E2E Networks Limited provides cloud infrastructure and computing services in India. The company offers cloud infrastructure services through its cloud platform for deployment of compute workloads to manage and monitor Linux/Windows/GPU Cloud Machines with high performance CPU, large memory, or smart dedicated compute for CPU cores. It offers Linux, Windows, and storage cloud solutions; and cloud GPUs. The company's products are used in data science, NLP, computer vision / image processing, observe ability, consumer tech, and other fields. The company was incorporated in 2009 and is based in New Delhi, India.

India

E2E Networks Limited

Technology

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

E2E.NS reported revenue of INR 1 599mn in the last 12 months, up 93% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 74% from FY23 to INR 25.03.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 38ppts over six months and grown 37ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is positive. Usually, this means that a fairly valued or slightly undervalued stock has become more 'expensive', indicating that the market, in general, may have gained short-term confidence in the stock.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 70.5% in the last 12 months, up from 52.6% in FY23. 

Historically, E2E.NS has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 23.4%, down from 25.3% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 7.3% in the last 12 months, a decrease from 12.9% in FY23. 

E2E Networks Limited reported a return on equity (RoE) of 13.4% in the last 12 months, down from 34.7% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 8.9%, below the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.8 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

E2E.NS has below average trading liquidity. The average private investor can sell his common position in the stock in a single trading day. Liquidity is relatively stable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, excessive margin volatility, and poor working capital management.

In highly turbulent market conditions, E2E.NS is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, E2E.NS is volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move much wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. We would also like to highlight the mild intraday volatility of the instrument. 

Based on key historical and expected multiples, the stock is greatly overvalued relative to its peers. Specifically, the stock is 'expensive' on P/E, overvalued on EV/EBITDA, overpriced on P/FCF. 

E2E Networks Limited

₹ 2766.9

4

E2E Networks Limited

₹ 2766.9

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

₹ 2766.9

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