Netweb Technologies India Ltd
IT - Hardware
Stock Info
Shareholding Pattern
Price performance
Indexed Stock Performance
Well placed for sustained growth while maintaining leadership in technology
Company profile
Netweb Technologies India Ltd (“Netweb Technologies”) is one of India’s
leading High-end Computing Solutions (HCS) providers, with fully integrated design
and manufacturing capabilities. Their HCS offerings comprises (i) high performance
computing (Supercomputing / HPC) systems; (ii) private cloud and hyper converged
infrastructure (HCI); (iii) AI systems and enterprise workstations; (iv) high performance
storage (HPS / Enterprise Storage System) solutions; (v) data centre servers; and
(vi) software and services for their HCS offerings. NetWeb Technologies is one of
India’s leading Indian origin owned and controlled OEM in the space of HCS
providing Supercomputing systems, private cloud and HCI, data centre servers, AI
systems and enterprise workstations, and HPS solutions.
In terms of number of HPC installations, they are one of the most significant OEMs in India amongst others. Since the inception of the erstwhile sole proprietorship, one of their Promoters, Sanjay Lodha, M/s Netweb Technologies, which the company had acquired in August, 2016, until February 28, 2023, they have undertaken installations of (i) over 300 Supercomputing systems, (ii) over 50 private cloud and HCI installations; (iii) over 4,000 accelerator / GPU based AI systems and enterprise workstations; and (iv) HPS solutions with throughput storage of up to 450 GB/ sec.
Company’s products and solutions offerings are sold under Tyrone brand and supported by engineering solutions.
Investment Arguments
One of India’s leading Indian OEM for HCS with integrated design and manufacturing
capabilities
Netweb Technologies Ltd is one of India’s leading OEM for HCS with integrated
design and manufacturing capabilities. They design, manufacture and deploy
HCS comprising proprietary middleware solutions, end user utilities and pre-compiled
application stack. The proprietary designs are cloud native which, in addition to
technological benefits, are capable of catering to the evolving needs of Customers.
They are one of the few players in India who can offer a full stack of product and
solution suite with comprehensive capabilities in designing, developing, implementing
and integrating high performance computing solutions. They are also an Indian origin
OEM to build Supercomputing systems, private cloud and HCI, data centre servers,
AI systems and enterprise workstations, and HPS solutions under the ‘Make
in India’ initiative of the Government of India.
Established strong relationships with marquee customers and diverse customer base.
Netweb Technologies ability to provide end-to-end solutions right from design and
development to implementation and service support enables it to procure repeat orders
from existing clients and attract new clients. Their diverse customer base spread
across different Application Industries demonstrates the suitability of systems,
design and architecture across disparate applications. They cater to various end
user industries such as information technology enabled services, entertainment and
media, banking, financial services and insurance (BFSI), national data centres and
government entities including in the defence sector, education and research development
institutions (Application Industries) such as Indian Institute of Technology (IIT)
Jammu, IIT Kanpur, NMDC Data Centre Private Limited (NMDC Data Centre), Airamatrix
Private Limited (Airamatrix), Graviton Research Capital LLP (Graviton), Institute
of Nano Science and Technology (INST), HL Mando Softtech India Private Limited (HL
Mando), Dr. Shyam Prasad Mukherjee International Institute of Information Technology,
Naya Raipur (IIIT Naya Raipur), Jawaharlal Nehru University (JNU), Hemvati Nandan
Bahuguna Garhwal University (Hemvati University), Akamai India Networks Private
Limited (Akamai), A.P.T. Portfolio Private Limited (A.P.T.), and Yotta Data Services
Private Limited (Yotta), Centre for Computational Biology and Bioinformatics, Central
University of Himachal Pradesh (CUHP University). It also caters to an Indian Government
space research organisation and an R&D organisation of the Ministry of Electronics
and Information Technology, Government of India which is involved in carrying out
R&D in information technology and electronics and associated areas including
Supercomputing.
Significant product development and innovation through R&D
The company strives towards innovation in product range and have continued to build
R&D capabilities by continuously developing R&D team to improve systems
design and architecture and to expand products and solutions suite. R&D team
is led by Mukesh Golla, Chief R&D Officer and has 38 members team. R&D team’s
in-depth understanding of high-end computing solutions, their ability to meet the
advanced technological challenges and their constant efforts at innovation, coupled
with experience in working on innovative products in India, enables the company
to stay at the forefront of technological evolution and anticipate and envision
the future needs of our Customers and the market. The R&D Facilities have enabled
the Company to increase the product lines to 8 viz., Tyrone Cluster Manager, KUBYTS,
VERTA, ParallelStor, Collectivo, SKYLUS and Tyrone Camarero AI Systems and GPU System.
Netweb Technologies along with various technology partners design and innovates
products and provide services tailored to specific customer requirements. It also
independently designs and innovates products and solutions offerings and provides
services tailored to specific customer requirements.
Operates in a rapidly evolving and technologically advanced industry with high
entry barriers.
