Shares of a global leader in digital infrastructure solutions provider, delivering network and system integration, managed services, and technology products hit a 5 percent lower circuit at Rs. 340.6 on BSE during Friday’s trading session. The stock has fallen by over 46 percent year-to-date. Here are some factors that could be influencing a shift in investor interest and contributing to the decline in shares:
Price Movement
With a market cap of Rs. 6,130.3 crores, the stock hit its 52-week high at Rs. 715.8 on 9th December 2024, and compared to its current price levels of Rs. 331.7, the stock is trading at a discount of nearly 54 percent. The stock has delivered positive returns of nearly 56 percent over a one-year period, while around 14 percent of negative returns in the last one month.
Revenue and Earnings Pressure
One of the primary reasons for Black Box’s stock decline is weaker-than-expected revenue growth. During the Q3 FY25 earnings call, the company acknowledged facing challenges related to contract renewals and project execution delays.
Black Box experienced a decline in its revenue from operations, showing a year-on-year decrease of around 9 percent from Rs. 1,655 crores in Q3 FY24 to Rs. 1,502 crores in Q3 FY25.
The management has mentioned that the revenue was predominantly affected due to a subdued order book as a result of delayed decision-making with some of our large customers coupled with the company’s strategy to exit the tail customers.
Order Book
Black Box’s order book stood at $465 million (~Rs. 3,900 crores) as of December 2024. The company’s pipeline for digital infrastructure, across industry verticals including hyperscalers, continues to grow, positioning Black Box for sustained growth and market leadership. The company’s order book decreased to $455 million in Q2 FY25, reflecting a decline of around 4.2 percent from $475 million in Q1 FY25.
Challenges
Revenue growth has remained subdued in recent years as the company prioritises operational efficiencies and the exit of lower-value clients. Further, the delays in large project orders have affected the timing of revenue recognition.
Severance costs continue to be a concern, with management anticipating these expenses to persist for at least three more quarters as they streamline operations.
Key Financial Ratios
In terms of key financial metrics, Black Box’s debt-to-equity ratio stands at 1.13, with a Return on Equity (RoE) of 42.5 percent and a return on capital employed (RoCE) of 30.9 percent.
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Financial Performance & Guidance
The company’s net profit increased from Rs. 41 crores in Q3 FY24 to Rs. 56 crores in Q3 FY25, indicating a rise of nearly 37 percent YoY. Strong operating performance has resulted in better profitability, despite higher exceptional items.
However, EBITDA for Q3 FY25 increased by about 15 percent YoY to Rs. 134 crores, up from Rs. 116 crores in Q3 FY24, but declined marginally by 1 percent from Rs. 135 crores in Q2 FY25.
EBITDA margins for Q3 FY25 improved by 130 basis points YoY to 8.9 percent, due to better efficiencies and improved productivity. For FY26, the company anticipates a revenue growth of Rs. 6,750 crores to Rs. 7,000 crores, driven by an expanding order book.
Recent Developments
In addition to its hyperscaler engagements, Black Box is expanding its footprint across various sectors. In Q4 FY25, the company has already received orders worth $80 million across verticals. One of the world’s largest hyperscalers allocated three large sites in the United States for building their digital infrastructure. Additionally, the company won orders worth Rs. 250 crore from this long-term customer.
The company also won a cybersecurity order of around Rs. 100 crore from a large municipal corporation, a large network integration project from a global telecom operator and an airport order amounting to around Rs. 45 crore.
About the Company
Black Box Limited is a global information, communications technology (ICT) solutions provider and integrator involved in delivering technology-based solutions across global markets and verticals layered with a spectrum of applications and services.
The company is the leader in Enterprise Communications in India with a global footprint in locations spanning India, the Middle East and Africa, North America, Australia, New Zealand, Singapore and Europe.
Written by Shivani Singh
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