Sanghi Industries - Turning dreams into concrete reality


(kartik.jajal) #1

Sanghi Industries Limited is the flagship company of The Ravi Sanghi Group dealing in the
production and distribution of Cement under the Brand Name “Sanghi Cement”. Sanghi Cement was commissioned in 2002 with one of the world’s largest single stream Cement Plant located at Sanghipuram, in the Abdasa Taluka of Kutch District of Gujarat State. This plant is fully automatic with state-of-the-art technology from Fuller International, USA and having present capacity of 4.0 MTPA.

Positive factors

  1. Capacity expasion to double
    capacityExpansion

  2. Save transportation coast to supply cement by using coastal route to dispatch cements from Kutch to Surat and Maharashtra region.

  3. Make in India, Smart city, affordable housing suppose to boost consumption of cement

  4. Sanghi Cements plans to set up floating facility at Kochi Port to reduce coast of shore base terminal. Once the project becomes operational, Kochi Port will be the first major port in the country to have a floating cement terminal,
    https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&ved=0ahUKEwi8_IiNiJvXAhVCLY8KHTk5Cp4QFghIMAc&url=http%3A%2F%2Fwww.thehindubusinessline.com%2Feconomy%2Flogistics%2Fsanghi-cements-plans-to-set-up%2Farticle9854500.ece&usg=AOvVaw3M0ZLP9p6zjASuJ-IHf-ja

Results

CMP : 134
Promotor holding : 74.98
Pleadge shares: : 70.58

Disc : Added small quantity near 90 level. Waiting to add more after getting views from VP members

http://www.sanghicement.com/themes/bartik/pdf/Corporate%20Presentation_August-2017.pdf

Proposed Expansion Plan.pdf (575.7 KB)
Edelweiss-SanghiIndustries.pdf (897.8 KB)
Venture-Sanghi Industries.pdf (1.3 MB)
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(Mute Spectator.) #2

HI Kartik , Good writeup but as you are writing on this platform it would be good if you try to put out your thoughts (I am not interested on Edelweiss thoughts ) on valuations.

I believe most people are value picker rather than story picker here …

Anyways at Rs90 Stock is already trading at 16 times FY19 earnings as per Edelweiss DCF model, At their cost price Rs 62, it’s still not that cheap around 11 times FY19 earnins.

How much are you expecting to make on this ? I feel its fully priced. I would love to buy it at trailing 15 PE rather than FY19 15 PE.

Thanks,


(anantshri_gupta) #3

Is the family feud over and settled completely? The four Sanghi brothers (one of whom is Ravi - MD of Sanghi Industries) were undergoing a separation couple of years back. I understand that this separation turned dirty… Anyone know the inside story and how it played out? Looking to see if management is a question mark.


(anantshri_gupta) #4

Why aren’t these guys paying any taxes?


(Marathondreams) #5

Great results from Sanghi. As compared to last Q2, Revenue up 38% , Profit up 190%. YOY profit up 5 times. Concall on 12th Feb at 11am should provide more details


([email protected]) #6

please note that sales change only 3 % and profit changes because reduction of excise duty , other income and tax reduction . there is no significant improvement in opreation perfomance. do u have insight on this


(Marathondreams) #7

There cement sales were up by 16% YoY whereas clinker sales (exports) were down impacting reduced overall sales growth. They also had kiln shutdown for 20 days in Dec qtr. On the concall, management mentioned that volumes and prices are recovering from H1 lows. Please see the attached KR Choksey research report with target price of Rs 155

20180214_Sanghi-Industries-Limited_44_QuarterUpdate.pdf (1.5 MB)

Disclosure - invested after Q3 results in last 2 weeks. Forms 2% of my PF


(Pratik Chandak) #8

Sanghi Industries Q4FY18 update : Overall Q4 seems to be NOT SO GOOD for Sanghi. There were 1)oneoffs in cost, 2)diffuculty in procurement of raw materials, 3)increase in cost of power fuel expenses and 4)shutdown of plant on account of technical reasons. This has definitely resulted in decrease in top line along with increase in cost which inturn decreased the margins. Further dilution of Equity has reduced the EPS dragging the EPS to 4.14 below estimates of 5+. This calls for the down gradation of SANGHI Industries.

