Shankara Building Products: PAT up 29% & Revenue up 31% in H1-24 with outlook of revenue CAGR of 26% for FY23-28 at a PE of 23
SHANKARA took a clear call for FY23 to up the ante for top line growth. Aspiration to grow to Rs 10,000 cr by FY28 while expanding margins. H1-24 performance on track to deliver FY28 targets
1. Marketplace for Building Materials
shankarabuildpro.com | NSE: SHANKARA
Products: Non-steel business expansion to drive blended EBITDA margin improvement in the coming years
2. FY17-23: Delivering top-line growth in FY23
FY23 PAT still below the FY18 peak
We sort of were very focused on working capital and balance sheet management. Last year, i.e., ‘22-23, the management took a clear call that we need to up our ante as far as top line growth
3. FY23: PAT up 84% and revenue up 67% YoY
4. Strong Q1-24: PAT up 44% and revenue up 36% YoY
5. Q2-24: PAT up 17% and revenue up 26% YoY
6. Strong H1-24: PAT up 29% and revenue up 31% YoY
7. Business metrics: Improving return ratios but cashflow has been hit
7. Outlook: Revenue CAGR of 26% for FY23-28
i. Rs 10,000 cr revenue by FY28 i.e. CAGR of 26% for FY23-28
We are aspiring to grow our revenue at 20% to 30% CAGR over the next 4 to 5 years. We aspire to become a Rs. 10,000 crores top line company in the next 5 years.
ii. EBITDA margin expansion
EBITDA Margin: Aspirational is 4 percentage.
iii. Targeting ROCE of 16-18% in FY24
ROCE as of H1-24 was 16%. It is in line with the target of 16-18% ROCE for FY24.
8. PAT growth of 29% & revenue growth of 31% YoY in H1-24 at a PE of 23
9. So Wait and Watch
If I hold the stock then one may continue holding on to SHANKARA .
Coverage of SHANKARA was initiated after Q1-24 results. The investment thesis has not changed after a strong H1-24. The only changes are the delivery of a strong H1-24 and the increased confidence in the management to deliver a stronger FY24
H2-24 is expected to be stronger than H1-24 and SHANKARA is on track to deliver a FY24 in line with its target to achieve Rs 10,000 cr revenue by FY28
Deterioration of cashflow in Q2-24 is a red flag. Needs to be observed for Q3-24.
10. Or, join the ride
If I am looking to enter SHANKARA then
SHANKARA has delivered PAT growth of 29% and revenue growth of 31% in H1-24 at a PE of 23 which makes the valuations fair.
H2-24 is expected to be stronger than H1-24 which makes the valuations look reasonable at a PE of 23 in the medium term
From a longer term perspective, FY24 performance is in line to deliver Rs 10,000 cr by FY28 at revenue CAGR of 26%. A revenue CAGR of 26% for FY23-28 at a PE of 23 makes valuations quite reasonable.
Previous coverage of SHANKARA
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Disclaimer
It is an analysis of the company data and not a stock recommendation
My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company
I look to own good companies at prices where there is a path to market beating returns over decades