New Ventures In Real Estate, Education, And Healthcare Will Mitigate Risks And Improve Stability

Key Takeaways

• Strategic expansion in leasing and robust project pipelines in design and build promise strong revenue growth and enhanced profitability.
  
• Diversification across industries is poised to stabilize revenue streams and mitigate economic risks, bolstering long-term earnings stability.
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Catalysts

Engages in real estate leasing business in India.

• The new certificate of registration for EFC's Emberstone SM REIT, which is about to file an offer document, presents a promising growth avenue that could enhance revenue and boost the bottom line by generating fee-based income through management operations.
  
• EFC's strategic expansion of its leasing vertical, with assets under management increasing to over 2.6 million square feet and a high occupancy rate of 90%, shows the potential for continued robust rental revenue growth, thus positively influencing EBITDA.
  
• The impressive growth in the design and build vertical, with a strong project pipeline worth ₹92 crores, indicates potential revenue increases and enhanced margins as these projects progress to completion.
  
• The furniture division has a robust order pipeline and the capability to achieve high-margin business, potentially reaching around 30% EBITDA, enhancing overall profitability.
  
• EFC's focus on spreading its business across diverse industries like real estate, education, and healthcare is likely to stabilize and boost revenue streams, mitigating risks from economic downturns and improving long-term earnings stability.

EFC (I) Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming EFC (I)'s revenue will grow by 42.0% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 20.8% today to 14.8% in 3 years time.
• Analysts expect earnings to reach ₹2.2 billion (and earnings per share of ₹22.72) by about March 2028, up from ₹1.1 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.0x on those 2028 earnings, down from 20.0x today. This future PE is lower than the current PE for the IN Retail Distributors industry at 24.4x.
• Analysts expect the number of shares outstanding to decline by 6.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.28%, as per the Simply Wall St company report.

EFC (I) Future Earnings Per Share Growth

Risks

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Valuation

• The analysts have a consensus price target of ₹365.0 for EFC (I) based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹15.2 billion, earnings will come to ₹2.2 billion, and it would be trading on a PE ratio of 19.0x, assuming you use a discount rate of 14.3%.
• Given the current share price of ₹229.8, the analyst price target of ₹365.0 is 37.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.