Buy PDS, target price Rs 790: JM Financial

JM Financial has maintained a buy call on PDS with an unchanged target price of Rs 790. The current market price of PDS is Rs 449.6 .Time period given by the analyst is a year when PDS price can reach the defined target. PDS, incorporated in 2011, is a Small Cap company with a market cap of Rs 6278.58 crore, operating in the Miscellaneous sector.

PDS' key products/revenue segments include Textiles, Sale of services and Rental Income for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 3133.85 crore, down -5.54% from last quarter Total Income of Rs 3317.82 crore and up 20.74% from last year same quarter Total Income of Rs 2595.45 crore. The company has reported net profit after tax of Rs 43.17 crore in the latest quarter.

The company?s top management includes Dr.Deepak Kumar Seth, Mr.B G Srinivas, Mr.Mungo Park, Mr.Robert Sinclair, Ms.Yael Gairola, Mr.Parth Gandhi, Mr.Nishant Parikh, Mr.Pallak Seth, Mrs.Payel Seth, Ms.Sandra Campos. Company has Walker Chandiok & Co. LLP as its auditors. As on 31-12-2024, the company has a total of 14 Crore shares outstanding.

Investment Rationale
PDS has provided insights on the growth strategy to achieve its 3-3-3 vision ($3 billion GMV over 3 years and delivering a 3% PAT). The company plans to achieve this via a) maintaining a sustainable growth rate of mid-teens to reach a GMV of $3 billion, translating into a projected top-line of ~$2.1 billion b) moving from investment stage to extraction stage . The past investments in employee costs to translate into lower fixed costs, in turn aiding margins (3% PAT by FY27) and c) diversify into high-value categories and build new customers across geographies to capitalize on the growth opportunities.

PDS expects 4Q demand to be subdued but expects significant growth in FY26 and FY27. The company?s recent acquisition of 55% stake in Knit Gallery India Pvt Ltd. (KGIPL) for an equity consideration of Rs 410 million at ~6x EV/EBITDA and ~4x P/E is expected to consummate by May?25, helping PDS diversify its sourcing footprint and enhancing company?s manufacturing capabilities in India. The company remains committed to its long-term 5-5-5 vision targeting USD5bn GMV over 5 years and delivering a 5% PAT. Going forward structural drivers in terms of a) increased out-sourcing by global retailers b) turnaround in manufacturing operations c) newer revenue streams - SAAS/Brand management d) increasing penetration in US markets is likely to act as strong base for top line growth. JM Financial maintains its BUY call on PDS.

Promoter/FII Holdings
Promoters held 61.52 per cent stake in the company as of 31-Dec-2024, while FIIs owned 5.15 per cent, DIIs 5.74 per cent.