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

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

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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Address: A-412, Shilp Aaron, Sindhu Bhavan Road, Ahmedabad, Gujarat - 380059
Email: services@yellowstoneequity.com
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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 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+.


<ul>
<li>Nesco reported strong growth in BEC revenues led by Q2 being a seasonally strong quarter for the exhibition business. Even in YoY terms, the growth was decent at 8%.</li>
<li>Nesco IT Park revenues also jumped by 14% QoQ, suggesting that the occupancy level in Tower 3 has gone up from 82% earlier.</li>
<li>Nesco Foods business continues to grow rapidly as the new Food Court and Restaurants have seen strong traction. Revenue in Foods business has more than doubled YoY.</li>
</ul>


Nesco reported strong growth in BEC revenues led by Q2 being a seasonally strong quarter for the exhibition business. Even in YoY terms, the growth was decent at 8%.
Nesco IT Park revenues also jumped by 14% QoQ, suggesting that the occupancy level in Tower 3 has gone up from 82% earlier.
Nesco Foods business continues to grow rapidly as the new Food Court and Restaurants have seen strong traction. Revenue in Foods business has more than doubled YoY.


<ul>
<li>Q1 tends to be a seasonally weak quarter for the exhibition business (BEC) and as a result, the revenues declined on a QoQ basis.</li>
<li>However, in YoY terms, BEC revenues grew 75%+ and exceeded pre-COVID levels, i.e. the revenues are up 7% vs that in Q1FY20.</li>
<li>The IT Parks business saw marginal improvement of 1% QoQ growth suggesting that the occupancy level is steady. Occupancy is 97% in Tower 4 and 82% in Tower 3.</li>
</ul>


Q1 tends to be a seasonally weak quarter for the exhibition business (BEC) and as a result, the revenues declined on a QoQ basis.
However, in YoY terms, BEC revenues grew 75%+ and exceeded pre-COVID levels, i.e. the revenues are up 7% vs that in Q1FY20.
The IT Parks business saw marginal improvement of 1% QoQ growth suggesting that the occupancy level is steady. Occupancy is 97% in Tower 4 and 82% in Tower 3.


Nesco: FY24 Earnings on Track to Be Strong

<ul>
<li>As projected, Nesco's BEC business has completely normalized and clocked INR 45cr+ revenues in Q4FY23. With this, Nesco clocked FY23 PAT of INR 290cr+, well above our INR 250cr+ estimate.</li>
<li>Alongside the BEC business, Nesco's foods business has also seen significant recovery led by footfalls from the BEC. Independent of BEC also, Nesco Foods is growing significantly on its own.</li>
<li>Nesco is on track to earn PAT of INR 320cr+ for FY24, suggesting that at the current market cap of INR 4250cr, it is valued attractively at 13x P/E.</li>
</ul>


As projected, Nesco's BEC business has completely normalized and clocked INR 45cr+ revenues in Q4FY23. With this, Nesco clocked FY23 PAT of INR 290cr+, well above our INR 250cr+ estimate.
Alongside the BEC business, Nesco's foods business has also seen significant recovery led by footfalls from the BEC. Independent of BEC also, Nesco Foods is growing significantly on its own.
Nesco is on track to earn PAT of INR 320cr+ for FY24, suggesting that at the current market cap of INR 4250cr, it is valued attractively at 13x P/E.


Nesco: BEC Business Is Now Beyond Pre-COVID Level | Foods Business Is Expanding Into New Horizons

<ul>
<li>BEC revenues continue to match the pre-COVID level suggesting that the business has now normalized fully post-COVID. COVID led shift in working habits has had no structural impact.</li>
<li>IT Office Leasing revenues grew 6%+ QoQ, led by the improvement in occupancy rates. Profitability also improved led by operating efficiencies. </li>
<li>BEC's EBIT margin came in significantly lower than expected due to one-off expense of INR 15cr for demolition of a factory shed to build a new exhibition hall.</li>
</ul>


BEC revenues continue to match the pre-COVID level suggesting that the business has now normalized fully post-COVID. COVID led shift in working habits has had no structural impact.
IT Office Leasing revenues grew 6%+ QoQ, led by the improvement in occupancy rates. Profitability also improved led by operating efficiencies. 
BEC's EBIT margin came in significantly lower than expected due to one-off expense of INR 15cr for demolition of a factory shed to build a new exhibition hall.


Nesco: Business Is Now As Usual Similar to Pre-COVID Level

India

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

Nesco Ltd (NSE IN)

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

Nesco: Strong Q2FY24 Earnings

Nesco reported a strong jump in revenues across BEC, IT Parks and Foods businesses. Biggest positive surprise was the jump in the IT Park occupancy...

Ankit Agrawal, CFA

Nesco: FY24 Earnings on Track to Be Strong

Nesco's business has now completely normalized post-COVID. FY24 PAT is on track to be INR 320cr+. An investment in Nesco at the current valuation...

Ankit Agrawal, CFA

Nesco: BEC Business Is Now Beyond Pre-COVID Level | Foods Business Is Expanding Into New Horizons

An investment in Nesco has potential to more than double over the next couple of years. BEC business is now doing better than the pre-COVID level....

Ankit Agrawal, CFA

Nesco: Business Is Now As Usual Similar to Pre-COVID Level

Nesco is an attractive post-COVID normalization play and presents an attractive IRR of 50%+ by the end of FY24. There seems to have been no...

Ankit Agrawal, CFA