50-60% growth till FY27 with stable margins

  • Forward analysis restricted to FY27 as one needs to watch execution play out.

  • If growth plays out as per management guidance till FY30 — current valuations implies that KPIGREEN is available at throw away valuations

• Valuations are attractive based on FY26 expected earnings

• Market has not discounted FY26 and FY27 earnings

  • Past track record of diluting equity

  • Concerns on debt-equity as debt has risen the fund the growth

8.2 Opportunity at Current Valuation

• Valuations: Markets are not discounting FY26 and FY27 execution

  • Creates opportunity of re-rating of valuations

• Margin of safety: The forward valuations have a margin of safety to support one or two weak quarters

• Sun Drop Energy (Subsidiary) & IPO Plans — Monetization potential not yet discounted

• New Business Optionality: New business not considered in valuations till FY27. Beyond FY27 they could another axis of growth

• Operations and Maintenance (O&M) Services

  • In-house O&M team manages its own IPP and CPP portfolios

  • KPIGREEN intends to leverage these capabilities to bid for and manage third-party O&M contracts in the future, turning this cost center into a revenue-generating service vertical

8.3 Risk at Current Valuation

• Based on forward valuations — Markets does not believe the numbers and will not believe in it for a long period of time.

  • Disbelief in numbers is reflected in the stock price — its not going anywhere

• Delivering 60% growth CAGR FY25-27 for any company is a challenge though the management is confident on delivering on it.

• Conversion of profits to cash is a concern

  • Increase in receivables – customers haven’t paid

  • Profit is being used to build inventories

• Quality of growth needs to be watched

  • Historically growth driven by equity dilutions

  • Growth fueled by increasing debts

• High Execution Risk on Capital Expenditure

  • A power producer ties up a large amount of capital in projects not yet complete. These projects are not yet generating revenue. This situation poses a significant execution risk.

  • Execution-heavy: Lumpy EPC revenue; project delays (permits, monsoon, logistics) can disrupt growth.

  • IPP still scaling: Cash flows growing but still small vs EPC; full annuity benefits yet to kick in.

• Sector risks: Policy changes (ALMM, grid, BCD) and state-level delays could impact timelines.

Previous coverage of KPIGREEN

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1. Super specialty hospital chain

yatharthhospitals.com | NSE: YATHARTH

2. FY21–25: PAT CAGR 61% & Revenue CAGR 40%

3. FY25: PAT up 14% & Revenue up 31% YoY

• Growth led by higher occupancy (61%) and ARPOB gains (+8%).

• Oncology and robotics drove case mix upgradation.

• Margins diluted by losses at new units and depreciation spike.

4. Q3-26: PAT up 41% & Revenue up 46% YoY

PAT up 4% & Revenue up 15% QoQ

• Highest-ever quarterly revenue and profitability, driven by

  • Rapid ramp-up of new facilities in New Delhi and Faridabad,

  • Strong operational metrics in mature hospitals.

• Faster-than-expected stabilization of New Delhi and Faridabad Sector 20 hospitals — contributed 9% to group revenue in their first full quarter.

  • 100% revenue from Cash and Private Insurance (TPA) — avoiding low-paying government schemes in their launch phase.

• ARPOB (Average Revenue Per Occupied Bed): Increased by 10% YoY

  • Noida Extension (Flagship) — highest-ever ARPOB of ~₹44,000

• Consolidated occupancy stood at 67%.

  • Noida: Operating at peak capacity — 91%.

  • Greater Noida: 74%.

  • New Units: Faridabad Sector 20 is at 43% and New Delhi at 38%, which management considers healthy for new launches.

• Oncology grew from ₹63 crores to ₹85 crores YoY — contributes ~18% of the Noida Extension revenue.

• Acquired Agra hospital was fully integrated effective February 1, 2026.

  • Profitable from Day 1 — expected to contribute to EBITDA from Q4

5. 9M-26: PAT up 38% & Revenue up 32% YoY

5. Business Metrics: Weakening Ratios — Impacted by Acquisitions

• FY25 return ratios dipped due to front-loaded capex, equity dilution, and margin compression from new hospital ramp-ups.

• Management expects normalization as new units breakeven and ARPOB/margins improve.

