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.

Research Analyst Contact Details:
Address: A-412, Shilp Aaron, Sindhu Bhavan Road, Ahmedabad, Gujarat - 380059
Email: services@yellowstoneequity.com
Mobile: +91-7575817289

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

<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

<ul>
<li>Bombay Exhibition Center (BEC) business has recovered sooner than expected and is now back to pre-COVID level with INR 50cr+ revenues in Q2FY23.</li>
<li>Demand for exhibitions could grow structurally post-COVID, suggesting that the BEC business is now likely to be even stronger than pre-COVID.</li>
<li>Office Leasing (IT Parks) business showed QoQ growth suggesting that the occupancy level showed marginal improvement.</li>
</ul>


Bombay Exhibition Center (BEC) business has recovered sooner than expected and is now back to pre-COVID level with INR 50cr+ revenues in Q2FY23.
Demand for exhibitions could grow structurally post-COVID, suggesting that the BEC business is now likely to be even stronger than pre-COVID.
Office Leasing (IT Parks) business showed QoQ growth suggesting that the occupancy level showed marginal improvement.


Nesco: BEC Business Is Back to Pre-COVID Level

<ul>
<li>Nesco's Bombay Exhibition Center (BEC) business where revenues declined to almost negligible during the last couple of years due to COVID, is now recovering as COVID restrictions have receded.</li>
<li>During Q1FY23, BEC business did INR 16.8cr in revenues (annualized INR 65cr+) and is on track to normalize to pre-COVID levels of INR 150cr+.</li>
<li>Nesco's IT Park business continues to remain strong with 90%+ occupancy in Tower 4 and 80% occupancy in Tower 3.</li>
</ul>


Nesco's Bombay Exhibition Center (BEC) business where revenues declined to almost negligible during the last couple of years due to COVID, is now recovering as COVID restrictions have receded.
During Q1FY23, BEC business did INR 16.8cr in revenues (annualized INR 65cr+) and is on track to normalize to pre-COVID levels of INR 150cr+.
Nesco's IT Park business continues to remain strong with 90%+ occupancy in Tower 4 and 80% occupancy in Tower 3.


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 (NESCO IN)

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

Nesco: BEC Business Is Back to Pre-COVID Level

With the BEC business normalizing, Nesco is on track to post FY24 PAT of INR 250cr+ from its core operations. Our estimates suggest that at the...

Ankit Agrawal, CFA

Nesco: BEC Business Is Now Recovering

Nesco provides an interesting investment opportunity to play the post-COVID normalization theme. At current valuation, it offers 70%+ upside over...

Ankit Agrawal, CFA

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