Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

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Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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Compliance/Grievance Officer:
Name: Ankit Agrawal
Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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Equity Bottom-Up

<ul>
<li>Nesco reported a strong Q3FY25 with 16% YoY revenue growth and 17% YoY PAT growth. The exhibitions (BEC) segment grew 13% YoY and the IT Parks segment grew 16% YoY.</li>
<li>Nesco Foods segment reported 29% YoY growth in revenues led by improved BEC footfalls and scaling up of the Food Court and Restaurants business.</li>
<li>Recently, Nesco also received IOD from the municipal corporation of Mumbai, thus paving way for receiving future approvals for Tower 2. Tower 2 construction is expected to commence in Q3FY26. </li>
</ul>


Nesco reported a strong Q3FY25 with 16% YoY revenue growth and 17% YoY PAT growth. The exhibitions (BEC) segment grew 13% YoY and the IT Parks segment grew 16% YoY.
Nesco Foods segment reported 29% YoY growth in revenues led by improved BEC footfalls and scaling up of the Food Court and Restaurants business.
Recently, Nesco also received IOD from the municipal corporation of Mumbai, thus paving way for receiving future approvals for Tower 2. Tower 2 construction is expected to commence in Q3FY26. 


<ul>
<li>Q2FY25 performance was mixed. IT Parks segment reported good growth at 2.5% QoQ and 8.5% YoY. BEC growth was mediocre at 8.5% YoY; QoQ is not comparable due to seasonality.</li>
<li>Nesco Foods reported 10% YoY growth, which was decent but could have been better, given this business is relatively new and has significant potential. EBIT margin also declined YoY.</li>
<li>Nesco is venturing into expressway wayside amenities development and management business, which appears synergistic and has potential to provide additional growth lever going forward.</li>
</ul>


Q2FY25 performance was mixed. IT Parks segment reported good growth at 2.5% QoQ and 8.5% YoY. BEC growth was mediocre at 8.5% YoY; QoQ is not comparable due to seasonality.
Nesco Foods reported 10% YoY growth, which was decent but could have been better, given this business is relatively new and has significant potential. EBIT margin also declined YoY.
Nesco is venturing into expressway wayside amenities development and management business, which appears synergistic and has potential to provide additional growth lever going forward.


Nesco: Mixed Q2FY25, However Long-Term Prospects Remain Intact

<ul>
<li>Nesco reported a mixed Q1FY25. The IT Park business reported strong growth led by improved occupancy. IT Park revenue grew 20%+ YoY and 7.4% QoQ.</li>
<li>The BEC business saw decline in its revenue due to seasonality. Q1 tends to be the weakest quarter for BEC. This also impacted the Nesco Foods business to an extent.</li>
<li>BEC revenue declined -19% YoY. Nesco Foods revenue declined -14% YoY. Overall, Nesco's PBT increased 7% YoY, however PAT declined -8% YoY due to deferred tax impact. </li>
</ul>


Nesco reported a mixed Q1FY25. The IT Park business reported strong growth led by improved occupancy. IT Park revenue grew 20%+ YoY and 7.4% QoQ.
The BEC business saw decline in its revenue due to seasonality. Q1 tends to be the weakest quarter for BEC. This also impacted the Nesco Foods business to an extent.
BEC revenue declined -19% YoY. Nesco Foods revenue declined -14% YoY. Overall, Nesco's PBT increased 7% YoY, however PAT declined -8% YoY due to deferred tax impact. 


Nesco: Mixed Q1FY25, However On Track for Robust Growth

<ul>
<li>Exceeding our upgraded FY24 PAT estimate of INR 350cr+, Nesco reported PAT of INR 363cr, led by Q4Y24 PAT of INR 105cr, a rise of 24% YoY and 12%+ QoQ.</li>
<li>Q4FY24 revenues grew 6%+ QoQ and 20%+ YoY. Growth was driven by BEC where revenues grew 6% QoQ and 31%+ YoY. IT Park revenue grew 2% QoQ and 13% YoY.</li>
<li>For FY25, we estimate that Nesco could post a PAT of INR 420cr+. Per our FY25 exit P/E of 26x+, Nesco could be valued at around INR 11000cr.</li>
</ul>


Exceeding our upgraded FY24 PAT estimate of INR 350cr+, Nesco reported PAT of INR 363cr, led by Q4Y24 PAT of INR 105cr, a rise of 24% YoY and 12%+ QoQ.
Q4FY24 revenues grew 6%+ QoQ and 20%+ YoY. Growth was driven by BEC where revenues grew 6% QoQ and 31%+ YoY. IT Park revenue grew 2% QoQ and 13% YoY.
For FY25, we estimate that Nesco could post a PAT of INR 420cr+. Per our FY25 exit P/E of 26x+, Nesco could be valued at around INR 11000cr.


<ul>
<li>Nesco reported a strong Q3FY24 led by significant growth in the exhibition business. It grew by 55%+ YoY and grew 3%+ QoQ despite Q2 being a seasonally strong quarter.</li>
<li>The IT business performed steady with revenues at around INR 80cr and EBIT at around 65cr. Revenue declined by -4% QoQ, led by slight decline in occupancy.</li>
<li>Nesco is now on track to beat our prior FY24 upgraded PAT estimate of INR 330cr+. It may now end FY24 with a PAT of INR 350cr+.</li>
</ul>


Nesco reported a strong Q3FY24 led by significant growth in the exhibition business. It grew by 55%+ YoY and grew 3%+ QoQ despite Q2 being a seasonally strong quarter.
The IT business performed steady with revenues at around INR 80cr and EBIT at around 65cr. Revenue declined by -4% QoQ, led by slight decline in occupancy.
Nesco is now on track to beat our prior FY24 upgraded PAT estimate of INR 330cr+. It may now end FY24 with a PAT of INR 350cr+.


India

Nesco Ltd. is a diversified company involved in manufacturing and engineering products for railways and forging,  realty development, and runs an exhibition center.

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Nesco Ltd (NSE IN)

Nesco: Strong Q3FY25

Nesco reported a strong Q3FY25. We are revising our FY25E PAT back to INR 420cr+ vs INR 400cr+ earlier. At the current valuation, an investment in...

Ankit Agrawal, CFA

Nesco: Mixed Q2FY25, However Long-Term Prospects Remain Intact

Nesco reported a mixed Q2FY25 performance. While the IT Parks segment did well, the BEC business reported mediocre growth. However, Nesco's longer...

Ankit Agrawal, CFA

Nesco: Mixed Q1FY25, However On Track for Robust Growth

Nesco reported a mixed Q1FY25, however it remains on track to report robust growth over the next couple of years. At current valuation, it offers...

Ankit Agrawal, CFA

Nesco: Strong Performance Continues

Nesco's Q4FY24 PAT at INR 360cr+ came in better than even our upgraded estimate of INR 350cr+. At the current valuation, an investment in Nesco...

Ankit Agrawal, CFA

Nesco: Stellar Q3FY24

Nesco reported a stellar Q3FY24 led by strong growth in the Exhibition and the Foods businesses. We are now upgrading our FY24E PAT to INR 350cr+...

Ankit Agrawal, CFA

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