Any idea why revenue degrowth ? the corporate presentation added on bse is of Q1:anguished: is there any concall etc ?
http://www.bseindia.com/xml-data/corpfiling/AttachLive/55c056bc-b8ab-452f-b5a8-cdfaecccf46e.pdf
ncl industries completes QIP at 237.5 per share vs yesterdayâs closing of 247. it was at about 5% discount to the floor price of 249 (thats the max discount allowed as per rules; maybe there was some effort in pushing it through).
dilution is 25% - 85 lakh shares issued compared to existing no. of shares of 3.7cr. 201cr has been raised compared to sep 17 networth of 266cr. total debt is 344cr and d/e as of sep was 1.3.
lets see how much they reduce debt by and how much is growth capital out of the 200cr raised. a chunk of the debt is in form of high cost NCD from piramal (18%). it makes sense to reduce that.
NCL Industries looks interesting. I recently had a discussion with the NCL Industries management to understand their business better and their forward plans. The summary of my discussions and my views are below
Discussion with Management â Management Views
- Q2 2018 Revenues down on account of expansion of cement plant capacity, an additional 0.7 MT of capacity was added in Q2 2018 as an brownfield expansion leading to temporary stoppage of production
- Clinker & cement expansion (brownfield) completed at a cost of Rs 210 Crores
- Q2 transport costs have gone up too on account of increase in diesel prices, expansion into newer geographies requiring transport, tolls, etc.
- Pre-expansion capacity utilisation was around 75% at 1.5 MT, NCL Industries expects to close FY 2017-2018 at 1.8 MT at around 66% capacity utilisation post expansion to 2.7 MT
- Andhra Pradesh & Telangana are the key markets for NCL Industries accounting for around 70% of their sales
- Cement demand is growing in Telangana and Andhra Pradesh driven by the large scale irrigation & road projects and Government housing projects, and private investment in new capital area in Amaravati. Cement consumption / demand is growing from 2 MT / month to 2.4 MT / month in Telangana and Andhra Pradesh
- NCLâs brand name is powerful and they have recently expanded into Rayalseema and parts of Tamil Nadu & Karnataka
- The company has more than 1500 retailers and most of their sales are through retailers. Typical dealer offtake is around 3 to 4 truckloads per month
- Bison Boards plant capacity expanded with a 3rd unit in Telangana inaugurated in Dec 2017
- The debt is currently at Rs 354 Cr on a high cost NCD at an interest payout of 16.6% per month. The promoterâs shares are pledged towards the NCD. The NCD has an lock-in till September 2018
- NCL has launched a QIP placement at Rs 237.5. The proceeds of the QIP will be used towards working capital management, expansions, etc and internal accruals and cash flows will be used to repay the NCD debt
- Post QIP equity dilution is expected to be around 15 to 20%
- Boards division â Bison Boards contributed Rs 55.65 revenues & Rs 10.27 Cr PBIT in H1 FY 2017-2018. The boards division is very profitable with 2 plants running at 100% capacity and a 3rd plant that was commissioned in the 1st week of December 2017
- NCL Industries does not operate the prefab housing division, a few prefab housing projects were commissioned in the past to take advantage of low capacity utilisation of the boards division
- The Ready Mix Concrete (RMC) division business is being operated to support existing customers and to drive capacity utilisation in the cement business and to ensure that existing customers do not migrate from cement due to diversified offerings from competition. The RMC business at best can be a break even business
- NCL plans to invest Rs 40 Crores to manufacture readymade doors near Hyderabad. NCL is planning to buy a running readymade doors plant in Turkey and bring the machinery to India and install it near Hyderabad. The Turkish company will support the project with technical support and know-how
- According to the NCL Industries management, it will take between 3 to 4 years to utilise 100% cement installed capacity of 2.7 MT
NCLâs expansion is completed and they will start realising the capex benefits. Interest costs will drop from September 2018 onwards as the lock in period for the high cost NCDâs expires. NCL has the opportunity to retire the debt or a part of the debt from the QIP that is being raised currently. Their doors business, their highest margin business has also added new capacity which would drive their margins further. Expansion of cement & doors revenues and reduction in interest costs in mid-2018 will potentially drive profitability leading to earnings growth.
