This is an old story - often dismissed by many investors saying that they had lost a lot of money many years ago . This happened due to banning of blue asbestos . The company now deals with white asbestos made out of chrysotile fibers - which is NOT a banned product and will not get banned in the future.
This is an interesting bet with main drivers being - Rural development through better incomes and Industrialization - through development of industrial corridors and Make in India.
Market Cap - 450 Cr
Debt- ~ 160 Cr
EV - Rs.610 Cr
Sales - 1300 Cr (growth ~30% in 2 bad years due to poor monsoons)
PAT - ~30 Cr
While the building products is the bread and butter business - roofing sheets - this business is dependent on monsoons . Every year there is a good monsoon - this business will give out a good EBIT of 100 Cr+
The second new line of business has grown considerably to now form 37% of revenues in FY 2015-16 . This is the pre-fab structure business - (think warehouses / large retail format stores / factories). With revenues of 483 Crores and albeit a lower profit margin at the moment. Clearly there is a case for more business from an organized - dependable player like Everest for timely execution. Most of their customers are the one’s who cannot afford a delay in execution. For others - there are cheaper alternatives. To benchmark - Pennar EBS business is at 1.3 times sales and 15 times PAT. Everest is still not as profitable - but the trend of increasing profitability can be seen
Mutual funds will also get interested once the market cap increases a little.
Key risks -
- Building products - Bad monsoon , High Chrysotile prices ;
- Steel buildings - High steel prices, Competition reducing profitability
Disc - Invested