Topline Growth + Op Leverage Combo

2023年5月12日

Chart is self explanatory.

Vimta Labs is one of the well known food testing companies in India.
As per Management guidance,
1. Company is targeting 500 Cr Revenue for 2026; and
2. Margin Expansion upwards of 30%

At expected Revenue of 500 Cr and EBIT margins of 32% by 2026 - EBIT will be around 160 Cr and Net Profit 80 Cr at current NPM of 15%
This equates to an EPS of 37 approximately.

Now here's the tricky part - Finding a reasonable PE for this company.
Ever since it got listed in 2020 at peak PE of 45, the parameter has been declining steadily and is ranging at 20 plus minus 5 now since mid 2021.
At PE of 20, this would mean share price of 20 x 37 EPS = 740 by 2026 which is 25% CAGR approx.

This is a very rough calculation, and things can go wrong, like they did when the company postponed the revenue target from 2025 to 2026.
The price has formed bearish patterns at resistance levels, and it remains to be seen if it can give a breakout in the upside after a small traceback.

Either way, it makes sense to study the business which has been able to 7x its EPS in 3 years, at 25% ROCE.

Note : This is not an investment advice. This post is meant for educational purpose only. Kindly do your own due diligence before investing