DO anyone has idea about Sanghvi’s receivables from Suzlon??
Prashant
http://www.pib.nic.in/Pressreleaseshare.aspx?PRID=1579319
This is a significant development.
Construction of wind/solar power plant takes 2 years
Construction of transmission infra takes min 4 years.
Transmission Line construction does not start till private wind developer applies for transmission access (Connectivity and Long Term Access are the technical terms used).
This meant that wind/solar project would get ready, but the transmission evacuation would take 2/3 years more. This is exactly what happened in Bhuj Gujarat where transmission infra was delayed by 18-24 months and the expected uptick in wind project installations did not happen.
This impediment has been now removed by directions issued by Ministry of Power.
Physical progress of transmission line construction still needs to happen.
This government decision will pre-pone wind/solar projects by anywhere between 12-24 months. Actual benefit will vary from case to case.
My understanding is this is a big positive development for capacity addition over the next 4 years.
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Anyone attended AGM ?
Prashant
I have attended Sanghvi Movers AGM.
This is my first ever AGM till date and it has been a good learning on how AGMs are conducted.
Please find my notes below:
- Topline to come from infrastructure activities in the country like metro rails and airports. For example, Sanghvi has leased out 10 cranes to Mumbai Transharbour link construction activity
- Sanghvi Movers is seeing good growth in refineries segment. However when asked management if this is sustainable, management said this is due to BS VI transition of various plants and said “if” govt continues investments, we should see such growth going forward too. (not convinced)
- Company wants to focus on doing business with international wind players who have a strong balance sheet. Eg: Siemens Gamesa, Senvion, Envision…
- Company has taken 29 crores of provision from Suzlon and 7.8 crores of provisions from Lanco Infratech. Company did 1100 crores of business with Suzlon over the past ten years and is confident of receiving those 29 crores. However have written it off as prefer being conservative.
- Company has cleaned up Balance Sheet in FY19 provisions. Wrote-off all payments which are delayed by greater than or equal to 24 months.
- Company has no plans for diversification. Laser-like focus only on debt reduction until the cycle revives.
- Capacity utilization of Q1FY20 is 72% up from 58% in FY19.
- Management not happy with current economic situation of the country and also not happy with govt’s no-push for economic revival
- Balance of power has shifted completely towards customers. Previously, customer used to ask the crane for six months and used to handle related expenses. However, now customer demands the dates on which he wants the crane, demands when the erection should happen and also passes on some expenses (demobilization charges) to the company. Management thinks this is driven by poor demand situation in the country right now. However, management also said this is a bit structural now and not like 5 years before when competition was very low. So not very confident on re-gaining balance of power once the cycle revives due to competition.
- Company sold BKC property in Mumbai which they acquired a few years ago. Booked profit of 1 crore and 48 lakhs.
- No capex plan for next 12-18 months. Last year, bought 3 new cranes and sold 17 old cranes. Sold 5 cranes in the current quarter. Old cranes have lower capacity utilisation and lower reliability and hence better to sell. All cranes out of ~400 are in saleable situation. One of cranes from late 1970s was sold last year. Typically buyers of our cranes are those who want to make their self-employed living out it in a particular small geographical area.
- Stopped conference calls due to very junior analysts joining the call and asking basic questions without doing ground research
- Yields from crane are inversely proportional to capacity utilization. You can never have both in this business. Management is happy to sacrifice on yields if the customer is blue-chip.
- Even though competition is rising, there are lots of companies among them who have started over the past five years. Competition looks at this business as financial investment rather than running an engg business. However, we have engg expertise and hence having an edge over competition.
- Top competitors include (please bear some mis-spells) - Shetia, one division from All-Cargo, Amrit Singh, Shakti
- On wind industry, management said we should expect similar additions of 1700 MW during the AGM. However post AGM, management agreed they expect higher additions. They were just conservative during the speech as investors come back and blame them about it which is not in their control
- C.P. Sanghvi’s brother created a minor mess during the AGM. Apparently he does it every year and spoiled the mood of Rishi Sanghvi for some time
- Management maintaining its guidance of 25% topline growth for FY20 and look very confident in achieving it
- Management trying to monetize some land of 15-20 crores worth (I didn’t catch the details for this very well)
- Hybrid (solar + wind) plants actually have low yields and don’t work in reality as per management. This is because hybrid leads to wastage of land. Wind plants need to leave out some space around them
- Maintenance capex is charged directly to PnL
- Top 5 customers are - L&T (all the five verticals), Senvion, Vistas, Envision. Sector mix hasn’t changed much in Q1 except for power going down and refineries coming up
- Current order book is around 200 crores and confident of achieving topline growth of 25% for FY20
- Even after C. P. Sanghvi expired, they didn’t lose any customer due to that. And don’t see any issue in the transition
- Costs are increasing fast like power & fuel, manpower and will try to control them. Loss of balance of power is hurting here
My view on new management:
Shyam D. Kajale - Has been with the company since more than two decades. Seems to have a lot of knowledge and looks like someone who can run this business well
Rishi C. Sanghvi - Has some knowledge about the industry, however, looks like a pampered kid. Not sure if he can run the business, especially if Kajale leaves the company (for any x reason)
Q1 results have been decent.
