Everest Industries - Multiple Drivers in place

Stock Opportunities Not-so-Hidden Gems
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Not very excited about this vertical of Everest industries . Even though it is a sunrise sector and the there is immense growth ahead , other players in the same field are much more advanced than Everest in terms of design, supply and delivery . Have to closely watch how Everest scales and executes this vertical

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Though I have not studied competition in this sector, Everest Ind website
provides co’s. execution capabilities, like HCL IT building of 2 Lac sq.f completing in just 11 months,India Expomart Ltd exhibition center of 4.5 Lac sq.f built in 180 Days(!),4.6 Lac sq.f Shiv Nadar School built in flat 120 days and recent comment they are shipping at least one building structure per day exhumes confidence.Don’t know weather consumer preference shifting towards steel buildings…fast erection,dry construction etc. are some of many advantages. But their fortune is tied to economic cycle, it was worst affected by demonetisation…may be this is the reason stock price coming down…

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You should have received an email that should allow you to attend.

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Presentation:

Disclo. Invested,Tracking Position

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The MD sells a portion of his shares, after the run up in last few days…

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What could be the reason? :thinking:

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Even I was curious to know this. I just checked that over the years, he’s been allotted ESOPs and he’s selling them. So, I believe nothing unusual. This has been going around since 2012 or even earlier.

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I see. Great, thank you :slight_smile:

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Everest Industries Q2FY20 Earnings Call

Participants:

  • HNI Investment
  • Care Portfolio Managers
  • PhillipCapital
  • Kedia Securities
  • Prabhu Reddy
  • Prakash Patel

Business Overview:

  • Revenue at Rs 286 crore vs Rs 314 crore YoY
  • EBITDA at (Rs 2.3) crore vs Rs 17.6 crore YoY
  • PAT at (Rs 6.6) crore vs Rs 8.1 crore YoY
  • Revenue from boards and panels grew 8% on YoY basis
  • Cement price for the quarter increased to Rs 4680/ton from Rs 4300/ton YoY
  • Fibre prices have gone up from last year. Further, depreciation of rupee also made it costlier to import

Building products

  • Sales volume for the quarter at 155,000 MT vs 154,000 MT
  • Revenue at Rs 174.5 crore vs Rs 176.7 crore

Steel Building

  • Sales volume for the quarter at 13,400 MT vs 15,600 MT
  • Revenue at Rs 111.8 crore vs Rs 136.1 crore

ConCall highlights:

  • Business got impacted during the quarter due to extended monsoon and poor economic situation
  • Competitive intensity increased from steel roofing player as steel prices decline sharply in recent quarter which made them very competitive
  • Everest has introduced new variant of sheet; at wholesale level it is priced at Rs 35-100 higher from the regular products and margin is also superior
  • Everest has delivered 13,400 tons in steel building segment during this quarter. Company is doing large number of orders for automobile industry
  • Order book in steel building segment stands at 22,000 MT
  • Gross margin in steel building in current quarter (Q3FY20) has improved due to drop in steel prices; older inventory is getting replaced with newer inventory. Steel prices have declined by around Rs 3700/ton from last quarter and now
  • Steel mill companies said that further price reduction is not possible from here
  • In building product segment there is no problem with working capital as only 5% of sales on credit basis
  • Working capital days for steel building business elongated as money is coming very slowly
  • Import of chrysotile fibres from Brazil is miniscule, is around 5-7% only
  • Typically fibre price revised annually, but this year it has been revised in the middle of the year
  • In last three months around 40% of orders in steel building segment were from warehouses. Going forward contribution from logistic segment in case of steel building segment will increase to 60%
  • Everest increased boards and panel prices in August and September
  • Competitors: Roofing- HIL, Visaka; Boards and panels- Visaka, NCL, Ramco; Steel building- Kirby, Interarch, Zamil, Pennar
  • Market share: Roofing- 17-18%; boards and panels 25%; steel building- 6-7%
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Good H1 or better to say good last 3Q (vs same period) to factor in March qtr impact boosting Q1 of fy21. B/S now reflects cash of 200crs. Mcap 350crs. Networth 450crs ~

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Wrote this post Q1 fy21.