This is a capex intensive business where incremental revenues are dependent on capacity expansions as you achieve full capacities. There were reports on NCLâs low cost EV / Tonne and how NCL Industries is undervalued as the recent capacity addition was done at an EV /tonne around US$ 34-35/tonne. On checking with the management their view was âEnterprise value / tonne cannot be uniform and varies from location to location, the recent expansion was a brownfield expansion of the cement capacity and the clinker capacity was also expandedâ. The analyst / brokerage reports on EV / Tonne of US$ 34-35 is an overstatement
I feel the management has taken advantage of the run up in stock prices to raise funds through a QIP. My view is at current prices NCL Industries is more than fairly valued. It may offer better value at a 25% valuation drop from current levels
Happy for thoughts and feedback from ValuePickrâs, especially if other members have alternate opinions
Disc: Invested a very small quantity for tracking
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Cement production to cross 2 million tonne by FY19: NCL Industries
In an interview to CNBC-TV18, K Ravi, MD of NCL Industries spoke about the latest happenings in his company; debt levels post qualified institutional placement (QIP), current borrowing costs and sales volume target for FY19.
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I have gone through this Interview and also icicidirect report on NCL. It is turning around. All the ingredients are in place. Reduction in Debt, Revoking of Pledge and improvement in Top Line.
Just need little patience. Operating leverage will kick in Q1 2019E onwards
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The 220 Crores of NCD from Piramal has a lock in period of 3 years it seems. As per 2017 AR, the debentures are to be redeemed in the 4th, 5th and 6th years, commencing from the last quarter of financial year
2018-19. Which means the NCD and its 16.67% interest will be in the books till FY2019 (one more year ahead).
So the cash to be received through QIP in end of Mar2018 will be in the balance sheet as cash and Equity share capital will increase, Will it not affect the EPS for the year 2018 adversely. Interest will not decrease and the number of equity share capital will raise.
Also can anybody please help me understand why there is a pledge by promoters on 27th Dec 2017 and 2nd Jan 2018
in 2017 AR, the company has spent more money in Selling expense (30 Cr more than 2016), Transportation expenses(20 Cr) and Power and fuel (25cr). All the money earned in increase in sales is spent on these additional expense. Additional Transportation cost means, business is trying to reach far away markets due to lack of demand in its near places. The same with Selling expenses also. Power and Fuel because of petcoke and coal price increases. I understand NCL is a pure increase in capex play. But want to understand the scenario based on AR2017 financials.
@arvind_aries Yes NCLâs selling expenses have gone up and are expected to be on the higher side. Their core markets are Coastal Andhra Pradesh and parts of Telangana. They have expanded into Rayalseema and parts of Tamil Nadu & Karnataka resulting in additional transportation costs and selling expenses
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Lock-in was there but it can be mutually agreed and paid back this year itself
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Results Q3:
This should be for the Piramal NCDs
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NCL Industries result overall decent. Also just listen to Q4 concall to understand the significant growth ahead. In a tough year, EBIT/Tonne gone up from 590 to 640 in cement. Debt burden coming down. 135 cr of NCD from Piramal pending, to be replaced by low cost debt from Banks.
Valuation decentâŚ
Disc Invested
Impressive growth in dispatch for 1st quarter, almost 40% jump, looks rerating will happen sooner than later,
Disclosure: invested
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Good results - 48 Cr PBT in this quarter and market cap is only 530 cr + 200 Cr Debt
Interest costs also down and both Cement and Bison Board gave great results
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=69812116-5bd5-4d66-9f94-1bfd5ae7d07c
Disc : invested
2 Likes
Went through the Q2 conference call ,
- March 2019 and Q1 Fy20 was exceptional quarter due to high volumes and higher prices. This cannot be repeated again. One off scenario.
- In Q2, Sand was not available due to rains and demand has dried up in AP due to govt projects were stopped by the new CM. Demand in the retail segment has picked from Nov 2019 but govt demand is yet to pick up. Govt has cancelled old contracts and negotiating prices for new contracts. It might take atleast 2 months to settle down.
- We were supplying 1500T every day to pollavaram project which is stopped now.