The rapidity of technological advancement necessitates continual innovation, improvement,
and customisation of our solutions. Modification of designs and changes in implementation
of the offerings requires technical skill set and expertise which is a significant
entry barrier in the industry for new entrants. With continuous innovation, the
Company has developed a huge product basket comprising of kernel level design (i.e.,
establishes complete and unrestricted access between software and the underlying
hardware) and development capabilities, hardware product designs, fine-tuned printed
circuit board layouts, optimized operating systems, dense architectures, mix workload
capabilities, deploying servers and a repository of HPC-AI codes.
Expanding and augmenting product portfolio
Netweb Tech proposes to set up a manufacturing facility for setting up SMT line
to eliminate reliance on third party for the purpose of manufacturing server motherboards
and related printed circuit board (PCB) assemblies for its products. It proposes
to continue to expand product portfolio by offering 5G and private 5G solutions
and Network Switches, particularly having focus on the BFSI segment which is expected
to emerge as the largest industry vertical for enterprise networking in India by
2027. The company have already forayed into this market and received approval to
participate in and seek production linked incentives under, the Telecom and Networking
PLI Scheme under the category of manufacturing of switches, 5G edge and enterprise
equipment, and 5G RAN equipment. It proposes to also expand portfolio to include
reduced instruction set computer architecture based HCS systems.
Q1FY25 Result Highlights
Netweb Technologies Ltd delivered stellar earnings growth for the quarter ended
Q1FY25. Consolidated net sales more than doubled to Rs.149 cr as compared to Rs.60
cr registered in the same quarter of corresponding fiscal. Operating EBITDA
for Q1FY25 surged 132% YoY to Rs. 20 Crores. EBITDA margin for the quarter witnessed
a contraction of 104 bps YoY to 13.4%. Profit after tax saw a highest-ever growth
of 203% YoY to Rs. 16 Crores in Q1FY25.
Conference Call Highlights
Recent Development
Inaugurated high-end computing server, storage, and switch manufacturing facility
in Faridabad. Revenue share from AI systems increased to 14.6% in Q1FY25 marking
a 146% YoY growth. The company has a robust order book totalling Rs. 420 crores
as of Q1FY25.
Customers
The company onboarded 36 new clients in Q1FY25, while 163 repeat customers, associated
for over 5.21 years.
Future Outlook
Expecting continued revenue growth at a rate of 30-35% CAGR. Company is confident
of improving EBITDA Margins by 100-150 bps from next year onwards.
Execution of Rs. 150 Cr supercomputing order from Vikram Sarabhai Space Centre in the next two quarters.
The company is also exploring expansion into the Middle East and Europe, with sales efforts already initiated in the Middle East. They are also exploring strategic acquisition opportunities, primarily in areas related to existing product lines and technologies.
New Faridabad facility expected to be fully operational within the next 3-4 months.
Netweb is aiming to convert 30% of EBITDA to free cash flow.
Other Key details
Netweb highlights their focus on being a solution-oriented company offering hardware,
software, and services. There is a strong emphasis on research and development with
employee strength in the areas growing from 55 to 80+. Company is eligible for and
will be claiming benefits under both the IT hardware PLI and the Telecom and Networking
PLI schemes.
Key Risks & Concerns
High client concentration: Company’s top 5 clients together constituted 50.3% of revenue in FY24. Any unforeseen events impacting these 5 customers or change in outsourcing policies of these 5 clients could have a negative impact on Netweb.
Heavy dependence on few of the HCS offerings: Out of the HCS offerings, Supercomputing systems, and private cloud & HCI have generally been the largest revenue generating business verticals contributing 39% and 30% of total revenue respectively in Q1FY25.
Foreign Exchange Fluctuations: The company does not enter into hedging transactions in respect of forex exposure. Any losses, on account forex rate fluctuations may adversely affect the business, results of operations and financial condition.
Outlook & Valuation
Netweb presents a unique business model and is the only domestic company offering HCS (High end Computing Solutions) offerings (with high entry barriers) due to the lack of listed domestic and international players in the field. Netweb Technologies intends to leverage its presence in the fast-growing HCS (High end Computing Solutions) industry with a focus on developing refined, customised computing systems to address the high-end computational requirements of customers. The company is a leading player in the controlled OEM (original equipment manufacturers) space for HCS offerings. Presently, the business has its manufacturing facility located in Faridabad, Haryana. There has been a significant surge in the application of High-Performance Computing (HPC), also known as supercomputing, across various sectors such as academia, R&D, FMCG, oil and gas, automotive, aviation, and weather forecasting.
Netweb’s growth drivers include focus on quantum computing and launching the latest technology servers for NVIDIA, Intel and AMD and their exploration of acquisition opportunities. Their partnership with NVIDIA for AI servers is expected to develop 10 variants of CPUs and servers. Their in-house design manufacturing and software development capabilities set them apart from their competitors. Netweb anticipates a 30-35% sales growth over the next five years. Their focus on R&D and the introduction of 304 new products indicates repetitive orders from their existing clients which cover almost 69% of overall sales.
Netweb boasts of strong business pipeline and order book, combined with ongoing enhancements in their capabilities and expansion of both operations and product portfolio, place them well for sustained growth while maintaining leadership in technology. At CMP 2673 the stock is trading at 88x FY26E. We recommend BUY rating on the stock.