Broker’s call: Black Box (Buy)

Target: ₹826

CMP: ₹665.70

Despite muted sales growth in FY24, primarily due to delays in project execution and decision-making, Black Box is poised for its next growth phase. The company expects its pipeline to grow to $3 billion and aims for a conversion rate of approximately 25 per cent, up from the current 20 per cent.

Black Box has revamped its strategy by focusing on the top 300 customers and exiting less profitable long-tail customers, as they do not contribute to margin growth. Additionally, the company plans to renew its Go-To-Market strategy by adopting a matrix-based approach comprising industry verticals and product portfolio horizontals.

This strategy is designed to deliver industry-specific solutions and enhance customer engagement. Consequently, we expect revenues to grow at a CAGR of 8 per cent from ₹6,281.6 crore in FY24 to ₹7,996 crore by FY27E.

On the margin front, the company has set an ambitious target of 10 per cent EBITDA margins, driven by improved negotiations with customers, technology vendor partners, and increased operational efficiency. We expect EBITDA and net margins to expand by 240 basis points from 6.8 per cent to 9.2 per cent and by 250 basis points to 4.7 per cent, respectively.