Technology products solutions vertical to gain traction, projected to grow at 9% CAGR by FY27

Mumbai (The Uttam Hindu): Ventura has given a "buy" rating to Black Box Ltd projecting an upside potential of 27.3 percent from the current price of Rs 649 with a target price of Rs 826 over the next 24 to 30 months. Despite muted sales growth in FY24 mainly due to delays in project execution and decision-making Black Box is positioned for a growth phase. The company expects its project pipeline to reach $3 billion and aims to increase its conversion rate to 25 percent up from the current 20 percent. Black Box has redefined its strategy, now focusing on its top 300 customers and exiting less profitable long-tail customers that do not contribute to margin growth. Additionally, the company plans to refresh its Go-To-Market strategy by adopting a matrix-based approach that integrates industry verticals and product portfolio horizontals to offer industry-specific solutions and enhance customer engagement.

Ventura projects a revenue growth rate of 8 percent CAGR, from Rs 6,281.6 crore in FY24 to Rs 7,996 crore by FY27. The company is focusing on data centres, particularly in North America and India. With key clients like Meta, Amazon, and Microsoft investing heavily in data centre expansions, Black Box expects revenues from this sector to grow substantially, from Rs 1,256 crore to Rs 1,994 crore by FY27 at a CAGR of 15 percent. The Technology Products Solutions (TPS) vertical, which currently contributes 12-13 percent to total revenues, is expected to gain momentum, with revenue growth projected at 9 percent CAGR from Rs 758 crore to Rs 982 crore by FY27. The consulting business is expected to contribute an additional Rs 106 crore to Rs 112 crore by FY27, growing at a modest CAGR of 2 percent. On the margin front Black Box has set an ambitious target of 10 percent EBITDA margins, driven by improved customer negotiations stronger vendor relationships and increased operational efficiency. Ventura expects EBITDA margins to expand by 240 basis points from 6.8 percent to 9.2 percent and net margins to grow by 250 basis points reaching 4.7 percent by FY27. Black Box provides a wide range of digital infrastructure solutions, including Connectivity Solutions, Data Centre Solutions, Enterprise Networking, Modern Workplace Solutions, Cybersecurity Solutions, Technology Products Solutions, and Consulting Services.