The analyst highlighted Netweb’s heavy reliance on government orders, execution risks in scaling AI infrastructure, and the possibility of a derating if high expectations fail to materialize.
Netweb Technologies has delivered strong growth and built a unique position in India’s tech hardware space, but current valuations leave little room for comfort.
Fundamentals
SEBI-registered analyst Rajneesh Sharma said the company works in high-performance computing systems, AI servers, and private cloud infrastructure.
Its major government customers are the National Supercomputing Mission, DRDO, and the education sector. The strategic partners of the company include Intel, AMD, NVIDIA, Samsung, and Seagate.
For FY25, Netweb reported revenue of ₹1,149 crore, a three-year CAGR of about 67%. EBITDA came in at ₹160 crore with margins near 14%, and PAT was ₹114.5 crore at 10% margin.
Earnings per share stood at ₹20.25, with return ratios strong at 32.6% ROCE and 24% ROE.
The company remains in a net cash position, though it reported negative operating cash flow due to working capital buildup. It has guided for a 35% CAGR revenue growth between FY25 and FY28, with AI systems targeted to reach 22% of total revenue by FY26.
Exports are expected to form 10% of sales within 2–3 years. The current project pipeline stands at ₹4,142 crore, supported by capex for a new AI infrastructure facility.
Valuation Concerns
At a current market price of ₹2,066, Sharma highlighted that Netweb trades at a P/E of around 91x and P/BV of 22.1x, with EV/EBITDA at 60.4x.
Based on a price-to-earnings growth method with 35% growth, intrinsic value was pegged at ₹1,639, leaving a negative margin of safety of –20.7%.
A discounted cash flow approach placed intrinsic value at ₹1,041, implying nearly 50% downside from current levels.
Technical Outlook and Risks
From a technical perspective, the stock is trading around ₹2,070 after a breakout above swing resistance. Sharma identified resistance at ₹2,326 and ₹2,600, with supports at ₹1,885, ₹1,700, and ₹1,450.
Relative strength index (RSI) at 56 suggests momentum is intact, but charts appear extended.
Key risks include stretched valuations relative to earnings and cash flows, heavy dependence on government orders, execution challenges in scaling AI infrastructure, and the possibility of a derating if high expectations are not met.
Takeaway
Sharma described the business quality as strong with solid execution visibility but low valuation comfort.
He advised that long-term investors should wait for better entry points or tighter valuations, while tactical traders may find opportunities with strict risk controls and momentum setups.
What Is The Retail Mood?
On Stocktwits, retail sentiment was ‘bearish’ amid ‘low’ message volume.
Netweb’s stock has declined 26.4% so far in 2025.
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