In last two quarters, Everest Industries has made ebitda of 45crs vs 60crs in base period. So, I am trying to ignore the flat quarter, as there was some unfulfilled demand of previous qtr. The co, is cautiously optimistic, given the good rains and harvest. Emphasis by PMAY on concrete roof did impact business in recent years, but looking at the delay in payouts relating to this scheme, they think that now the govt will be neutral to choice of roofing.

I liked their new branding & promotion strategy. Now they portray use of Everest roofing product to be a matter of pride (think owners’ pride, neighbours’ envy), rather than mere product benefits. They are using clients/ dealers to promoter videos via whatsapp, or facebook. Maybe a small point, but they are thinking.

Products are – roofing (asbestos sheets), boards and pre-fabricated steel structures, mainly for factories/warehouses.

** Will not say wow, as cyclical (possibly staring at an upturn right now), 10 year ROE is 12% and 0.7x book. One thing, I must say that their profitabilty metrics over 10-15 years have been better than most of the cement sector, ex Shree Cement. This holds true for Visaka and Ramco Industries too.

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Does anyone know why cash and cash equivalent spiked up to 214 Crs this quarter?

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inventory gains mainly …

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Lower working capital and cash from operations. Difficult to say if this will rise or reduce in medium term but likely to remain robust in fy21 as there are.many positive changes being done.

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FII holding is going up every quarter .Home upgradation/ industrial building structures requiments upswing has been rerating of the share prices.Good management and recent hired CEO and MD can make this company a Global building material giant.i can see great value of this company in time to come.

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My notes from AGM fy23

22/08/2023

Boards and Panels Division

  • The category is in nascent stages of development and management seemed quite confident of growth in size of the market.

  • The co. is building the market by creating awareness among influencers (Architects/Interior Designers) and training the technicians.

  • Cement, Silica and Fly Ash are important raw-material for manufacturing boards.

  • The division has started contributing to profits and profitability will go up as scale increases.

  • Margins for VAP are around 50% more than commoditised products.

  • A greenfield expansion worth 187 cr is under way in Karnataka. The same will be completed by end of 2023. 72000 MT.

  • There is a decent opportunity in export markets with higher margins. The co will focus on the same after new capacity comes up.

  • The co was able to pass on rm inflation in this segment.

PEB Division

  • The co is among Top 5 players in the country.

  • The co has turned around this segment by undertaking complete overhaul of processes and focusing on marquee customers.

  • A projects takes 3-6 months to complete, from finalisation to execution.

  • The co is buffered from steel price fluctuations and 8% type EBIT margins are sustainable. Margins can improve going forward, high probability on account of extracting efficiencies.

  • The co is focused on Factory and Warehousing market and is seeing a lot of repeat orders from customers.

  • The co has undertaken capacity expansion in South at the cost of 125 cr.

  • This segment is witnessing strong tailwinds.

Roofing

  • The market will grow at a meagre 2% on volume basis. The co maintained its market share in spite of tough times. Increases in prices of asbestos fibre (25% of total cost) hurt profitability. The co was unable to pass on rm inflation. Focusing on reducing cost by developing alternate sources of supply and innovation. High rm prices persisted even in q1 of fy24 (Verify).

  • Roofing is a seasonal business. March-June. Inventory peaks in March and bottoms out by June, almost halves in size. The co is taking efforts to reduce inventory days and improve WC.

General

  • Past few years were focused on plugging performance gaps, becoming efficient and building management team. The stage is set for growth and co is entering an investment phase. 100-150 cr deployment every year foreseeable for next 4-5 years (Verify).

  • Chairman, despite being of non-executive designation, appeared to be shaping the course of the co and keeping an eye on execution. The board has set high standards for the management are excited about future of the co

  • The co reduced Tax Liability by 80 cr in the fin year gone by.

  • FCF in q1fy24 is at 143 cr.

Disclosure: Invested

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