Newsletter Performance Review : Q3FY25

Issue #021 reviews the performance of featured stocks post their Q3FY25 results. This includes SAMHI, BLS, Zaggle, Sky Gold, Raymond, Ceigall, Garware, Kilburn, Deep, UGRO, Zen Tech & Hariom Pipes

The past few weeks have been tough for stock market investors

Since the 2nd week of December:
▸ The Nifty 50 is down 7.5% 🔻
▸ The Nifty Midcap 150 has dropped 13.8% 🔻
▸ And the Nifty Smallcap 250 has plunged 20.2% 🔻

Given the focus on small & microcap stocks, this quarter has been particularly challenging for me

Except for Sky Gold & Garware Hi Tech Films, all other featured companies have declined in stock price (not business performance) from the date of publishing

As all companies are small/microcaps, I benchmarked their performance against the Nifty Smallcap 250 Index

And I must confess – seeing the smallcap index in an even worse shape did give me a misplaced sense of relief

Despite the slump, our focus remains clear – 1. analyzing the reasons behind price drops, 2. spotting undervaluation opportunities & 3. learning from these situations

📝 I wasn’t able to prepare a detailed report for every company like I did for Deep Industries last week as the research, analysis & writing was taking longer than expected. My apologies — will do better next time

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1. BLS International

Original post | Q3 Transcript | Q3 Presentation

• BLS International delivered its highest-ever quarterly revenue of ₹513 crores (+17% YoY) while EBITDA and PAT surged 79% and 50% respectively

• The EBITDA margin expanded by 10.6% (not a typo!) driven by the integration of new businesses (iDATA, Citizenship Invest, Aadifidelis) and a shift from partnership to a self-managed model

• In its Visa business, overall revenue appears to have declined, but net revenue (post-commission) increased by 60% YoY, making it a key metric to track

• Despite the strong performance, the company has not provided any forward guidance

Given our evolving understanding of BLS’s business model, a follow-up note will be published in the coming weeks

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2. Ceigall India

Original post | Q3 Transcript | Q3 Presentation

• Ceigall India’s 9MFY25 revenue growth slowed to 16.3%, a steep drop from its 82% growth in FY23 and 46% in FY24

• The company maintains a healthy orderbook of ₹5,700+ crores in EPC & BOT and another ₹5,500 crores in HAM projects

• For FY26, management has guided for 15-20% revenue growth at 12.5-13% margins – a notable shift from earlier expectations

This new guidance marks a significant deviation from our original investment thesis, requiring a reassessment of projections

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3. Deep Industries

Original post | Q3 Transcript | Q3 Presentation

• Deep Industries delivered an exceptional Q3 with revenue, EBITDA, PAT and EPS growing 48%, 53%, 70%, and 56% YoY respectively

• Key developments & material changes in Q3 include – a) delay in barge deployment, b) 7-8 month delay in PEC revenues and c) equity dilution from a ₹350 crore QIP

• Our estimation puts DIL’s FY27 revenue at ₹950 crores with an EPS of ₹37.0. At a PE multiple of 20, this translates to an annualized stock return of 23.2% by FY27

A detailed Q3FY25 update was published on 16th February (read)

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4. Garware Hi-Tech Films

Original post | Q3 Transcript | Q3 Presentation

• As expected, Q3 seasonality impacted the sales of high-margin Infrared Radiation products — leading to a 25% QoQ revenue decline & 5% drop in margin

• Despite this, Garware remains on track to achieve its FY25 topline target of ₹2,000 crores, with margins of 24% ±3%. This is in-line with our estimates

• This quarter’s key development was the approval of a ₹118 crore TPU extrusion line, expected to be operational by Oct 2026, enabling cost savings for the PPF segment

• Management reaffirmed its FY26 topline guidance of ₹2,500 crores (very likely to achieve ) and have set a FY27 target of ₹3,000 crores

After reviewing the earnings call, we see no change in our investment thesis. We’ll reassess post Q4 results

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5. Hariom Pipe Industries

Original post | Q3 Transcript | Q3 Presentation

• Hariom Pipe posted a weak Q3 due to falling steel prices. However, the company managed to increase volumes by 17% YoY while EBITDA margins improved to 13.2% (+1.6% YoY)

• With steel prices at multi-year lows, Hariom will miss its FY26 revenue target of ₹2,500 crores

• Assuming a modest price recovery and 20% volume growth, revised estimates suggest an FY26 topline of ₹1,700 crores

Since guidance has been significantly reduced, the investment thesis will require a reassessment

A potential catalyst is the Indian government's proposed 15% safeguard duty on steel imports which, per Morgan Stanley estimates, could increase domestic hot rolled coil prices by 10%. Hariom Pipe benefits from such a move

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6. Kilburn Engineering

Original post | Q3 Transcript | Q3 Presentation

• KEL made key strides this quarter, including: a) completion of the Monga Strayfield acquisition, b) acquisition of a unit at MIDC Ambernath and c) completion of phase 1 of M E Energy expansion

• The company has lowered its FY25 topline guidance from ₹500 crores to ₹450-500 crores citing delays in a major order (now expected only in Q2FY26)

• Similarly, the FY26 guidance has been revised downwards from ₹700-750 crores to ₹650-700 crores

• While management reaffirmed its ₹2,000 crore order pipeline, the current order book (₹409 crores), along with revenue estimates from Monga Strayfield (₹90 crs) and M E Energy (₹100 crs), raises doubts about it hitting the ₹650 crore target for FY26

