Q2 results out:-
http://www.bseindia.com/xml-data/corpfiling/AttachLive/Sahyadri_Industries_Ltd_301012_Rst.pdf
Ayush - ur take?
Hi Atul,
The nos are weaker and below expectations. May be due to seasonal nature of business too.
Sorry, I seem to keep spamming this place with news about everest. I have been trying to look up details about this sector due to it’s moderate p/e, good dividend and great growth reported by nearly all the companies even in the ‘worst’ quarter - Shankar sharma (and congress) keeps saying rural india has never had it so good.
basically everest promoter is the same guy who is the founder of ambuja cements … Damani holds over 1% in everest and that is why he gives premium to everest over hyd industries
he bought everest from ACC after it was taken over
In spite of all the glory, Sekhsaria prefers to keep a low profile.
His philosophy, which has also become the companyâs motto is, âGive a man orders and he will do the task reasonably well. But let him set his own targets, give him freedom and authority, and his task becomes a personal mission.â
The greatest strength of Sekhsaria, a chemical engineer, is his uncanny knack of identifying the right person for the right job and trusting him completely. This is important as he lacks technical expertise.
âHe has always assigned a job to a person and allowed him to do it his way. This has brought in a sense of responsibility and belonging, which is very critical for any organisation,â says Anil Singhvi, executive director, Gujarat Ambuja, who has worked with Sekhsaria for the past 19 years.
Everest’s Chairman (somani) is only 38 years old and was appointed in 2010 and sekhsaria does not hold any position in the company.
MD is 49 , mba from iim, with everest since 2001
If you look at the performance incentive of Chairman, it is more than his salary… which is a good sign…
Over the next 12 months, in the run up to the general elections, there is the likelihood of increased rural spend and dole out of freebies…a good Rabi crop and MSP hikes would also increase rural liquidity… all of this could provide a bump up, albeit short lived, to the earnings of fibre cement roofing suppliers.
Discl: Have a vested interest.
Hi Guys,
In the longer term, the sector (especially HIL and Everest which are positioning themselves as a building materials cum building solutions provider) could also be abeneficiaryof the unfolding retail+logistics+GST story… but that’s still some time away and lot would depend on the industry dynamics!
Fulfilling a poll promise, the ruling Samajwadi Party gifted Uttar Pradesh farmers a loan waiver of around Rs.1,650 crore, making the announcement on party chief Mulayam Singh Yadav’s 74th birthday on Thursday. Chief minister Akhilesh Yadav, the SP chief’s son, waived loans of up to Rs. 50,000 taken from the Uttar Pradesh cooperative rural development bank. The decision will benefit 7.2 lakh farmers.
Such loan waivers type schemes might keep happening in the run up to the polls. The next union bugdet may have more such freebies or schemes.
There has been a concern raised that there might be an excess capacity in the system. I guess most of the plants have been operating at 85% plus utilisation. With such loan waivers,MNREGA, more govt schemes for poor farmers, direct cash transfers to plug the leaking pds , we may finally be seeing more money in the hands of the teeming masses ( farmer benefit is also the aim of retail FDI but that’s still a distance away). Given the amount of kuccha housing in India, if demand rises with more money to spend, capacities should not be a problem.
In conference call 2013 , everest industries has announced that the nasik strike( labour problem) is over. Just going by the managements willingness to share information and their presentations…everest looks attractive . They are not overly dependant on debt. Their pre fabricated steel building section looks attractive.Their capacity addition is not mindless .
The big question is will the mgmt be able to sustain the level of growth.
Can anyone throw some light on the low pe given for this sector?
Perhaps the low PE is given as the product growth has to slow down in future as lots of new and better products have been coming up. Also the margins in this industry are quite cyclical.
Ayush, Its the fear of govt regulations against Asbestos cement sheets . But its not going to happen any time soon. Because of the low cost compared to any other in the rural setup. A ban would be disruptive in the short to medium term. In the long term it will be phased out.
Everest and HIL have taken efforts to reduce their dependence on asbestos sheets . HIL plans to bring asbestos : green products to 50 :50 in a couple of years.
