Black Box shares: This stock zoomed 23x in 5 years; Ventura sees more upside ahead

Domestic brokerage firm Ventura Securities remains positive on multibagger stock Black Box Ltd, which has delivered a whopping 23 times return to the investors in the last five years. The homegrown broker sees more steam left in it on the back of its revamped strategy to drive growth.

Black Box offers a broad range of digital infrastructure solutions, including connectivity solutions, data center solutions, enterprise networking, modern workplace solutions, cybersecurity solutions, technology products solutions, and consulting services to its clients.

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 25 per cent. It has revamped its strategy by focusing on the top 300 customers and exiting less profitable long-tail customers, said Ventura.

Shares of Black Box Ltd rose 2.5 per cent to Rs 691.85 during the trading session on Friday, commanding a total market capitalization of more than 11,500 crore. The scrip had settled at Rs 674.95 in the previous trading session on Thursday.

Shares of Black Box Ltd have zoomed more than 325 per cent from its 52-week low at Rs 210.10 hit in March 2024. The stock has soared a stellar 2,300 per cent in the last five year from around Rs 30-levels in January 2020. It means that if one had invested Rs 1 lakh in the stock five year ago, the current valuation of investment would have become Rs 23 lakh as of now.

Ventura expects revenues to grow at a CAGR of 8 per cent from Rs 6,281.6 crore in FY24 to Rs 7,996 crore by FY27E. The contribution to revenues from data centers is anticipated to be disproportionately high, growing at 15 per cent CARG to Rs 1,994 crore by FY27E as it plans to concentrate on data centers, primarily in North America and India.

The technology products solutions (TPS) vertical currently contributes 12-13 per cent  to overall revenues and is expected to gain traction, with revenues projected to grow at a 9 per cent CAGR to  Rs 982 crore by FY27E. The consulting business is expected to supplement the overall growth trajectory, increasing to Rs 112 crore by FY27E at a CAGR of 2 per cent, it noted.

"Black Box 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 to 9.2 per cent and by 250 basis points to 4.7 per cent, respectively," it added with a buy rating and a target price of Rs 826.