  ---

7. Outlook: 30% Revenue CAGR FY25-27; 24 % EBITDA margin

7.1 Outlook for FY26 — Yatharth Hospital

• FY26

  • Revenue: I think we are being actually a bit conservative when we’re seeing 30% revenue growth. We feel that this number should be easily overachieved

  • For next 3 years, we do expect 8% to 10% ARPOB growth clearly.

• FY27:

  • Our guidance remains the same, as we have always maintained that last few years the company has grown close to around 30%. I think in the upcoming years also, including this year, we remain on track for that.

• Q4 FY26 is expected to be better than Q3 due to

  • addition of the profitable Agra unit

  • continued ramp-up of Delhi/Faridabad.

  • impact of recent CGHS price revisions.

• Consolidated EBITDA margin in the range of 24–25% for FY27 and the near future.

• New Hospitals Break-even:

  • Faridabad Sector 20: Operational break-even within 12 months.

  • New Delhi (Model Town): Expected to break even within 15 months.

• Double its capacity to approximately 5,000 beds within 3 years, with full operationalization taking 4–5 years.

  • Current capacity stands at ~2,550 beds.

  • Planned capex is ~₹1,500 Cr over the next 5 years.

  • Focus on the NCR region (Priority 1), major cities in North India (Priority 2).

• The share of government business is currently ~35%. Management aims to reduce this to 25–28% over the next 2 years to improve working capital cycles.

• Receivables (Working Capital): Receivable days remain high at 116 days. Management expects this to drop to <110 days by March 2027 as the mix shifts toward private payors.

• Contribution of oncology to specialty revenue is expected to grow from the current ~10% to 15% within 1.5 to 2 years.

7.2 9M FY26 Performance vs FY26 Guidance

Overall Positive: Revenue, margins In-line, capacity expansion on schedule

• Revenue Growth: 30% guidance vs 32% achievement in (M-26

  • On track — Q4 to be stronger than Q3

• EBITDA Margin: lagging the 24-25% guidance

8. Valuation Analysis

8.1 Valuation Snapshot — Yatharth Hospital

Current Market Price= ₹694.2; Market Cap = ₹6,688.9 Cr

• Fully-priced from an FY26 perspective.

• Attractively priced from an FY27 perspective as full year impact of profitable Agra hospital is felt. – possibility of re-rating of multiples

• Opportunity emerges beyond FY28 as addition of beds is completed and operations start stabilizing with integration of New Delhi (Model Town)/ Fairdabad hospital.

7.2 Opportunity at Current Valuation

• Valuations: At FY26 P/E of ~36×, EV/EBIDTA of ~23× the valuations seem to be discounting FY26 performance and FY26 guidance

  • Potential for re-rating of multiples based on FY27 execution as break-even of Delhi and Faridabad hospitals is not yet discounted

  • Significant opportunity emerges in FY28 as acquisitions start delivering

• Doubling of capacity to approximately 5,000 beds within 3 years is not yet discounted

• Impact of improving operational metrics not yet discounted

  • Headroom of increased occupancy in the new hospitals

  • Impact of 8% to 10% ARPOB is an opportunity

  • Improving payor mix with reduction of government schemes.

7.3 Risk at Current Valuation

• While valuations offer an opportunity but margin of safety in the valuations is limited for FY26 and FY27. Any slip-up in execution would impact multiples

• Doubling of bed capacity to 5,000 beds is a key variable in the overall story of YATHARTH — any delays or slip ups will have a negative impact given the limited margin of safety

• Delhi Model Town and Faridabad-20 are critical to FY27–28 earnings. Slower-than-expected occupancy ramp up and delays in break-even would impact both the top-line and profitability of overall operations

• Government/CGHS is an important component of payer mix. Delays in claim settlement or any future rollback of rates would impact the profitability of the business

Previous coverage of YATHARTH

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Stock Ideas at moneymuscle.in

1. Manufacturing of Casting Gold Jewelry

skygold.co.in | NSE: SKYGOLD

2. FY21–25: PAT CAGR of 129% & Revenue CAGR of 45%

3. FY25: PAT up 228% & Revenue up 103% YoY

Key drivers for PAT margin expansion are advanced gold, gold metal loans, and our high margin diamond business, along with operating leverages from scale

