Reviews

In this edition, we have reviewed Saksoft Limited and Steelcast Limited. We suggest our reader-investors to HOLD Saksoft Limited and Steelcast Limited. 

We had recommended Saksoft Ltd. in Volume 38, Issue No. 25 dated Nov 6, 2023 — Nov 19, 2023, under the ‘Cover Story’ segment. The recommended price for the stock was `369.45. We had recommended the stock based on a digital transformation suite, maximising customer value and revenue potential. Saksoft is engaged in providing business intelligence and information management solutions, predominantly to mid-tier companies based out of the US and the UK.

It initially catered to the BFSI segment before diversifying into e-commerce, manufacturing, the public sector and education verticals. The company now offers associated services like application development, testing and quality control, and solutions based on cloud, mobility and the Internet of Things (IoT) along with information management (IM) and business intelligence (BI) solutions. As of March 31, 2023, Saksoft had five wholly-owned subsidiaries and seven step-down subsidiaries across geographies like the US, the UK and Singapore.

In Q4FY24, on a consolidated basis, its revenue increased by 7.06 per cent YoY to ₹194.9 crore compared to ₹182.06 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 1.07 per cent. The PBIDT excluding other income increased by 2.44 per cent to ₹33.31 crore YoY as compared to ₹32.51 crore from the previous year’s same quarter, while sequentially increasing by 0.83 per cent. Its net profit stood at ₹23.2 crore compared to ₹24.99 crore, a YoY decrease of 7.14 per cent, while sequentially increasing by 2.95 per cent from ₹22.54 crore.

At TTM, the shares of Saksoft are trading at a PE of 32.4 times, which is higher than its three-year median PE of 20.4 times, whereas the industry PE stands at 31.7 times. If we look at its PBV, it is currently at 6.17 times, which is higher than the industry PBV of 3.42 times. The company has a three-year average return on equity (ROE) of 21.8 per cent and a return on capital employed (ROCE) of 27.5 per cent. Saksoft with its global presence is poised for growth.

Its strategic restructuring into four key business units (financial technology, hi-tech media and utilities, transportation and logistics, and retail e-commerce) allows it to cater to diverse industry needs. Additionally, the company’s focus on cross-selling and up-selling services leverages its comprehensive digital transformation suite, maximising customer value and revenue potential. This multifaceted approach positions Saksoft as a strong contender in the digital transformation landscape. Hence, we recommend HOLD.

We had recommended Steelcast Ltd. in Volume 38, Issue No. 25 dated Nov 6, 2023 — Nov 19, 2023, under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹643.05. We had recommended the stock based on strategic acquisitions, focus on innovation and technology and diversified growth channels. SCL was established as a partnership firm in 1960 by the Tamboli family based out of Bhavnagar, Gujarat. Subsequently, it was converted into a private limited company in 1972 and a public limited company in 1994.

SCL is engaged in the manufacturing of castings of various components, mainly for earth-moving equipment manufacturers through the sand casting process. It had a total casting capacity of 30,000 metric tons per annum (MTPA) as of March 31, 2023 at its unit located in Bhavnagar, Gujarat. In Q4FY24, on a consolidated basis, its revenue decreased by 18.22 per cent YoY to ₹98.4 crore compared to ₹120.32 crore from the previous year’s same quarter. On a sequential basis, the revenue increased by 8.96 per cent.

The PBIDT excluding other income decreased by 6.91 per cent to ₹28.82 crore YoY as compared to ₹30.96 crore from the previous year’s same quarter, while sequentially increasing by 5.44 per cent. The net profit stood at ₹18.71 crore compared to ₹19.55 crore, a YoY decrease of 4.28 per cent, while sequentially increasing by 7.38 per cent from ₹17.42 crore. At TTM, the shares of Steelcast are trading at a PE of 17.4 times, which is lower than its three-year median PE of 18.7 times, whereas the industry PE stands at 34.2 times.

If we look at its PBV, it is currently at 4.84 times, which is lower than the industry PBV of 3.65 times. The company has a three-year average return on equity (ROE) of 31.2 per cent and a return on capital employed (ROCE) of 35.7 per cent. The company plans to diversify into new sectors like ground-engaging tools, aiming for a significant sales contribution of 7-8 per cent. This strategic move will help expand its market reach and reduce reliance on the existing sectors.

Additionally, it is actively developing new parts and targeting new industries, demonstrating a commitment to continuous innovation and sustainable expansion. While its greenfield projects are on hold for strategic reasons, the company’s focus remains on securing long-term growth through customer base expansion, exploring new markets, and adapting to evolving industry trends. These initiatives position Steelcast as a proactive player in a dynamic market. Hence, we recommend HOLD.