Overall, I feel a bit mixed and enforces my thoughts that this is a pure opportunistic bet.
Unable to conclude anything on whether to add-up or off-load. Will have to sit-back and re-go-through my thoughts I had when I bought in March.
Discl: Invested
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Thank you for your takeaways @lingalarahul7.
The way I see these takeaways is the tide turning to the good. Sales yoy have increased capacity utilisation has increased in the this quarter significantly, no doubt q2 fy20 will be down due to monsoon, but H2 fy20 onwards will be all guns blazing. As you pointed out they have laser pins on loans this will be taken positively by market participants in these times of loan defaults and NPA’s. I think I would add on this range between rs 90 to 100 for 1 year time frame.
Thank you for updating AGM notes:
like their focus on Reduction in debt but currently no pricing power is dampening. Lets see how they perform
Prashant
The ministry of environment relaxed the rs 30000 per MW of lease rent for wind power companies. The link is https://pib.gov.in/PressReleseDetail.aspx?PRID=1582630
What will be the impact of this?
According to BSE filings yesterday, Rishi Sanghvi purchased nearly 66L worth shares from open market. This on the back of mgmt saying they expect a strong H2 & 25% top line growth, gives some sort of confidence looking ahead
Disc : Not invested yet, just tracking
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Article dated 9/Sep/2019
“In India, crane rental company Sanghvi Movers has secured orders from GE India for the supply of various crane packages, plus auxiliary cranes and specialized trailer for the Gadhsisa Wind Farm in Gujarat. Sanghvi Movers has already erected a 132 m wind tower for GE India. For this it used a Terex CC 2800/1 crawler crane; it claims this is the first time in India that CC 2800/1 has been used to erect a turbine with a hub height of 130 m.”
Distance between Gadhsisa and Bhuj is just 45km.
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Ideally there should have been an update given to BSE and NSE about order win. What gives?
Result out. Still in loss, but quite good in comparison with YoY nos.
Operating revenue increased 40% to 81cr
PBT improved 70% to -6.5cr
Deferred tax from -7.7cr to -5.8cr
EPS from -3 to -0.2
Of the 90cr term loan obligations due for FY20, 72cr is already paid and only 18cr left to be paid (as of Oct end). Total borrowings at present 370cr.
Receivable days is kind of flat over the last three quarters from 134 (Q3FY19) to 90(Q4) to 76(Q1) to 86(Q2) days.
Share of revenue from wind mill sector holding steady at 52% for the last two quarters (from 44% in Q3FY19).
Confirmed order book of 111cr to be executed in H2FY20. Company expects to receive more orders in H2.
Not sure about the 1st statement though. If the 111cr doesn’t include the ones under execution, it is okay. Else, top-line would be around 160cr (H1) + 111cr (H2) = ~270cr as against 280cr of FY19 and thus improvement in bottomline coming mainly from better margins alone. Please correct.
Can someone please throw light on the typical duration of projects undertaken by SM?
@amey153 Your views on the results would be greatly appreciated. Thanks.
@zygo23554 Do you still track the stock? If yes, please share your views also. Thank you.
the company has been able to repay approx 30crs every quarter for the last 3 quarters. Utilization at 72% is decent but yield is low at 1.73%. I think headwinds in terms of demand continues for the time being which will restrict improvement in yield / utilization, however, their BS getting de-leveraged at a reasonably decent pace which is good. Returns on this stock will perhaps follow when the demand situation gets better
Along with 111 crore order book, the asset side has around 23 crore unbilled recieveables which adds to total taking it to rs 293 crore. Is my understanding correct?
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govt led infra capex is in full swing, L&T order book crossed Rs 3L cr during this quarter, planning to close FY 20 at Rs 5L crore, considering SML has business with all L&T verticals, the spill over should improve.
About the receivables major amount is stuck at discoms between them and Power Producers, approx 60k to 70k crore, its eye popping and thereby power minitry has told to settle the dues to PP. Once settled the stretched working capital of the supply chain should ease out.
Q2FY20 Update – Sanghvi Movers
Market Cap = Rs 330 Cr (for stock price of Rs 77)
Total Debt = Rs 380 Cr
Enterprise Value = Rs 710 Cr
The company is paying down debt by about Rs 100-120 Cr every year.
In 3.5 years, Sanghvi Movers will be debt free. Market Cap should increase to the level of Enterprise Value ie from Rs 330 Cr to Rs 710 Cr.
Wind Capacity addition in the first 6 months till Sep-19 = 1304 MW
Wind Capacity addition entire year FY19 = 1580 MW
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Availability of land is a huge risk to the entire investment thesis in Sanghvi Movers
We need to do some detailed work on this stock - project by project update on what is happening on the ground.
Anyone game to collaborate on this?
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Seems like a positive wherein independant director Ms. Madhu Dubhashi has bought 10k shares. She has worked previously at crisil as director of research, axis finance; authored a book on accounting and analysis, currently independent director at jm financial.
Does the LinkedIn profile of this individual mention her association with Sanghvi Movers? I couldn’t find, hence asking.
Not yet and might not be possible too, as linkedin does not have the feature to recognized he/she are as independant directors and can have multiple positions in various companies. It’s her wish to disclose it or not.
Land allotment issues still persist in Gujarat
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