Sales is happening more on panels and boards segment which is good for the industry as a whole as margins are better. There is a tremendous market which is waiting to be untapped by this segment. This segment is critical for company as its seen as an alternate to the plywood industry and has a huge potential.
Momentum to continue till monsoon in building product segment in India and value added products will drive sales going forward.
Export market is still subdued and will take some time for revival and orders to kick in.
Pre-engineered steel building segment will take sometime for revival. Investment yet to pick up and orders are yet to come from all sectors. The company has an order book of around 21000 MT in this segment which is sufficient for around 5 months.
I listened to the call that day, a small correction: Mr Sanghi said that PEB segment was sluggish in last quarter and he blamed that on the volatility of steel prices. He said they are comfortable with an order book of 25000MT(equivalent to 5 months work) for PEB but currently it is at 21000MT, a bit lower than what is ideal.
@suhagpatel - thank you very much for sharing your findings after discussions with company stakeholders and industry participants.
As we can clearly see that FCB (Fiber Cement Boards) business is picking up quite well for big public listed players. Current market for FCB stands at roughly 500-600cr growing at 15-20% annually. There are talks of âvalue migrationâ from Plywood to FCB. Obviously Plywood business is not going to die but it will be very interesting to see how much of migration happens from current 20,000cr Plywood market.
I feel new players will enter the FCB industry at some point. Existing players will definitely have the advantage given their manufacturing facilities in place along with good distribution network with dealers.
What is your take on the Entry Barriers for FCB industry? Why canât existing cement players start offering FCB as generally FCB is 75% cement, 15% cellulose fiber, and 10% water and other chemicals? I feel it shouldnât be too difficult for major cement players with big pockets to create a new product line offering. Since you have done a lot of ground level work - it would be great if you can share your view on FCB Entry Barriers.
I read in Centuryplyâs FY2017 annual report page 25 that they are offering FCB product which they are currently importing. They plan to manufacture FCBs themselves once they have reached decent scale. So I see existing plywood players also offering FCB products as they foresee potential value migration.
You can check NCL Industries investor pptâŚthey already have these FCB in place under the brand name Bison panels and they have recently expanded the capacity also.
@rupaniamit entry barriers for FCB industry are not tough to crack IMHO. There are already 4-5 players in the listed space and some more might be gaining traction there. However, the market is big enough to accommodate them. Shift from playwood to board and panels is real and the distributors whom i talked to earlier also confirmed that. Your note on centryply also vindicates that as century being a plywood company investing in FCB.
Advantage for existing players is already established distribution network and acceptance level of their products to the existing customers. Nothing much.
Vishaka who is also in the same industry came out with decent numbers yesterday so we will see the momentum going on for near future.
Increase in product awareness and adoption of higher margin Fibre Cement Boards (FCBs) lead to recent run-up in Indian roofing businesses. I dug deeper to find whether FCB has potential to be a game-changer in construction building material industry. If you are interested to read what I put together, please click here. I am looking forward to any questions/comments.
Recent conversation of Manish Sanghi, MD of Everest Industries with Bloomberg Quint.
Roofing
They have launched Everest Super (New roofing sheet). It comes in various colors. It does not get black over time as the current traditional roofing sheet. They expect demand to increase for new product in the time to come.
They have entered retail space in metal roofing with product called Durasteel. They used to do metal roofing only for industries so far. Manufacturing for durasteel has been setup at Nashik, Bharuch, Roorkie and Ranchi
Pre-Engineered Steel Products
Company is seeing revival of capex from Private sector in steel products. Expecting to be EBIDTA positive by Q1FY19
Boards & Panels
Company expect good momentum in this space from Q2FY19. Currently it forms 15% of the total sales.
Capex
Mostly in modernization of their facility in Nashik and Kolkata. No plans for greenfield expansions as of now.
The utilisation rate is almost full. I dont understand how the revenue will grow significantly without major capex plan. Could anyone provide some information?
The quarter saw reduction in price gap between unorganized and organized players in Building product segment.
Volumes for building product segment grew by 10% while value on comparable basis net of GST and excise adjustments were up by 8% as compared to reported 3% growth in Mar 18 quarter.
Bharat Mala project is going to bring lot of opportunities for companies like Everest Industries.