- We tried to market in Kerala but we are not able to manage because of very thin margins
- Last month prices were subdued but this month its good. In hyb 270 per bag and in some places 330 also there. Earlier it was 220 to 240. 270 per bag is likely to be sustained
7.NCL major supply in AP and telangana only. TN and Ktk, very less presence - As of now cement volume is 9.14T and overall year guidance will be 18T. Fy20 will see degrowth when compared to FY19
9.In the process of buying land near vizhag, we are major brand there and competitors are giving good service. Once land is ready, we will approach board for approval for grinding unit. Clinker will go from main plant. Capacity will be 2000 or 3000 per day and it will take 3 months for pulling the land, then clearances, approvals from board and bank. Fy22 is the earliest we can have this plant. We need to give service so we need to have this grinding unit to serve them better.
10.Clinker expansion â Line 3 is 7000T per day and we are producing only 3550T per day, surplus clinker is there, idea is go to grinding unit. With minimal investment we can add 1M T of clinker.Roughly 150 to 200cr to add more capacity to the clinker
Boards
Margins have compressed â RM cost run up, cement and wood cost gone up. Ebdta margins were in pressure. Cement is purchased from outside. We are asking the vendors to reduce the price to increase the EBIDTA
Readymix - Only 1 Cr of EBIDTA and No generation of power from Energy divison
New Doors Division
- Factory is ready and waiting to start the operations. Only from FY22 there can be some reasonable volumes.
- Factory in Hyb and are premium doors worth 20000 per door.
Chinese company tie up
1.Project cost 40 Cr and our share is 10cr
2.It will take 6 months to start the production and the technology to build high rise buildings and now one has done in India yet. Others are doing factory building
3.We are not looking at pricing power from this biz, over all building materials business is important
WHR project cost is 100Cr and 70 to 80 cr will be spent this year, 30 cr savings every year
My Overall opinion as of now is new Doors division and Chinese JV steel structure division will not add any value for next two years.
Boards division RM prices have gone up and company is not able to push to the customers and wants to negotiate with vendors for good prices. Volumes are not growing much, the capacity addition phase is slow as per the history. Not a great division in my opinion.
Regarding cement division, not able to expand to TN, Ktk and Kerala. Other players are giving good service in Vizhag and makes the company to spend more capex. Clinker capacity is available to meet if increase in demand comes up again.
No point holding the stock in expecting the cement demand and price to pick up. Not a stable business as we know its a commodity business
I will work the valuation and post in the weekend.
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NCL Industries Q3FY20 Earnings Call Highlights:
Participants:
- Anand Rathi
- Nirmal Bang
- Antique Stock Broking
- Phillip Capital
- Sundaram Mutual Fund
- HDFC Securities
Business Overview:
- Revenue for the quarter at Rs 211 crore; 9MFY20 Revenue at Rs 691 crore
- EBITDA is close to Rs 25 crore in Q3FY20; 9MFY20 EBITDA at Rs 117 crore
- PAT for the quarter at Rs 5.4 crore; 9MFY20 PAT at Rs 43 crore
- 75% revenue came from cement division
- EBITDA breakup for the quarter: Cement- Rs 15 crore; Boards- Rs 4 crore; RMC- Rs 2 crore; Energy- Rs 4 crore
- Company has produced 4 lakh tons of clinker during the quarter. Capacity utilization for the cement plant was 63% during the quarter compared to 55% in previous quarter. 9MFY20 capacity utilization is 67%
- Cement sales for the quarter was 4.3 lakh tons and EBITDA per ton is close to Rs 350
- Capacity utilization for board division was 85%; 9MFY20 capacity utilization was 81% vs 73% YoY
- RMC volume for the quarter was 53,000 cubic meter vs 49,000 cubic meter in previous quarter. EBITDA at Rs 1.76 crore vs Rs 1.59 crore
ConCall highlights:
- NCL has reported negative other income during the quarter as company has spent some addition expenditure on repairs and maintenance for their 200+ trucks and income was not enough to take care of that cost due to lower volume