Everest scores in this regard. In 2013 they have managed to bring it down to 60% asbestos, 5
25 % PEB , rest from wall, floor , door products. They are positioning themselves as a total building solutions provider. PEB pre fabricated steel buildings sector shows a lot of promise. In this permanent Labour apathy seen in india, wherever possible PEB will be the norm . In Western countries more than 70 % of civil infra falls under PEB. Everest forms only 5% of pebs in india. But it has put lots of efforts into it and plans to grow at 25 % CAGR. Its competitors are tata bluescope, tiger , interarch, zamil , kirby. All unlisted players. Everest maybe the only way to play it( please correct me if i am wrong)
If everest brings asbestos share in EBIT to 50%, it deserves a rerating? For a cyclical industry its 10 year
Sales CAGR of 20 % .
A pe of 5.
Div - 3.5%
Debt- 0.3
Cash - 70 cr. ( debt only for money mgmt)( can expand with internal accurals)
Ayush please give ur views. Earlier you said you had doubts abouts the management .Please elaborate.
Initially i was also quite attracted by the PEB segment of the co, however on doing more research, I noticed that huge no of players have mushroomed up in this space. There are lots of cos in the listed space too - Pennar, Richa etc and all of them are doing well but if one looks carefully, nobody is making good money in this segment.
Over longer term, yes, PEB is a very good area but given the slowdown and competition, I doubt if these players will make good money as of now.
On the mgmt quality, if you look at their past announcements, press releases etc, they always keep painting a rosy picture but fail to deliver on the same.
HIL seems safer and more steady to me in this segment.
Ayush
PS: As valuations of Everest are attractive and co does has a good name etc, it may be a good idea. Please go by your own homework. I’m just sharing a personal opinion and feel there are betteropportunities.
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Thanks for your view ayush.
Peb seems to be low margin business ( 5-7%). I will wait for a few more quarters , lets see if the management walks the talk.
What truly gets my goat on HIL is their complete silence in every quarterly result announcement, even as numbers go from bad to worse. It is acceptable if there are setbacks in business; what is not acceptable is that there is nothing the “management” has to say about it.
Dear Ayushji @ayushmit ,is there any change happening now. because the stock now started moving again to Oct 14 areas
Regards
Cijo
the stock has given a major breakout on back of porinju entering the stock a couple of days back
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Rather than clutter HIL thread, felt to revive this topic as extensive discussion has happened with respect to the building products segment in this thread.
CONFERENCE CALL - from Capital Markets
Visaka Industries
Management continues to remain optimistic about all the segments of the company in FY’17
The company held its conference call on 11th May’16 and was addressed by key management
Key Highlights
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The company is carrying inventory of around 2 months of crysotile fiber. Management expects further crysotile fiber prices to come down during FY’17 given the overall fall in commodity prices and demand of crysotile.
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The building product segment saw an overall volumes being lower by around 3% in Mar’16 quarter. However in comparison to cement volumes which were lower by around 8% YoY, as per the management, the performance of the company is reasonable.
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The Spinning division of the company primarily consists of Technical textiles. As per the management due to fall in crude oil prices, there was some impact on the sector, but the segment scaled through due to lower raw material prices. The management continues to remain very optimistic about the sector. Around Rs 70 crore of investments planned in this sector which will expand the capacity by around 26%. The capacity will be operational from Sep’16 onwards.
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The Asbestos Cement Sheet (ACS) sector as a whole was flat for the past 4 years. Lower monsoon, Chinese imports etc were major reasons. However for FY’17, the industry as a whole is due for growth. Management expects around 10% growth of ACS industry in FY’17 given the robust outlook on monsoon and the inventory system. However Q1 FY’17 will be on lower side, as the monsoon starts from June’16 onwards.
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Within Building product segment, EBIDT margins of ACS business was around 7.6% vis a vis 9% for 12 months ended Mar’15. V Boards saw a significant turnaround with EBIDT margin of 11.25% for Mar’16 as compare to a -4% EBIDT margin for Mar’15. Management expects ACS margin to come back to around 9% level and EBIDT margin of V Boards to improve further from here, as the company is able to increase volumes and penetrate faster.
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The spinning segment saw an EBIDT margin of around 16.1% vis a vis 13% for Mar’15. With the capacity addition on cards, management expects a further improvement in the overall EBIDT margin in FY’17 in spinning segment as well.
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FY’16 results includes a onetime provision of around Rs 4.5 crore due to diminution in the value of investments and a provision of around Rs 1.3 crore for doubtful debts in V Board segment.