Kilburn Engineering has effectively lowered guidance without explicitly stating it. This will require a redrawing of the numbers

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7. Raymond Lifestyle

Original post | Q3 Transcript | Q3 Presentation

• Raymond Lifestyle posted weak Q3 numbers – revenue growth of just 2% YoY, EBITDA down 30% while PAT declined sharply by 60% — on account of weak festive demand, scale deleverage, store expansion costs, advertising spends & an unfavorable sales mix

• RLL opened 61 new stores, expanded into sleepwear (Oct 2024) and launched innerwear (Jan 2025). These investments will continue over the next 2-3 years, with a focus on premiumization, casualization & brand building

• RLL had previously targeted ₹2,200 crores of EBITDA in FY28 which might get pushed back by 12-18 months. They’re targeting a blended EBITDA margin of 15%

The ongoing weakness has impacted RLL’s plans pushing our investment timeline from moderate to long-term. While our initial thesis was based on valuation comparison amongst peers, a detailed financial proforma is now necessary to assess whether RLL is investable at current levels

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8. SAMHI Hotels

Original post | Q3 Transcript | Q3 Presentation

• SAMHI’s turnaround remains on track, reporting a ₹23 crore PAT this quarter – a sharp improvement from their ₹74 crore loss in Q3FY24

• Q3 revenues grew 10% YoY driven by a strong 15% increase in RevPAR, EBITDA margins were at 41.2% while the aggregate occupancy was at 72%

• The company plans to double its inventory in the upscale segment, increasing premium room count from 1,000 to 2,000+, which should enhance ARR & RevPAR

• While no formal guidance was provided, SAMHI’s expansion strategy suggests a 3-year revenue CAGR of 13% – slightly lower than industry peers

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9. Sky Gold

Original post | Q3 Transcript | Q3 Presentation

• Sky Gold is on track to achieve its annual revenue target of ₹3,300 crores delivering a stellar Q3 with YoY revenues, EBITDA and PAT surging by 116%, 217% and 309% respectively

• In Q3, the company expanded partnerships with Indriya (Aditya Birla), CaratLane, and P.N. Gadgil, while also entering the 18-carat & lab-grown diamond jewellery segments

• With major retailers like Kalyan, Senco, Malabar Gold etc. aggressively opening stores, Sky Gold has upped its FY27 revenue guidance from ₹6,300 crores to ₹7,200 crores, with projected EBITDA & PAT margins of 5.5% & 3.5%

Given the revised guidance on revenue and margins, we will be updating our investment thesis accordingly

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10. UGRO Capital

Original post | Q3 Transcript | Q3 Presentation

• Despite regulatory headwinds in the NBFC and microfinance sectors, UGRO Capital’s Q3 AUM surged 32% YoY with record net disbursements. The company aims to maintain 30% AUM growth

• Branch network has now expanded to 224 locations, with a target of 400 branches by FY26. Breakeven now occurs in just 8 months, highlighting operational efficiency

• Asset quality remains stable with GNPA at 2.1% and NNPA at 1.5%. 70% of loans are secured and importantly, 75% of unsecured portfolio is covered under CGTMSE guarantee, effectively reducing risk

• The current ROA stands at 1.9% (target: 3.5 - 4%) and ROE at 8.4% (target: 16-18%). UGRO initially aimed to achieve an 18% ROE by March 2027, but slowdown in liquidity has pushed this timeline back by 2-3 quarters

I’m currently conducting a deeper analysis of UGRO Capital and will publish a follow-up note soon

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11. Zaggle Prepaid

Original post | Q3 Transcript | Q3 Presentation

• Zaggle posted strong YoY growth in revenues (68%), adjusted EBITDA (37%) & PAT (33%) in this quarter

• This expansion has come at a cost. Q3 EBITDA margins declined from 11.5% to 9.4% as the company aggressively invests in incentives, cashback & rewards to drive user engagement

• Zaggle is actively exploring acquisitions in related fields like merchant card software & payment infrastructure. This is in addition to investments in Mobileware Technologies and Taxspanner (Q2FY25)

• The company has raised its topline growth target to 58-63% and targets EBITDA margins of 15-16% over the next four years

Zaggle’s business model is complex, and I’m currently studying it in greater depth. A follow-up note will be published soon

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12. Zen Technologies

Original post | Q3 Transcript | Q3 Presentation

• As explained in the original post, the key metric for Zen Technologies is its order book, which saw a marginal ₹1.69 crore increase in Q3

• This quarter is critical for the company as the stock performance now hinges on it securing a high value of new orders (atleast ₹500 crores). I must add - Mr. Atluri in his Q3 earning call confirmed some orders will most likely spill into Q1FY26 & probably a little into Q2

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Apologies for the long read, but I hope these highlights have provided some valuable insights into each company’s current state of affairs. For more clarity, please do read the Q3 transcript & presentation, as I have done for each company

Personally, this exercise has reinforced my appreciation for the discovery process and helped identify areas where our research can improve. Priyam and I will continue refining our analysis by incorporating stronger evidence, avoiding overly complex operating models and thoroughly assessing key headwinds & tailwinds

I truly believe this iterative approach will ultimately improve our ability to identify long-term winners making us better investors (I’m sure you’ve already spotted some promising names from this list!)

Much love,

Shankar