Black Box Ltd., an IT sector small cap company (having a market cap of Rs 2,469.10 cr), gets a buy call from Ventura Securities. The brokerage has recommended buy the stock of the company for a target price of Rs 301 apiece. Considering the stock's current market price and the brokerage's estimated target price, stocks could surge up to 105% in the target time of 24 months.
The current market price (CMP) of the Black Box on BSE is Rs 147.10 apiece, trading 2.51% up. The 52 week low of the stock is Rs 124.05 apiece and the 52 week high is Rs 219.80 apiece, respectively.
Returns of Investments
The shares of the company in the past 1 week surged 2.21%. Whereas, in the past 1 and 3 months, the shares surged 17.51% and 7.87%, respectively. Over the past 1 year, the shares fell 29.05%. Whereas, in the past 3 years, the shares surged a whooping 534.92%, giving a multibagger return. In the past 5 years, the shares also surged giving a multibagger return of 499.92%.
Black Box Ltd (erstwhile AGC Network Ltd) has built a reputation for acquiring inefficient businesses (with global potential) at frugal valuations, integrating them with their existing operations, scaling them up rapidly while ruthlessly cutting costs to achieve the stated goals on profitability. Today, Black Box has emerged as a serious global systems integration player and vendor of choice for global corporations.
Unwrapping its true potential- Brokerage's views
We believe that Black Box is at the threshold of accelerated growth given its expanding footprint, improving market share and new cloud-oriented product offerings. We expect revenue to grow at a CAGR of 12.3% over FY22-25 to INR 7,600.0 cr in FY25 driven by:
- 4.3% CAGR in system integration revenues to INR 5,026.9 cr in FY25.
- 155.5% CAGR in consulting revenues to INR 1,733.8 cr in FY25.
- We have not built in any growth for the product business of Black Box as the company mostly does white labelling there. This remains an upside risk to our estimates.
EBITDA and PAT are expected to grow at a faster CAGR of 32.6% & 66.6%, respectively, to INR 607.6 cr & INR 336.5 cr over the forecast period, on the back of operating leverage coupled with cost centricity. As a result, EBITDA and PAT margins are set to improve by 315bps & 307bps to 8.0% & 4.4%, respectively. Consequently, return ratios RoE/RoCE are set to expand by 698/1,071bps to 34.9/36.3% in FY25.
Further, the conscious decision to stay away from high working capital intensive government contracts would mean that the working capital cycle should stay negative over the forecast period.
Buy for a target price of Rs 301
The brokerage said, "We initiate coverage on Black Box with a BUY for a Price Target of INR 301 representing an upside of 130% over next 24 months. Geographical concentration given large exposure to USA, remains a key risk in our view which the management is trying to mitigate by concentrating on Europe and APAC."
The stock has been picked from the brokerage report of Ventura Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.