Total debt reduced from Rs 180 crore to Rs 77 crore as on Mar 18. Further deleveraging is possible
Capex of around Rs 20 crore for FY 19 and FY 20 unless there is a green field expansion.
In FY 18, Roofing line modernized in Kolkata. Nasik factory is also modernized
Introduced Everest Super, the coloured asbestos sheet in Mar 18 quarter. Expects strong demand for this segment.
Overall for FY 18, the company sold around 1.9 lakh tons of asbestos sheets, volume growth of 7% YoY.
Boards and Panels achieved better volumes after losing some ground on account of lower exports.
Stable raw material prices helping in overall reduction in costs. Outlook for raw material continues to remain stable.
Exports are a matter of concern and no change is expected in near term.
Company achieved around 8% volume growth in steel building segment. Volatility in steel prices has resulted in margin fluctuations. Order pipeline of around 25000 MT.
Shift from conventional structures to prefabricated structures is leading to strong demand visibility in steel building segment.
Good monsoon and higher MSP will help FY 19 apart from good rural economy. The company has opened the year FY 19 with higher inventory which should result in higher sales going ahead.
GST benefits fully passed on to the customers.
Realizations improved in roofing segment in Mar 18 quarter. The company has gained market share in roofing segment.
Company continues to remain under MAT. Unless some litigations arise in future.
Higher unallocable expenditure is on account of some additional ad and promotion spends. This will continue. There were also some forex loss adjustments shown as unallocable. The company has increased its television campaign and also is present in IPL campaign.
Expects to reach Ebidta margin of around 10% in next couple of years.
Hello sir in one interview i heard that everest is catering to market of 1 lack crores.is it right.if it is right how much it can get market share in percentage .and also your view sir
Even at 7% margin, it has had a blowout year. Profit and EPS have risen about 1200% while price has risen only 65% in the last year. With the govt focusing on low cost housing before the election year, this company is likely to benefit significantly. New product lines in roofing and panels, renovating production facilities, strong order pipeline but donât see a sharp increase in price. What am I missing?
Disc: Own a few shares. Looking to increase my stake significantly.
Last year was a pretty bad year in the aftermath of demonetization. Hence the numbers were not comparable. Even the management said that if you want to compare then compare with the numbers of the year before last.
This quarterâs numbers are decent at best, nothing much to write home about. This company has good potential but they have to execute well.
By the way, if you want to increase your stake significantly then you should be happy that the price hasnât risen sharply, no?
My presentation in Bangalore ValuePickr forum today
One Q- I have and audience have - does anyone has the figure of Price comparison of the following - Fibre Cement Sheet vs GP/GC Sheet vs Aluminium Sheet vs Red Mud Plastic
Fibre cement sheet or Asbestos sheet is actually a dying product because of health issues related to it. Apart from health related problem one major disadvantage which I have heard about fibre Cement sheet is that they are not suitable for rain water harvesting purpose as the water which flows through them gets contaminated with chemicals and this is not suitable for consumption without treatment. In fact the only place where fibre sheets are still used are mainly rural areas.
As of now there is big gap between demand and supply of colour coated sheets mainly because of limited colour coating facilities available in India. But as the capacities are rising ( Both JSW and Tata Bluescope have big capex going on) I feel that metal sheet manufacturers will also start targeting rural places where fibre sheet are still used.
Regarding your query about prices, last month we got a quote of about Rs 40/sqft for Bluescope Sheets, JSW quoted around Rs36/sqft and Around Rs80/sqft for Aluminium sheets from Hindalco. Though we did not Enquire about Fibre cement sheet but our architect told us that price is less than half the price of Coated metal sheets. We could not see any value in using aluminium sheets so selected Bluescope sheets. Our decision was also biased because of huge business our company does with Tata Bluescope.
Diluted EPS in Q1 was 12.45
Diluted EPS in Q2 is 19.46
Average q1 and q2 EPS comes to around 16.
The full year EPS then comes out to be 64 and the PE based on an approximate current price of 480 comes out to be just 7.5.
Using a conservative growth rate of 15 percent, the estimated stock price one year from now could be âŚ
At PE of 7.5, the price could be 552.
At PE of 10, the price could be 736.
At PE of 15, the price could be 1104.
