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Our view

Capacite reported weak set of numbers led by slower execution on account of delay in tying up non-fund based limits. However, with sanction of additional working capital limits of Rs1.5bn and equity infusion of Rs963mn, the liquidity position has improved and the same will be reflected from 2Q. With order inflow of Rs11.5bn in 1Q, management is confident of achieving the order inflow target of Rs21-22bn in FY24E. Orderbook stood at Rs102.5bn in 1QFY24 thereby providing strong revenue visibility for next 5-6years. Management has retained revenue guidance of Rs21- 22bn for FY24E with EBITDA margins of 17-18%. We believe that CAPACITE is well-positioned to gain traction driven by a) impressive execution track record with stable margins, b) healthy order book (Rs102.5bn as on 1QFY24), c) lean balance sheet with healthy return ratios, d) strong management pedigree and e) asset-light business model. We expect CAPACITE to post 17%/25% revenue/PAT CAGR over FY23-25E. With the recent run up in the stock we have revised our rating to ADD with TP of Rs239.

Result Highlights

* For Q1FY24, CAPACITE’s revenues de-grew 9.8% YoY to Rs4.3bn (below our estimate Rs5.2bn) due to slowdown in execution.

* EBITDA came in at Rs709mn (down 28.3% YoY), with EBITDAM witnessing a degrowth of 427bps to 16.5% (below our and street estimate of 18.6% / 19.0%). Margins were lower than expected due to higher raw material and other expenses.

* On bottom-line front, company posted a profit of Rs191mn (below our estimate of Rs297mn). This was mainly on account of lower operating margins.

* In Q1, company has bagged orders worth Rs11.5bn.

* At the CMP, the stock trades at a PE of 12.7x and 9.7x FY24E and FY25E EPS.

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