Frontier Springs: PAT growth of 203% & Revenue growth of 77% in H1-25 at a PE of 32
FY25 revenue growth of 67%. Revenue growth of 40% in FY26 & 40%+ in FY27. Revenue CAGR of 49% for FY24-27. EBITDA margin of 16% sustained in FY25. Railway industry tailwinds are strong
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. Recovery in PAT in FY24 after a weak FY20-23
3. Strong FY24: PAT up 79% and Revenue up 26% YoY
4. Strong Q2-25: PAT up 155% and Revenue up 59% YoY
PAT up 4% and Revenue up 3% QoQ
5. Strong H1-25: PAT up 203% and Revenue up 77% YoY
6. Return ratios: Strong improvement in FY24
6. Strong Outlook: Revenue growth of 67% in FY25
i. FY25: Revenue growth of 67%
FY24 Revenue of about Rs 135 cr to grow to Rs 225 cr in FY25 i.e. 67% growth
Our revenue for the quarter aligns with our previously stated guidance, targeting a gross top line of ₹240-250 crores for FY25.
ii. FY26: 40% revenue growth
With Rs 250 cr revenue for FY25 (including GST) growing to Rs 350 cr implies a growth of 40%
this year we are targeting 250 next year will be around 350.
ii. FY27: 40%+ revenue growth
With Rs 350 cr planned revenue for FY26 (including GST) growing to Rs 500 cr implies a growth of 40%+
in last concall I have already told that by 26-27 we will be targeting 500 crores business which is gross
iv. Order book 3.4X FY25 expected revenue
With Rs 250 cr revenue for FY25 (including GST) the order book of Rs 850 crore is 3.4X FY25 expected revenue.
As far as orders are concerned, we have a good order book almost Rs.850 crore orders are in hand includes forging, air springs and coil springs
7. PAT growth of 203% and Revenue up 77% in H1-25 at a PE of 32
8. Buy?
If I hold the stock then one may continue holding on to Frontier Springs
The performance for H1-25 has been strong and is in line to achieve the guidance of Rs 240-250 cr revenue in FY25.
Our results are in line with the guidance we set at the beginning of the financial year, and we remain on track to achieve our target gross revenue of ₹240-250 crores for FY25. The strong performance this quarter was driven by robust contributions from all three of our business verticals: Coil Springs, Forging, and Air Springs.
Frontier Springs is in the middle of a strong run and has sequentially grown its Revenue and PAT on a QoQ basis for the last 5 quarters from Q2-24.
While the past track record of Frontier Springs is not exceptional, one can expect a strong future given the underlying orders in place to support the business growth. However, outlook is strong for FY-25
The demand for our products remains robust, and we have a strong order book with excellent visibility of future demand. We remain confident in achieving our stated guidance and look forward to a future full of growth and prosperity
Outlook is very positive given guidance of revenue CAGR of 49% for FY24-27
New product (Air Springs) to significantly contribute to the topline growth
New (Air Springs) to help improve the margin profile of the business
Strong Industry Tailwinds and growth visibility
Margin expansion from 15.34% in FY24 to 19.85% H1-25 implies bottom-line to grow faster than the top-line.
9. Buy?
If I am looking to enter Frontier Springs then
Frontier Springs has delivered PAT growth of 203% and revenue growth of 77% in H1-25 at a PE of 32 which makes the valuations acceptable.
Outlook for 67% revenue growth in FY25 with bottom-line growing in line with top-line growth the top-line on account of EBITDA margin expansion at a PE of 32 makes the valuations reasonable from a FY25 perspective.
Outlook for 49% revenue CAGR for FY24-27 with bottom-line growing in line with top-line growth the top-line on account of EBITDA margin expansion at a PE of 32 creates opportunity in Frontier Springs over the longer term.
The performance for FY25 looks well discounted in the price. The opportunity in stock is from the performance from FY25 onwards.
Frontier Springs has generated Rs 12.7 cr of free cash flow as of H1-25 end and is available at a market cap of Rs 811 cr. At a free cash flow yield of 1.57% (not annualized) the valuations look acceptable.
For a company with expected revenue of Rs240-250 cr, a PE of 32 looks rich in the short term hence positions need to be built over time over bad days when the stock is not doing well. Reaction in stock price will be seen if execution for even one quarter is not in line with the guidance given.
The risk of investing in a small company with Rs 240-250 cr of revenue expected for FY25 needs to be kept in mind.
