YB new stock pitches (Thu, Apr 10)

Sotera Health Company (SHC), a dominant player in the sterilization and lab testing market, offers an attractive investment opportunity with 50% upside potential. The company boasts a 50% EBITDA margin, 5-7% revenue growth, and trades at 17x P/E, a discount to peers due to ethylene oxide (EO) litigation and customer destocking concerns. SHC's strong moat and pricing power stem from its duopoly position, controlling 80%+ of the US market with competitor Steris. Catalysts include resolution of EO lawsuits, volume rebound as destocking ends, and increased free cash flow as legal expenses and capital expenditures decline. The company targets 20x 2027 FCF, offering 50% upside. Risks include ongoing lawsuits, particularly in California, and potential new sterilization technologies. However, SHC's mission-critical nature, high barriers to entry, and 100% renewal rates for top customers support its long-term growth prospects. Management's conservative 5-7% revenue growth guidance aims to rebuild market credibility after recent forecasting challenges.

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Toya (TOA.WA), a Polish small-cap company with a market cap of PLN 540 million, specializes in importing and distributing hand tools, power tools, and household appliances. Since 2008, the company has achieved a 9.65% CAGR in sales and 9.72% in net profits, consistently delivering double-digit returns on invested capital. Despite recent challenges, Toya posted 12.1% sales growth in 2024, driven by strong wholesale, export, and e-commerce performance. The company maintains a robust financial position with a low Net Debt/EBITDA ratio of 0.17x and trades at a normalized P/E of 7.20x, below the sector average. Toya offers over 13,000 products in more than 120 countries and plans a PLN 100 million share buyback program. Risks include liquidity concerns and geopolitical factors. The revised intrinsic value estimate is PLN 15.80 per share, down from the previous PLN 20, reflecting a more cautious approach while still indicating potential undervaluation and long-term growth prospects. - link

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Nulab Inc. (5033.T) is a Japanese SaaS company specializing in project management, diagramming, and security-led collaboration tools. With a 22% ARR CAGR to ¥4.1B in 2024, the company's flagship product Backlog accounts for 90% of sales and 79% of paid contracts. Cacoo (diagramming) and Nulab Pass (security) are driving growth, while Typetalk is being sunsetted. The company trades at 0.71x EV/ARR with a 17% FCF yield. Key catalysts include enterprise expansion, cross-selling opportunities, and international growth. Risks involve single product dependence, slowing growth, and potential challenges in enterprise segment execution. The base case projects a 12% ARR CAGR to 2027, potentially yielding a 27.3% investor CAGR over 3 years. Management, led by co-founder CEO Masanori Hashimoto, holds significant ownership and focuses on product-led growth with low churn (0.41% monthly). The company's valuation is attractive compared to global peers, but investors should monitor growth acceleration, product diversification, and execution in new markets.

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