A fellow investor in Kriti Industries attended the AGM & has forwarded the following note:
Kriti Industries AGM Notes:
Kriti Ind is a dominant piping player in central region with MP, Rajasthan, UP & maharashtra contributing more than 80% of total sales.
Last year was bad as demonitisation hit during the peak season of Oct-dec, and resulted in sales being down from 460 crs in FY16 to 360 crs in FY17. They also set up a unit II for manufacturing water tanks and cpvc pipes and it became operational just before demonitisation.
*They also spent around 10-15cr last year in modernisation and automation of the existing plant which would result in operational efficiencies in coming years.
Current overall capacity is 80k MT and runs at 100% during peak season of from Oct-Dec. However overall utilization can be max 60-65%.
This year during the 1st quarter due to gst there was lot of de-stocking by dealers and that affected the sales for a month or so. Demand is improving and they are hopeful it will pick up during peak season of Oct-dec. All govt schemes and housing for all will create significant demand for pipes n fittings going ahead
*PVC resin prices are volatile and due to that there would be inventory gain/loss depending on the price movement as it is not a pass through. Chinese dumping is also there.
Sustainable operating margins are 8-10%, in a good year can do around 10%.
Normal capex is 5-6 cr every year.
Their main strength is agricultural pipes and fittings, in CPVC pipes they are going slow as they are seeing tough competition there. Current capacity is around 1500MT.
*They are looking to buy a plant in South and also planning to shift some products in their Pune subsidiary plant to cater to Maharashtra and neighboring places, which would save logistic cost.
- For FY18 they are hopeful to do 500+ cr kind of turnover as they see demand improving and with good monsoon next year they said thay can easily cross 600 cr mark. Ebitda margins can slightly improve from here. On a 600 cr revenue in FY19 with around 8-8.5% ebitda margins they can easily do 22 cr PAT (mkt cap is 175 cr).