u/hvsc

Please set up a reminder for two years to check back on how I did with this investment. Would really appreciate some valuable opinion or feedback if you have any insights on Emerald Finance, not expecting any generic diversification or stop loss Gyan. They have three business verticals, EWA, lending and loans syndication.

Despite lending to the lowest risk category borrower with the best bureau score and LenDenClub score, I have had massive negative returns.

Saakshi Medtech and Panels manufactures electrical control panels and cabinets used in elevators, air compressors, the renewal energy industry, the oil & gas exploration industry and electrical vehicle charging stations, among others. The company announced a phenomenal FY’26 H1 result and I was surprised not to see any notable coverage on the company yet! This could mark a fundamental turnaround from the depressed FY2025 performance. I’ve been following this company for more than a year now.

To understand why H1 FY26 is “blockbuster,” you need to recognize FY25 was a trough year rather than a declining business. Revenue contracted 24.14% to ₹92.43 crore, and PAT crashed 58.36% to ₹4.71 crore with margins compressing to just 5.10%. This wasn’t due to structural weakness, also the Mahindra ₹250 crore order announcement came in December 2024 (end of FY25) , meaning virtually zero contribution to FY25 revenues. M&M is on rise, gaining market share both in ICE and EV category. Think of FY25 as the investment phase where management sacrificed near-term profitability to build capacity and secure a transformational customer anchor.

FY26 H1 results should now reflect the true turnaround story: Mahindra order execution starting, Ramping up production capacity and new facility operational, and margin recovery beginning due to better ultilization of assets.

With the new 41,000 sq ft facility now capitalized and operational (August 2025 completion), depreciation will increase notably:

Expected Depreciation in FY26: ~₹8-8.5 crore (vs. ₹3.89 crore in FY25) Incremental depreciation burden: ~4.1-4.6 crore for the full year However: Mahindra order is expected to contribute ₹45-50 crore in annual revenue post-full ramp, generating ~₹5-6 crore in incremental PAT Net Impact: Even with higher depreciation from the new facility, the margin expansion and Mahindra volume lift more than offset the depreciation impact.

Valuation & Investment Reset

With actual H1 FY26 results now public, the stock deserves a some re-rating:

Revised Forward Valuation:

FY2026E Full Year Revenue: ₹115-120 crore (annualizing H1 momentum) FY2026E Full Year PAT: ₹13-15 crore (assuming H2 maintains 11-13% margins) FY2026E EPS: ₹7-8 per share Current Stock Price: ₹169.90 Forward P/E at FY2026E: 21-23x (vs. backward P/E of 63.6x) This is a dramatic compression from 63.6x backward to 23x forward—representing significant re-rating upside if investors recognize the earnings inflection.

Revised Target Price: ₹220-260 by end of FY2026 (assuming 12-14x P/E at 50% higher earnings)

Risk Analysis

Operational Risk: Revenue Concentration Dependency (VERY HIGH)

The Mahindra order now represents 40-45% of H1 FY26 revenue. Any slowdown in M&M’s EV ramp, pricing pressure, or supply chain disruption could materially impact results. Monitor: Mahindra’s EV sales growth (should be a concern given the GST led price decline of ICE vehicles, hence people will prefer ICE over an EV; BUT IT WOULD SERVE US TO KEEP A LOOKOUT OON THE COMMPANY SIGNING ANY DEALS FOR ICE VEHICLE PANELS AS WELL, THAT WILL BE HUGE), quarterly delivery cadence from Saakshi.

Depreciation & Capex ROI

The new facility’s ~₹4.5 crore annual depreciation must generate at least ₹7-8 crore in incremental PAT over 10-year life. Current margins suggest this is achievable, but underutilization (<70% capacity) would be a red flag.

Margin Sustainability

The jump from 5.10% (FY25) to 11-12% (H1 FY26) assumes Mahindra orders carry 13-14% net margin. Any competitive pressure or pricing concessions could compress margins back toward 8-10%. Track: Gross margins on Mahindra business quarterly.

Capex Capitalization Timing Risk

My verification confirms capex was post-FY25 capitalization, so depreciation will fully hit in FY26. Management must execute facility utilization targets or capex ROI will suffer.

Customer Concentration Risk

Mahindra = 40-45% of H1 FY26 revenue. Diversification into other EV OEMs (Tata EV, Hyundai, MG Motor) is critical. Monitor: New customer win announcements (as highlighted above).

Small-Cap Liquidity

NSE SME listing with minimal institutional ownership remains a concern for position sizing and exit liquidity.