- NCL earns around Rs 1.5-2 crore as other income on quarterly basis
- Waste heat recovery unit: Civil work at an advanced stage of completion; likely to be commissioned in September
- NCL announced hike in cement prices by Rs 30-40 in the first week of February
- Realization for cement business was weak in Q2 and Q3; Q4 onwards realization will improve
- Cement capacity in Andhra Pradesh and Telangana is around 90-100 mn tons; another 5-6 mn tons will be added in next two years
- NCL is market leader in Andhra Pradesh, particularly in Vizag
- NCLâs cement capacity utilization suffered due to contract cancellation in Andhra Pradesh
- Revenue mix: 70% from trade
- In RMC business NCL is only present in Hyderabad and Vizag as RMC cannot be serviced beyond 40 KM from the unit. Cost of setting up per RMC unit is around Rs 2.5 crore
- Debtors at Rs 140-150 crore
- Gross debt including working capital stands at Rs 250-300 crore
- NCL has received orders of 7000-8000 doors recently, price per door around Rs 15,000-20,000
- Formation of Chinese JV (70:30) will take another six months. Total investment would be around Rs 40 crore, of which NCL would invest Rs 7-8 crore
Capex:
- Company is not contemplating any capex plan for board division as of now
Guidance:
Volume for the current financial year would be around 2 million tons for cement division against their earlier guidance of 2.4 million tons
NCL Industries - Earnings Call Q4 FY20
Hereâs a brief summary of the discussion at the earnings call held earlier today
Existing Business
- Current demand is good, Some cement dispatches in April. NCL is supplying cement for the Polavaram hydro dam project, 1000 / tonnes per day for Polavaram project; Kaleshwaram Lift Irrigation Project, Dilip Buildcon, Road contractors; Indian railways - cement for concrete sleepers
- In AP NCL sells cement at Rs 5-10 premium over Ultratech
- 77% capacity utilisation for Q1FY21
- Liquidity position is very comfortable
- Q1 FY21 will be negative growth
- Sales - Trade is 65-70% & non-trade is 30-35%. Higher trade will result in higher average realizations
- Cement Prices - Rs 350 - Rs 380 / cement bag as on date
- Cement EBITDA Q4FY20 - Rs 41 Cr; EBITDA / Tonne - Rs 408/ per tonne; Boards Division EBITDA for Q4 FY20 Rs 5.09 Cr
- New Cement capacities in AP - Ramco Cements in Kurnool; Shree Cements in Guntur
- Production Volumes
- Cement - Q4FY20 5.09 Lakh tonnes; FY20 18.58 lakh tonnes
- Boards - Q4FY20 - 15567 Nos; FY20 - 61037 Nos
- RMC - Q4FY20 - 45252 cm / FY20 - 191000 cm (cubic meter)
- Hydro Power - Q4FY20 - 4.42 Mill units / FY20 - 36.8 mill units
- Doors 916 Nos - Door division - Volumes expected only from FY 22 onwards only
Joint Venture Update
- NCL JV with Guangzheng - Rs 11 Cr project for production of PreFab slabs for high rise steel buildings. NCL will build the factory (Rs 7.5 Cr) & Guangzheng (Rs 3.5-4 Cr investment) will supply the machinery as per the terms of the joint venture.
- Conventional construction takes 1 floor / 1 month, with steel buildings 1 floor / 1 week. With several new building / apartment projects coming up in Hyderabad there is good potential for PreFab steel. This segment is different from Pre Engineered Buildings (PEB)
Receivables
- Because of COVID receivables are higher. All contracts of the previous Government (Telugu Desam Party) cancelled by YSR Congress, and contractors have not been paid and NCLâs payments in turn are stuck with the contractors whose contracts have been cancelled.
Expansion / Capex
- Cement grinding unit (Rs 150 Cr) to be set up near Vishakapatnam with 2000 TPD capacity and modernization of existing cement unit (Rs 53 Cr) at estimated project cost of Rs 203 Cr. This will be funded by Rs 140 Cr term loan and balance through internal accruals
- Cement grinding unit - new unit will be commissioned between 18 to 24 months
- Rs 25 Cr savings / year expected on account of the power project
- Rs 3.5 Cr power savings on account of the proposed Rs 53 Cr modernisation of the existing cement unit
Disc: Invested at higher levels. Valuation attractive at 3x Operating Cash Flow (OCF) and 4.26x EV/EBITDA. Exploring options of investing at current or lower levels
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stock at 3x PEâŚ!!!..
any governance issues ?
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