Mumbai, Jan 2 Digital infrastructure company Black Box stock has an upside potential of 27.3 per cent from the current price of Rs 649 to Rs 826 in the next 24 to 30 months, according to a report by brokerage house Ventura on Thursday.
According to the report, despite muted sales growth in FY24, primarily due to delays in project execution and decision-making, Black Box is poised for its next growth phase. The company expects its pipeline to grow to $3 billion and aims for a conversion rate of approximately 25 per cent, up from the current 20 per cent.
Black Box has revamped its strategy by focusing on the top 300 customers and exiting less profitable long-tail customers, as they do not contribute to margin growth, the report said.
Additionally, the company plans to renew its Go-To-Market strategy by adopting a matrix-based approach comprising industry verticals and product portfolio horizontals. This strategy is designed to deliver industry-specific solutions and enhance customer engagement.
Ventura said: "We expect revenues to grow at a CAGR of 8 per cent from Rs 6,281.6 crore in FY24 to Rs 7,996 crore by FY27E."
"The company plans to concentrate on data centres, primarily in North America and India. With a customer base that includes major hyperscalers like Meta, Amazon, and Microsoft, which are expected to significantly invest in data centre buildouts, the contribution to revenues from data centres is anticipated to be disproportionately high, growing from Rs 1,256 crore to Rs 1,994 crore by FY27E at a CAGR of 15 per cent."
Meanwhile, The Technology Products Solutions (TPS) vertical currently contributes between 12 per cent and 13 per cent to overall revenues and is expected to gain traction, with revenues projected to grow at a 9 per cent CAGR from Rs 758 crore to Rs 982 crore by FY27E. Additionally, the consulting business is expected to supplement the overall growth trajectory, increasing from Rs 106 crore to Rs 112 crore by FY27E at a CAGR of 2 per cent.
"On the margin front, the company has set an ambitious target of 10 per cent EBITDA margins, driven by improved negotiations with customers, technology vendor partners, and increased operational efficiency. We expect EBITDA and net margins to expand by 240 basis points from 6.8 per cent to 9.2 per cent and by 250 basis points to 4.7 per cent, respectively," the report stated.
Black Box offers a broad range of digital infrastructure solutions, including Connectivity Solutions, Data Centre solutions, Enterprise Networking, Modern Workplace Solutions, Cybersecurity Solutions, Technology Products Solutions, and Consulting Services.
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