ICE Make Refrigeration (MCAP Rs 627cr) - Commercial Refrigeration Solution provider
Caters to Dairy, Ice Cream, Food & beverages, Hospitality, Pharma, Medicine, etc.
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About the business -
ICE Make provides solution (equipment + services) for commercial & industrial refrigeration. Key product categories are - (1) Cold Storage Solutions, incl Cold Rooms (46% mix), (2) Commercial Refrigeration for ice cream mix preparation, curd incubation chamber, dairy processing plant solutions, commercial freezer, deep freezers, etc. (28% mix), (3) Industrial chillers (5% mix), (4) Transport Refr. (10% mix) and (5) Equipment & projects based on natural refrigerant (Ammonia), used exclusively & extensively for food, dairy, beverage, brewery & ice cream (10% mix).
Cold chain solutions (storage) market in India is ~1.8bn$ (~Rs14-15k crores) and is expected to grow at ~14-15%, tailwinds of - (1) increasing mix of organized retail, (2) growth of processed food sector, (3) dd from healthcare sector, (4) increasing farming of fruit & vegetables (which require temperature-controlled storage as against grains), (5) increasing dairy product consumption (ex. Ice creams, curd, etc.), etc.
ICE Make clocked revenue of Rs 312 crore in FY23 (25% CAGR since FY18), EBIDTA margins of ~10%, PAT margins of 7% (Rs 21 cr PAT). West accounts for 63% of revenue, balance 37% comes from other regions (mainly South & East). They are gradually expanding their presence in South & East.
ICE’s product & after sales service reviews have been very good (as per checks), few of its notable customers are Amul, Vadilal, Havmor, Coca Cola, Subway, Alkem, Intas, etc. Customer concentration is not very high, Top 10 customers contribute < 35% of of revenue.
In terms of competition, Blue Star, Voltas, Carrier, Daikin, Panasonic, Rinac, etc. in commercial & industrial refrigeration and cold room. Suraksha and Sub‐Zero in transport refrigeration.
About the promoters -
Started in 1993, ICE Make is Ahmedabad based company, still run by the three founding promoters (Mr. Chandrakant Patel, Mr. Rajendra Patel & Mr. Vipul Patel).
Since listing in FY18, company has demonstrated very good governance – (1) consistent shareholder interactions since FY18, (2) regular dividend payouts, (3) Very transparent & conservative guidance, they have been delivering more than guidance throughout past 2-3 years, (4) judicious capital allocation, ensuring healthy ROCE, organically driven growth. Despite being a microcap, comfort on promoter’s integrity & execution capabilities is high given the past performance.
Promoter Group Holding 75%, Institutions 0%, Public 25%
Business growth & visibility -
Revenue visibility of ~Rs 600-650cr by FY26/27 (vs ~Rs 310 crore in FY23).
From their existing capacity of cold chain solutions, they can achieve Rs 400-450 crore of revenue (vs Rs 310 cr in FY23).
Company will be doing backward integration by greenfield expansion into continuous insulation panels (a key RM). Apart from captive use case in refrigeration industry, it is also used in infrastructure, residential & commercial buildings. It is Rs 3000 crore market in India, growing at ~15% rate. The guided timeline for project completion is end FY24, revenue from which will start from FY25. Single-shift revenue potential from the expansion will be Rs 200 crore+.
Post the current greenfield expansion, ICE will focus on expanding capacity for its commercial refrigeration unit.
What’s in the price?
At CMP (Rs 397, MCAP Rs 627), stock trades at 30x FY23 PE. At these entry point, one SHOULD NOT build in any re-rating, hence earnings growth will be the key driver for return.
Having said that, factors like - (1) Supportive industry tailwinds, (2) Growth focused management, 20-25% growth achievable, and (3) Good promoter governance despite small size, ticks in all the boxes of compounding play.
Expect revenue to double over 3-4 years to Rs 650 crore levels by FY26/27. Management’s aspiration is to reach 1000 crore in 6-7 years (by FY30). Building in ~10% EBIDTA margins, though volatility due to RM price environment is a key risk to keep a track on, ICE Make can do FY26/27 EBIDTA of Rs 65 crore, PAT of Rs 40-45 crore.
Nearest large cap company to compare ICE Make would be Bluestar (50x FY23 PE) or Voltas, rather growth profile for ICE is better in medium term given exposure to commercial & industrial cold storage. At 30x PE (assuming no re/de-rating), ICE could be Rs 1300cr MCAP by FY26/27 (~20% CAGR over 4-year).