Top line
• Volumes were down because of 15 days shutdown due to technical reasons. In percentgage term it was shut downed for 17% of the time in Q4FY18.
• But shut down period was utilised t for the upgradation of mill.
• Produced 6.50 lakh tonne cement in Q4FY18 including the export of 26,000 tonne. Out of this Mumbai contributed 66,000 tonne.
• Produced 5.31 lakh tonne clinker and faced a loss of 1.30 lakh tonne on account of plant shutdown.
• Geographic Mix for Q4FY18:
o Gujarat: 83%
o Maharashtra: 10%
o Others: 6%
• As the plant was shut down, Sanghi has bought the clinker from other sources for the purpose of continuation of business. Bought 21000 tonne of clinker at higher cost which inturn increased their cost significantly.
• Management has said the cement prices were on upside for FY18 and they have moved towards the industry average in terms of price realisation. This can be seen as improvement in their Brand value.

Margins
• EBIDTA per tonne can be seen as Rs. 617/tonne for Q4FY18.
• A slight change can be seen in terms of cement mix.
Ratio of OPC and PPC was 69% and 30% in FY18 against ratio of 65% and 35% in FY17. PPC being the high margin business, this proportion might have affected negatively on the margin to an extent.
• As the plant was shut down, Sanghi has bought the clinker from other sources for the purpose of continuation of business. Bought 21000 tonne of clinker at higher cost which inturn increased their cost significantly.
• Sanghi faced envioremental clearance issue in proecurement of lignite which was resulted in change of power and fuel mix. Currently the ratio is 43% coal and 57% lignite against 32% coal and 68% lignite previous year. Coal being on the higher cost side increased in coal ratio resulted in increase in power and fuel cost. Power cost increased from 73 paisa per Kcal to 88 paisa per Kcal which in turn has affected the margins further.
• Yearly fuel mix was 68% lignite, 21%coke & 11% petcoke and expecting it to be skewed towards coal in Q1FY19.
• Speaking about Fly ash used in production of cement, management said that availibility of fly ash will be constraint after shutdown of Adani power plant at Mundra. Currently management is looking for alternatives and expected to comeup with one in Q2FY19.
• Selling and distribution – Selling and distribution has seen oneoff of 11-12 crore which has decreased margins to an extent. Out of this, 8 crore was seen on account of increase in accountign provisions and 2 to 3 crore was seen as one off in shipping side for piloting and other one time cost. This are not expected to be repetative in nature. Net of this cost, Management expect the cost to reduce by 230 per tonne.
• Increse in freight cost was seen after the overloadign issues and increase in diesel cost by almost 20%. Out of total increase in freight cost 8-10% cost was passed on to transporter.
Finance
• Debentures carrying cost of 15.50% has been repaid and issued new debentures with the cost of 10.50% which was subscribed by reliance MF. Now new cost of borrwing stands at 10.50 to 11%.
• QIP was used to reduce current portion of the term loan, advance payment to suppliers and to buy instruments.
• Out of Rs. 515 crore term borrowing and 163 crore working capital borrowing, net borrowing stood at Rs. 278 crore after deducting the cash of Rs. 426 crores.
Future guidance
• Volume expected to reach to 3.2 MTPA in FY19 which indicated capacity utilisation of above 75%.
• Targeting vol of 3 to 3.5 tonne for mumbai region and already achieved 25k tonne vol per month for the month of April and May.
• No specific guidance on Gujarat sales was given. It was said to be linked to GDP growth of Gujarat. And expecting growth of 4 to 5%.
• Cement price realisation has increased by 5 to 6% in may and april 2018.
• Cost is expected to reduce significantly after increase in lignite proportion.
• Power and fuel cost is expected to reduce by 20 to 25% per tonne in Q1FY19.
• Targeting the EBIDTA margin of 850 PT for Q1FY19 against current 617 PT in Q4FY18.

Overall Q4 seems to be NOT SO GOOD for Sanghi. There were 1)oneoffs in cost, 2)diffuculty in procurement of raw materials, 3)increase in cost of power production and 4)shutdown of plant on account of technical reasons. This has definitely resulted in decrease in top line along with increase in cost which inturn decreased the margins. Further dilution of Equity has reduced the EPS dragging the EPS to 4.14 below estimates of 5+.

Disclaimer : New in the market. Please do your due diligence.