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FY25 revenue guidance revised downwards, however growth story remains intact:

* Earlier EFCIL had guided to double their revenue in FY25, however missed the guidance and are now anticipating a revenue growth of 50% YoY in FY25.

* Q3FY25 consolidated revenues at INR 1772 Mn, up 3.0% YoY and 6.5% QoQ (vs CEBPL est. INR 1688 Mn) • EBITDA for Q3FY25 was reported at INR 927 Mn, up 5% YoY 16.8% QoQ (vs CEBPL est. INR 775 Mn)

* Net profit for Q3FY25 stood at INR 405 Mn, up 91.1% YOY and 10.7% QoQ. (vs CEBPL est. INR 353 Mn)

* Number of seats added was 5,650 in Q3FY25 (vs 3600 in Q2FY25) and average rent per seat per month stood at INR 6,250 per seat.

Capitalising on the rising demand for Flex working spaces by almost doubling its seat capacity : Revenue for the quarter rose by 31% YoY to INR 963 Mn. Increasing Demand for flexible working spaces is supported by the rise of GCCs, start up ecosystem, hybrid work models and preference for Opex-led cost models by businesses. Management has guided to increase from 57,000 seats currently to 1,10,000 seats in the next 3 years, however we have considered that they would reach a total capacity of 1,00,000 seats only.

D&B (Design & Build) Vertical to show maximum growth: Revenue for the quarter increased 27% YoY to INR 676 Mn. Robust demand for managed, hybrid and flexible office spaces along with a growing orderbook will support growth in the D&B vertical.

Furniture Manufacturing to scale up, management targeting to do a revenue of INR 3000 Mn in FY27 : The Furniture Manufacturing Unit has begun operations, contributing INR 133.3 Mn in Q3FY25 entirely from third-party orders. A strong order pipeline includes INR 85.7 Mn to be completed within 30 days and INR 143.5 Mn in the next 30-60 days. Management is optimistic about achieving 30% EBITDA margins as their capacity scales up. Operating leverage to play out as capex for its manufacturing unit has already been incurred.

View and Valuation: We revise our FY25/26E EPS estimates by -36.5%/--54.3% due to lower revenue guidance for FY25. We remain positive on EFCIL’s long-term growth story with plans to scale up all 3 business verticals – Managed Office Space, D&B and Furniture Manufacturing, establishing itself as an integrated player with diverse revenue streams capitalizing on the cross synergies from these 3 verticals. We maintain a “BUY” rating with a target price (TP) of INR. 730, valuing it at our earlier 20x FY27E EPS. We have not factored in any income from its SM REIT in our valuation.

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