Recommendation from Trading Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

SAT INDUSTRIES : FOCUSED ON INNOVATION AND GROWTH

HERE IS WHY
✓ Unique business model with prudent investments
✓ International presence in over 100 countries
✓ Strong commitment to product development

The Indian flexible packaging industry is rapidly expanding, with the market expected to reach USD 204.81 billion by 2025. The fastest-growing segments include laminates and flexible packaging, particularly Polyethylene Terephthalate (PET) and woven sacks. The flexible intermediate bulk container (FIBC) market has seen a 38 per cent increase in production in the past decade, with food-grade production accounting for 28 per cent of the total production. Considering the growing scope of these industries and the promising future growth prospects, our recommendation for a low-priced investment is SAT Industries Ltd.

SAT Industries operates in various sectors and business domains, including investments, knowledge-based engineering, innovative packaging, and financial technology and lending. SAT Industries has developed a unique business model that balances traditional cash flow-generating business with prudent investments in high-growth and high-potential start-ups. This model includes the SAT brand, strategic investments in disruptive start-ups and venture capital funds, as well as diversified subsidiaries engaged in manufacturing, financial technology and lending.

The company has maintained a global presence with offices in Mumbai, Dubai and London, strategically positioning itself in international markets across the Middle East, Europe, Asia, Africa and the Americas. The company has sales touch-points in over 100 countries. In Q1FY25, on a consolidated basis, the company’s revenue decreased by 5.67 per cent YoY to ₹122.61 crore compared to ₹129.98 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 6.23 per cent. The PBIDT excluding other income increased by 3 per cent to ₹21.44 crore YoY as compared to ₹20.82 crore from the previous year’s same quarter, while sequentially increasing by 27.6 per cent. The net profit stood at ₹18.01 crore compared to ₹70.34 crore, a YoY decrease of 74.4 per cent, while sequentially increasing by 25.34 per cent from ₹14.37 crore. The company has been actively pursuing growth through acquisitions and expansions. It has acquired M R Organisation, a technology-based last-mile utility services company, to enhance its financial performance and market positioning.

Aeroflex Industries, a subsidiary of SAT Industries, has expanded its product line to include expansion joints for piping systems, offering a wider range of flexible flow solutions. Sah Polymers, another subsidiary of SAT Industries, is pursuing BRC audit certification to supply its products to the food and pharmaceutical industries, potentially increasing its revenue. SAT Industries also invests in start-ups, maintaining a diverse portfolio across 35+ sectors. These acquisitions demonstrate the company’s ability to identify and integrate promising businesses, enhancing its market position and financial performance.

The expansion of Aeroflex Industries’ product line and Sah Polymers’ pursuit of BRC certification also highlight SAT Industries’ commitment to innovation and product development. At TTM, the share of SAT Industries is trading at a PE of 8.29 times, which is lower than its three-year median PE of 14.4 times and lower than the industry PE of 28.5 times. It has maintained a three-year ROE and ROCE of 15 per cent and 17.2 per cent, respectively, and has a three-year compounded sales and profit growth of 35 per cent and 89 per cent, respectively. The interest coverage ratio is 30.4 times. Hence, we recommend BUY.