Geekay Wires is a leading manufacturer of various wire and fastener products in India. It is slowly starting to become a major player in India’s expanding wires and fastener industry. The stock has given multi-bagger returns in the last two years. In this article, we evaluate the growth factors that have fueled the surge of the company in recent years.
What is the business model of the company?
Company operates in the B2B space (Business to Business).
It importantly manufactures:
Galvanized Steel Wires: Used for overhead power lines in transmission, cable and conductor manufacturing, construction and general engineering.
Stainless steel fasteners: For the uninitiated, the fastener is a hardware device that joins two devices together. Geekay Wires manufactures various types of fasteners, including nuts, bolts, screws, and nails, which are used in numerous industries, including construction, manufacturing, automotive and infrastructure development.
Fences: They manufacture chain-link fences used in residential areas, barbed wires for perimeter protection, welded wire for crop protection and concertina wire for military protection.
These products are sold to other businesses.
Expected growth in the industry
According to market research reports, the Indian industrial fasteners market is projected to grow at a CAGR of 7.9% between 2023 and 2030. The overall wire and cable market is also expected to grow at a CAGR of 15%, reflecting the rapid development in the power and infrastructure sectors.
Noticeable competitive advantage enjoyed by the company
It is a preferred vendor for major clients like PGCIL, HBL Power and several state transmission and distribution companies, which reflects the competence in the products manufactured by the company.
Risks
Major red flag is the debt.
Company has a Debt-to-Equity Ratio which is greater than 1. Though the company has reduced debt from 108cr in 2022 to 73cr in 2024.
Geekay Wires seems to be less financially stable compared to its peers. Altman Z score of Geekay Wires is 4.63.
Also, it has over-dependency on few of its key clients like PGCIL.
At the same time, the prices of raw materials required by Geekay Wires – steel and zinc, fluctuates and is very dependent on the prevailing macroeconomic atmosphere.
Should you invest?
The stock is currently at a 20% correction point from its all-time-high. Company has reduced debt and is capitalizing on the interest cost. Sector is facing strong tailwinds due to the capex announced by the government and make in India initiative.
Company is expected to give its quarterly results on August 2nd, 2024. It seems like a good buy at the current valuation if the results are good. Even after accounting the levels of debt in the company, Geekay wires seems like a good buy at 13PE ratio and a PEG ratio of just 0.19.
For more such insights, join my WhatsApp community here.
No buy or sell recommendations offered.