NCL Industries - Resumption of growth?


(hamed) #122

Any idea why revenue degrowth ? the corporate presentation added on bse is of Q1:anguished: is there any concall etc ?


(vinay ambekar) #123

http://www.bseindia.com/xml-data/corpfiling/AttachLive/55c056bc-b8ab-452f-b5a8-cdfaecccf46e.pdf

ncl industries completes QIP at 237.5 per share vs yesterday’s 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.


(pskrishnan) #124

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 – Management Views

  1. 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
  2. Clinker & cement expansion (brownfield) completed at a cost of Rs 210 Crores
  3. Q2 transport costs have gone up too on account of increase in diesel prices, expansion into newer geographies requiring transport, tolls, etc.
  4. 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
  5. Andhra Pradesh & Telangana are the key markets for NCL Industries accounting for around 70% of their sales
  6. 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
  7. NCL’s brand name is powerful and they have recently expanded into Rayalseema and parts of Tamil Nadu & Karnataka
  8. 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
  9. Bison Boards plant capacity expanded with a 3rd unit in Telangana inaugurated in Dec 2017
  10. The debt is currently at Rs 354 Cr on a high cost NCD at an interest payout of 16.6% per month. The promoter’s shares are pledged towards the NCD. The NCD has an lock-in till September 2018
  11. 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
  12. Post QIP equity dilution is expected to be around 15 to 20%
  13. Boards division – 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
  14. 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
  15. 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
  16. 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
  17. According to the NCL Industries management, it will take between 3 to 4 years to utilise 100% cement installed capacity of 2.7 MT

NCL’s 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 NCD’s 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 NCL’s 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 “Enterprise 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 expanded”. 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 ValuePickr’s, especially if other members have alternate opinions

Disc: Invested a very small quantity for tracking


(pskrishnan) #125

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.


(nil_71) #126

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


(Ram Arvin) #128

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.


(pskrishnan) #129

@arvind_aries Yes NCL’s 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


(Rohan) #130

Lock-in was there but it can be mutually agreed and paid back this year itself