Buy Black Box Ltd for the Target Rs.670 by JM Financial Services Ltd.
Black Box reported a largely in-line quarter, with revenue slightly ahead at +11% YoY (vs JMFe: +9%), while EBITDA margin (ex-FX) was broadly in-line at 9.1% (JMFe: 9.2%). Adjusted PAT (ex-labour code impact) came in below estimates at INR 552mn (JMFe: INR 657mn). Management cut FY26E revenue, EBITDA and PAT guidance, citing supply-chain bottlenecks amid intense demand for fibre, cabling and related accessories, with USD 40–45mn revenue deferred to FY27. However, bookings guidance remains intact at USD 1bn for FY26, and exit backlog guidance was raised to USD 800mn (mid-point) from USD 700mn earlier, implying large deal wins ahead and strong visibility for FY27. While management reiterated its USD 2bn revenue ambition by FY29, weak FY26 has made it more challenging. The renewed GTM model has to take bookings run-rate to USD 300–350mn levels and these have to ramp-up in a timely manner. We remain constructive, given growing traction in data centre space and BBOX’s positioning to participate in large-scale global and India DC build-outs. Maintain BUY.
? Q3FY26- largely in-line quarter: Black Box reported an in-line quarter, with revenue slightly ahead of estimates but profits soft. Revenues grew 11% YoY (+5% QoQ) to INR 16.6bn (beating JMFe: 8.6% YoY), driven by higher order execution in infra and data centre projects. However, supply chain delays in fibre, cabling and related accessories impacted execution timelines, leading to revenue deferral into subsequent quarters. EBITDA margin (excl. FX) improved 30bps YoY (10bps QoQ) to 9.1%, supported by operating leverage and efficiency gains, partly offset by higher investment in GTM talent. Adjusted PAT (ex-labor code impact) declined 2% YoY/1% QoQ to INR 552mn, below estimates, and was impacted by FX losses. The company also announced the acquisition of 2S Technological Innovations (Brazil) for a consideration of INR 2.75bn (additional INR 1bn contingent payout), this is expected to add INR 5bn revenue in FY27 at 10% EBITDA margin and c.20% growth run-rate. The acquisition strengthens BBOX’s LATAM presence, deepens its networking and cloud capabilities, enhances managed services exposure, and supports its medium-term inorganic growth ambitions.
? Outlook – Guidance lowered, bookings momentum to continue: Management lowered FY26 revenue guidance to INR 63.25-63.75bn (6-7% YoY) from INR 67.5-70bn, EBITDA to INR 5.55- 5.75bn (5-8% YoY) from INR 6.05-6.45bn, and PAT to INR 2.20-2.30bn (7-12% YoY) from INR 2.65–2.85bn, guidance was lowered due to supply-chain-led delays in fiber, cabling and accessories in large infra projects. Management stated that USD 40–45mn revenue was deferred to FY27. FY26 bookings guidance was reiterated at c.USD 1bn and exit backlog guidance was raised to USD 775–825mn (vs USD 700mn earlier), signalling strong bookings in 4Q and strengthening FY27 visibility. Managmeent expect bookings to reach USD 300-350 mn in subsequent quarters. Management reiterated its c.USD 2bn revenue ambition by FY29, driven by double-digit organic growth from AI-led data center builds, airport and public infra projects, geographic expansion into Europe/India and improved conversion under the renewed GTM model. USD 700–800mn inorganic addition is expected and acquisitions will remain ROE/ROCEaccretive, and funded through a mix of internal accruals and debt. EBITDA margins are expected to reach c.10% in the medium term, supported by operating leverage and cost discipline.
? EPS cut by 6-13%; Maintain BUY: We cut revenue/EBITDA/PAT estimates for BBOX over FY26-28E given inline performance in the quarter and cuts to FY26E guidance. EPS estimates sees cuts of 6-13%. However, we raise our target multiple to 28.5x from 25x before given increased traction in the Data centre space and large DC build outs globally and in India.
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SEBI Registration Number is INM000010361
