Khambatta Securities' research report on Debock Industries
Jaipur-headquartered Debock Industries operates across three verticals, viz. Farm Equipment & Seeds, Mining, and Hospitality. Currently 99% of the company’s revenues comes from the farm equipment and seeds business with the small remainder contributed by hospitality. The agri-products (farm equipment and seeds) business is a steady and the main revenue generator for Debock, aided by its monopolistic power and subsidy. The Rajasthan government’s 30% subsidy offer and 0% GST on farm equipment is a key driver for Debock’s sales. The management observed that the company does not have any major competition in Rajasthan. Healthy growth in production, productivity and harvest price indicate an increasing trend in farm income in Rajasthan. With a widespread practice of mechanised agriculture and a well-established market for farm equipment (Rajasthan has higher-than-national average farm power availability, especially in the western part), the state presents a strong opportunity for farm equipment manufacturers and suppliers.
The Debock stock currently trades at an attractive forward multiple of 5.4x FY24E EPS. With nearly a half of FY24E revenues forecast to come from mining, which is a completely new vertical for the company, we value Debock at a conservative P/E of 8.0x FY24E EPS @ Rs 65, informing an upside of 49% from current levels, as we initiate coverage on the company with a BUY rating.
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