About the company

Incorporated in 2001, Techknowgreen Solutions Limited provides pioneering environmental consulting services and is one of the first companies in India to offer environmental IT solutions through software applications and compliance tools.

Their business is divided into three segments: consulting, waste management, and IT software for waste management. The consulting segment is further categorized into regulatory and environmental assessment, helping companies obtain sustainable permits. Renowned for its expertise in environmental assessment, the company is certified by NABET. The company assists cities in reducing carbon footprints and achieving carbon neutrality. Additionally, it specializes in industrial water and sewage purification, having completed over 300 projects.

Techknowgreen Solutions offers comprehensive services, including regulatory environmental compliance, consulting, environmental technology solutions, and IT applications.

With over 20 years of experience, Techknowgreen has completed over 2,500 projects and ensured compliance with over 1,200 regulatory requirements. Supported by a dedicated team of over 70 professionals, Techknowgreen serves over 350 clients across 15 states and has contributed to more than 30 research publications.

Project Details

Completed Projects

Stelle Media

The Stelle Media Global Data Centres project, completed in 2023 for over INR 2 Cr., provided environmental clearances, traffic impact studies, energy simulations, and ESG reporting.

Cipla Project

The Cipla project, completed in 2023 worth INR 3 Cr., included environmental clearance, product mix assessment, plantation, and ESG services.

Ongoing Projects

The total order book is around INR 38.27 Cr., including ~INR 29 Cr. carried from the previous fiscal year, new orders received in April and May of 2024 add up to INR 5.44 Cr.

FY24 Financial Performance

• Total Revenue at INR 23.5 Cr. v/s INR 14.8 Cr. in FY23 (+58.8% YoY)

• EBITDA at INR 8.93 Cr. v/s INR 6.53 Cr. in FY23 (+36.8% YoY)

• EBITDA Margins at 38.1% v/s 44% in FY23 (-590 Bps YoY)

• PAT at INR 6.11 Cr. v/s INR 4.51 Cr. in FY23 (+35.5% YoY)

FY24 Revenue Split

Promoter Analysis

Dr. Ajay Ojha (Managing Director)

• He holds 32.79% of the share in the company

• 23+ years of experience with a Doctorate (PhD) in chemistry and specialization in environmental chemistry

• In his tenure, he has designed ~500 wastewater plants, 10 biogas units, 100 systems for air quality improvement for basements

Dr. Prasad Pawar (CEO and Full-time Director)

• He holds 32.79% of the share in the company

• 22+ years of experience with Doctorate (PhD) in environmental science and specialization in E-waste Management

• He has completed more than 500 wastewater projects and more than 1500 consultancy projects.

Industry Outlook

• The government is investing heavily in environmental initiatives, including INR 5,021 Cr. for the FAME-II electric vehicle scheme, INR 795 Cr. for the National Clean Air Program, and INR 5,188 Cr. for the Namami Gange program.

• Corporations are also investing significantly in sustainability. Adani Group plans INR 5 Lakh Cr. for green projects, Reliance Group INR 83,690 Cr. for a green ecosystem, Tata Power INR 75,322 Cr. in renewables, ITC Limited INR 9,206 Cr. in sustainability, and Mahindra & Aditya Birla Groups INR 8,368 Cr. each in electric vehicles and renewables.

• The regulatory compliance market for environmental clearances is valued at INR 39,751 Cr. with environmental consulting projected to grow from INR 6,276 Cr. to INR 9,205 Cr. by FY26.

Investment thesis

Order Book Execution

A steady order book of INR 38.27 Cr. and INR 10 Cr. of orders in the pipeline. The management has guided 9-12 months for order execution, which aligns with the expected timeline.

Robust Cash Flow Management

The company has a policy of invoicing an advance payment of ~65% of the total order amount for every order before execution. This policy helps the company to smoothly manage their cash flow cycle.

High Sustainable Margins

Each revenue stream has different profitability levels, and we anticipate maintaining EBITDA margins of ~35%+ in the next 5 years, consistent with this year's performance.

Revenue Growth

The business is set to grow at a very high rate of ~50-100% in the next 5 years. We see the company clocking revenues of INR 75+ Cr. in FY27, which reflects a CAGR of ~50%

Healthy Customer retention

Customer retention is at 40%, highlighting the company’s quality in maintaining a healthy relationship with its existing customers.

Focus on the private consulting business

The private consulting business already contributes 53% to the revenue. The management is focusing on further expanding its private consulting segment to ~60%, which entails better profitability margins.

Valuation and Recommendation

We forecast INR 25.9 EPS for FY27. While the current PE multiple for Techknowgreen is ~35x, we conservatively value the company at 25x FY27 EPS, a target price of INR 643

We assign a “Buy” Rating to Techknowgreen with an upside of 135% in the next 18-24 months based on sustainable margins, high revenue growth, and a robust cash flow cycle.

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Disclaimer:

Mool Capital Limited is a SEBI Registered Research Analyst having registration no. INH000012449. This report has been prepared by Mool Capital Pvt. Ltd. and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with Mool Capital. Mool Capital and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.