Mizuho sees ’a significant rally ahead’ in this Magnificent 7 stock
GuruFocus -
- Revenue: Increased by 20.85% from INR33.29 crores to INR40.23 crores.
- EBITDA: Increased by 144.5% from INR2.44 crores to INR5.96 crores.
- Profit After Tax: Increased by 2% from INR0.68 crores to INR3.4 crores.
- Acquisition: Acquired Beryl Project Engineering Company with revenues of $5.6 million and profit close to $0.5 million.
- Purchase Consideration for Acquisition: $2.7 million plus other working capital adjustments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mold-Tek Technologies Ltd (BOM:526263) reported a significant revenue increase of 20.85% from INR33.29 crores to INR40.23 crores.
- EBITDA surged by 144.5%, indicating strong operational performance.
- The acquisition of Beryl Project Engineering Company is expected to expand Mold-Tek’s presence in the residential sector in the USA.
- Beryl’s AI-based plan review and permit processing procedures are expected to enhance efficiency and quality control.
- The company anticipates a meaningful contribution from Beryl in Q3, with plans to expand operations to more counties in the USA.
- Despite the revenue growth, the company’s performance is slightly lower compared to the previous year due to geopolitical situations, particularly in the US markets.
- The US construction industry has been dampened by new tariff situations, causing uncertainty.
- The acquisition of Beryl, while strategic, involves a significant financial commitment and integration challenges.
- The residential segment, while large in volume, involves smaller contract sizes compared to commercial projects.
- There is a reliance on the US market, which is subject to economic and regulatory changes that could impact future performance.
A: Lakshmana Janumahanti, Executive Chairman and Managing Director, explained that the acquisition cost was 0.5 times the revenue and about 7 times the EBITDA, which is an industry standard. The acquisition was a result of over a year of efforts and discussions with brokers in the US. Additionally, the founder of Beryl, Mr. Richard Leon, is investing in Mold-Tek’s equity, showing his commitment to the company.
Q: Can you elaborate on the civil space in the US and who Mold-Tek competes with?
A: Lakshmana Janumahanti explained that Beryl provides services starting from plan creation to on-site inspections, primarily in two counties in Florida. The potential for expansion is significant, with over 3,000 counties in the US. Mold-Tek’s competitive edge lies in the retiring workforce in the US and the use of AI-based models for faster processing. A major competitor mentioned was USB, a company with a multibillion turnover in similar services.
Q: What is the strategic goal behind partnerships with companies like Interarch and Affordable Robotic?
A: The goal is to provide pre-engineered buildings and robotics solutions. Mold-Tek aims to facilitate building erection, design, and connection work, while Interarch supplies the buildings. The partnership is expected to gain traction once tariff issues are clarified.
Q: How does the Beryl acquisition impact Mold-Tek’s civil engineering services and client mix?
A: The acquisition adds a significant residential segment to Mold-Tek’s portfolio, which is larger in volume compared to commercial projects. Beryl’s expertise in permits and approvals complements Mold-Tek’s design capabilities, allowing for expansion into more counties and potentially doubling revenues in the residential domain.
Q: What are the expected margin improvements at Beryl and Mold-Tek’s overall business?
A: The integration with Mold-Tek is expected to improve Beryl’s EBITDA margins from 7-8% to 15-20% over time, with a 20-25% growth in top-line revenue. Mold-Tek’s standalone business is also expected to see margin improvements due to operating leverage as the top line grows.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.