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Result Highlights

During Q1 FY23, the turnover increased 41.8% YoY to Rs.103.1 cr; the EBITDA margin improved 164 bps to 64.5%. The net margin stood at 52.1% as against 58.2% in Q1 FY22. EPS during the quarter stood at Rs.7.6 as against Rs.6.0 in Q1 FY22. On sequential basis, the top-line showcased an increase of 13.2% while the profit margins contracted.

Segment-wise Highlights

• IT Park Division: – The division recorded a turnover of Rs.72.0 cr as against Rs.60.7 cr in Q1 FY22 & Rs.70.5 cr in Q4 FY22; the EBIT margin stood at 76.8% as against 83.5% in Q1 FY22 and 82.4% in Q4 FY22.The division contributed 64.9% to the top-line.

• Bombay Exhibition Center: The division recorded a turnover of Rs.16.8 cr as against Rs.1.7 cr in Q1 FY22 & Rs.4.8 cr in Q4 FY22; the EBIT margin stood at 61.1% as against 46.5% in Q4 FY22.The division contributed 15.2% to the top-line.

• Indabrator: The division recorded a turnover of Rs.8.9 cr as against Rs.5.4 cr in Q1 FY22 & Rs.12.3 cr in Q4 FY22. The division contributed 8.0% to the top-line.

• Nesco Foods: The revenue from this division stood at Rs.5.3 cr as against Rs.4.8 cr in Q1 FY22 and Rs.3.4 cr in Q4 FY22; this division also incurred losses at the operating level during the quarter. The division contributed 5.0% to the top-line.

• Income from Investments stood at Rs.7.8 cr as against Rs.13.1 cr in Q1 FY22 and Rs.12.0 cr in Q4 FY22.

OUTLOOK AND VALUATION

Nesco holds a 60+ acres land parcel in Goregaon, Mumbai and is engaged in real estate businesses through its IT Parks and Exhibition Centers which it lets out and generates robust cash-flows. The company reinvests these cash-flows to expand its leasable space portfolio. The company is slated to invest Rs.1,800-2,000 cr over the next few years to construct a new IT park alongwith a five-star hotel. Importantly, the company follows a policy of no debt and is going to fund the entire project through existing investments and internal accruals. During our previous result update, we had revised our top-line estimate for FY23 downwards to factor in persistent challenges being faced by the Bombay Exhibition Centre. Going forward, we expect the company to deliver an EPS of Rs.34.5 in FY23; maintaining a target multiple of 20x we arrive at our target price of Rs.690 showcasing an upside potential of 20% from current levels with an investment horizon of 12-18 months. Thus, we maintain our BUY rating for the stock.

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