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The company produced around 7 lakh tons vis a vis 7.2 lakh tons of ACS in Mar’15. Management has targeted a production of more than 7.5 lakh tons in FY’17. The company has installed capacity of around 8.5 lakh tons of ACS.
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The company produced around 91000 tons of V Boards in FY’16 and can produce around 120000 tons of V Boards without any additional capex being required.
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Asbestos sheets which constituted around 80% of turnover in the past, accounts for around 60-65% in FY’16. Management aims to bring this ACS segment to around 50% of total revenues.
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Extensive costs management exercise has helped the overall reduction in costs and higher margins in FY’16. Management expects this benefit to continue to remain going forward.
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Overall debt is around Rs 331 crore, which includes Rs 245 crore of short term debt.
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Overall, management continues to remain optimistic about all the segments of the company in FY’17.
Everest Industries
Prices of raw materials will be lower by around 10% in FY’17
The company held its conference call on 3rd May 2016 and was addressed by Mr. Manish Sanghi MD
Key Highlights
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FY’16 was a challenging year due to volatile currency; low steel prices resulted in cement roofing become less competitive, lower monsoon, uncertain crude and Middle East economy etc.
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The Building product segment volume was flat in FY’16, while revenue was lower by around 4% due to lower price realization. Steel building segment on the other hand witnessed a 29% increase in volumes and a 33% increase in revenues, due to better demand and increase in capacity utilization of the new Gujarat plant which was made operational during the year.
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The increase in roofing steel prices, allocation of around Rs 88000 crore in various rural oriented schemes in the Budget, prediction of normal monsoon, all will auger well for the Building product segment to perform in FY’17.
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In building product segment, demand from Southern India and Eastern India has picked up and is good while Western and Northern India is yet to pick up.
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The company can increase the operational capacity in Building product segment by another 20%, without any major capex.
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The Crysotile fiber which accounts for around 65-70% of total raw material costs are lower by around 20% on YoY basis. The company still has around a month of inventory of higher prices. By the end of Q1 FY’17, the company will get the complete benefit of lower raw material prices. Overall, considering the full impact of lower crysotile and other raw materials, management expects prices of all raw materials will be lower by around 10% on YoY basis in FY’17.
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With the increase in steel and cement prices, there has been some price increases in the roffing products in April’16. Further increase in prices and realization will depend upon the demand which in turn will depend upon monsoon.
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The sales of Panels and Boards did well in domestic market, but exports were disappointing. This is largely due to uncertain crude and Middle East economy. Saudi Arabia accounts for around 50% of total exports within Middle East market and is suffering badly. The company earlier planned to set up a manufacturing base in UAE for Boards and Panels, has now decided to hold on the project and review the same in next 12 months as and when that economy improves. So far around Rs 15 crore has been invested in design, drawings, regulations, land etc in UAE.
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The company is having an order book of steel building of around Rs 22000 tons as on Mar’16 as compared to 30000 tons as on Mar’15. This translates an order book value of around Rs 180 crore for 5 months. As per the management, they are happy for lower order book, as the building which the company delivers take time of around 3-4 months and its good not to have larger order book to start with given the uncertain raw material prices. Last year where customers used to wait for delivery and wanted to go slow was one of the reasons for higher order book of Mar’15. Further beyond 5 months of order book is no point to carry, since the churn for new orders happen faster.
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The company has net debt of around Rs 200 crore. Capex planned for FY’17 is around Rs 30 crore.
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Lower costs of interest in Mar’16 quarter was due to lower short term borrowings due to improvement in working capital of the company.
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Overall, management is confident of better margins in FY’17 due to lower raw material costs. With projection of normal monsoon, if the demand improves, there will be increase in volumes and value which will drive strong bottom line in FY’17.
The company has given good yoy qtr1 results. However,this is normally the best quarter for the industry. With some of the other building material companies e.g., Visaka doing quite well, there could be chances of revival in Sahyadri as well. If anyone from Pune is planning to attend the AGM, we can get some additional insights.
i was going through the numbers and it seems after a long time there has been two consecutive quarters of profits. if the next quarter is also in black, then i think the turnaround would be confirmed. The industry will have a good year as its heavily affected by the fortunes of monsoon. Visaka, i think has a lot of other business segments too.
the stock is now trading at new highs. technically looking very good. is there anyone planning to attend the AGM ?