4. Q3-26: PAT up 121% & Revenue up 77% YoY

PAT up 20% & Revenue up 19% QoQ

• Margin Expansion driven by

  • reduction in gold loss

  • Contribution from “advanced gold” business or job work — 12% of total volume

  • Value-added products (18k, 14k, and diamond-studded jewelry) account for 50%+ of total revenue

    • 18-karat jewelry made up 20% of the product mix in Q3

5. 9M FY26: PAT up 102% & Revenue up 76% YoY

6. Business Metrics: Strong Return Ratios

ROCE guidance of 27% by FY30

7. Outlook: PAT CAGR of 48% for FY25-30

7.1 Guidance — Sky Gold & Diamonds

• FY26/27 Guidance (Revised Upwards):

  • FY26/ FY27 Revenue projected at ~₹6,100/ 8,100 crore

  • EBITDA margin expected in the range of ~7.0-7.5%

  • PAT margin guided at 4.25% +

• FY30 Guidance (New Addition)

  • Revenue expected to be ~₹18,000 -19,000 crore

  • PAT margin projected to be ~5.25%+, aggregating to ₹ 945 crores

  • ROCE of 27% +

  • CFO/PAT of ~20% +

  • Net debt positive, driven by improvements in the working capital cycle

• Focusing on international expansion and growth funded entirely by internal capital generation, with no further equity dilution planned through 2030.

• To become net debt-free by 2030

• Expects to be cash flow neutral by March 2026 and cash flow positive thereafter.

• Gold Metal Loans (GML): Utilization is at ₹80 Cr with a limit of ₹150 Cr.

  • Aim to scale this to ₹350 Cr within four quarters despite administrative delays from banks.

• Exports: Currently 10% of revenue — target of 30%.

  • Opened an office in the Dubai Gold Souk

  • Targeting the EU and US markets by 2028-2029.

7.2 9M FY26 Performance vs FY26 Guidance

On-track Upgraded FY26 Revenue Guidance

• Revenue: Guidance for FY26 and FY27 increased. New guidance for FY30

• Margins: 9M FY26 = 4.4% ahead of PAT margin guided at 4.25%+

• Volume Targets: (kg per month)

  • Back on track after lagging in Q2

    • Q2 FY26: 580 target vs 554 achieved

    • Q3 FY26: 630 vs 631 achieved

    • Q4 FY26: 650

  • FY27: Reduced to 750 in Q3-26 guidance from 900 earlier

8. Valuation Analysis

8.1 Valuation Snapshot — Sky Gold

Current Market Price= ₹335; Market Cap = ₹ 5,187.9 Cr

• Attractively priced on a FY26 basis

• Attractively priced on a FY27 basis with 15x P/E and 12x EV/EBIDTA

• Opportunity to re-rate to to a 25x+ PE based on FY27 EPS.

Sky Gold & Diamonds appears undervalued on FY26 metrics — with re-rating potential as it delivers on FY26 guidance

8.2 Opportunity at Current Valuation

• The guidance for FY26,FY27 has not yet been discounted in the price

• Multi-year visibility: Guidance for FY30 (though far away) provides a longer term view on the stock

• Attractive Forward Valuations: At FY26 P/E of ~19x, EV/EBIDTA of ~14x the valuations don’t seem to be discounting FY26 guidance

  • Potential for re-rating of multiples based on FY26 execution

• Large Headroom for Growth:

  • Domestic

    • Transition toward organized jewellery retail is a structural tailwind

    • Regional Growth: Sales office was opened in Thrissur — strengthen position in the South Indian market.

  • Exports

    • Currently 10% of revenue — targets 30%.

    • Opened an office in the Dubai Gold Souk

    • Targeting the EU and US markets by 2028-2029.

8.3 Risk at Current Valuation

• Market does not believe in the SKYGOLD guidance even though forward valuations look attractive

  • The market may keep disbelieving the forward guidance

  • This disbelief is reflected in the price movement over the last 1 year

• Gold Metal Loan (GML) Delays: Ramp-up of GML usage — slower than planned due to administrative hurdles — will mute the proposed margin expansion

• Capability Gaps for Western Markets: EU and US markets requires specific designs and high-quality standards that SKYGOLD does not yet have

  • Will take one-and-a-half years to adapt their product for these regions

Previous coverage of SKYGOLD

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