GHCL - Soda ash & home-textiles player


(jajushobhit) #151

Overall I guess the company might report similar performance in FY18, if the soda ash prices remain stable. The company believes that Textile may turn EBITDA postive in FY19.

Disc: Invested


(thakurvi) #152

(cool_gaurav) #153

https://www.bseindia.com/xml-data/corpfiling/AttachLive/364e6be1-0408-46fa-8713-5f423d639e46.pdf.

Link to latest presentation after declaring Q1 numbers. Textile division is performing good and sequentially sales and EBDITA increased by 21% and 43 % respectively. Overall satisfactory numbers…

Important Commentary:
(1) PAT for the current quarter is Rs. 62 crore compared to Rs. 76 crore of Q1FY18 (excluding one time tax credit of Rs. 82 crore accounted in Q1FY18). This is mainly due to impact of Headwinds in Home Textile, however now looking stable and growing. In Soda Ash, despite Annual Shutdown and M2M Forex Impact profitability maintained at Q1FY18 levels due to operational efficiencies. Compared to Q4FY18 PAT of Rs. 82 crore, the profit is lower mainly due to Annual Shut Down, seasonality in soda ash (4 th Quarter being the best) and M2M Forex fluctuations. On Sequential basis, textile segment is showing signs of improvement compared to Q4FY18 which is likely to continue in the coming quarters. We are Confident of achieving our vision of +20% Profit growth on a long term horizon creating value for our stakeholders.

Inorganic Chemical Division:

Maintained EBITDA at Q1FY18 levels despite Impact of Annual shut down (taken during the current quarter) impact of Rs. 15 crore and Forex M2M of Rs. 7 crore due to efficiency improvement and increase in selling price over cost.

Home Textile Division:

Revenue increased by 21% as compared to Q4FY18, however lower compared to Q1FY18 is primarily due to reorganisation of customer mix. EBITDA Margins – In line with our previous guidance sequentially increased by 100BPS due to operational efficiencies. Yarn demand remained buoyant during the major part of the quarter mainly due to strong exports. Overall positive outlook with gradual growth is expected in both revenue and improvement in Margins


(Harshit Goel) #154

Latest credit rating report of GHCL by Ind-Ra. Report highlights upcoming expansion details and also positive view on Soda Ash industry. Following are the key points.

Soda Ash Segment

  • GHCL is investing INR3 billion towards a brownfield soda ash project of 125,000tpa, which is slated to come online by 4QFY19. The company is looking at another similar sized expansion by end-FY20 at a similar cost, taking the total capacity to 1.2 million tpa by FY21.
  • India’s 3.75 million tpa soda ash industry is characterised by steady annual demand growth of 5%, with import dependency of nearly 20% of the total demand.
  • At a global level, the impact of Turkey’s new supplies of natural soda ash was mitigated by continuing production constraints in China amid a robust worldwide demand in FY18.
  • Ind-Ra therefore expects the soda ash margins to remain well supported over the next two years.
  • GHCL is also working on a greenfield project of 0.5 million tpa in the next four to five years.

Textile Division

  • Revenues fell 15% yoy in FY18 to INR10.5 billion, while EBITDA margins dropped to 4.7% (FY17: 13.9%), driven by a weakness in the home textile division. This was due to various industry-level challenges such as oversupply in the US, impact of GST and demonetisation and a reduction in duty drawback.
  • GHCL’s yarn division is likely to witness a steady improvement in FY19 on improved demand environment, which is likely to offset the adverse impact the increased minimum support price of cotton.
  • Ind-Ra expects the home textile division to remain under pressure due to the oversupply situation and would take longer to demonstrate a material turnaround.

Regards
Harshit


(Harshit Goel) #155

New Capex Plans details of GHCL.
Source: http://www.careratings.com/upload/CompanyFiles/PR/GHCL%20Limited-10-08-2018.pdf

  • GHCL has envisaged to implement a green-field soda ash plant of 5 lakh MTPA (approximately half of its current capacity) at a new location which is expected to be implemented in a staggered manner over the medium-term. GHCL’s management has articulated that the capex is currently under conceptualization state. Subsequent to the land acquisition, GHCL shall apply for various environment and regulatory clearances along with lease rights for additional mines of salt, limestone and lignite from concerned government departments. This process is expected to take 2-3 years from now and during this period the cash outgo towards this capex is not envisaged to be material as indicated by the management. Subsequently, the actual construction of the soda ash plant shall commence which would be implemented over a period of another four years.
  • Company is also expanding its capacity in cotton yarn division by addition of 5,086 MTPA.

Regards
Harshit


(Ayush Mittal) #156

Good results from GHCL - https://www.bseindia.com/xml-data/corpfiling/AttachLive/ffb425d4-5575-481a-a952-c6a917b4116f.pdf

Investor Presentation - https://www.bseindia.com/xml-data/corpfiling/AttachLive/f0cf4366-f55d-4496-8b86-760f87a4595c.pdf


(Ayush Mittal) #157

I was going through the recent concall of the company and it was interesting to see that the anti-dumping duty is over on imports from US & China (it still remains on Turkey & Russia) and yet the prices of the product have remained stable and the company continues to do well. Infact the company has taken price increase in last few months. Expiry of anti-dumping used to be a major concern here.

I do wonder as to why this stock has been trading at 7-8 PE multiple despite very good margins consistent over last few years + lots of steps my management to improve their perception in the investing community + dividend and buybacks. Would be good to know the negatives.

Regards,
Ayush


(thakurvi) #158

It is the textile division that is dragging this company in past…soda ash division is performing well due to oligopolistic nature of business in India…Market is giving low PE due to its commodity business as well as previous history of promoters…I wonder why the promoter do not go for demerger of business to rerate the company…love to know more about its consumer division…


(jajushobhit) #159

Good results:

  1. The EBITDA margins came in at a healthy 24% for the quarter
  2. The revenues increased by ~18% while the PAT increased 44% YoY
  3. Improvement in performance of Textile segment and EBIT margins was ~7%
  4. The company looks all set to repeat its FY18 performance and an EPS of Rs. 35 looks likely for FY19

Regards
SJ