It’s not going to be so cut and dry. Remember company has doubled the capacity in Jan which will unleash huge operating leverage from this quarter onwards. Solar power plant would bring down cost of power for domestic business. European business may see 2 more quarters of pain (due to planned furnace shut down) but gas prices have cooled off lot in Europe and most of the merger related expenses would be completed by that time. Opening of Chinese economy would be good news for Borosil, as Chinese solar module installations would get accelerated thereby reducing dumping of solar glass in India and rest of the world.
Net net, I expect company to post full year EPS of 15 for FY 23-24 (similar to FY 21-22) so expect stock price also remain in that range of 600-700.
Disclosure - Sold out most of my position post Q3 results but planning to add more around 425
When a participant in latest concall asked about the status of SG4 & 5, management said it’s currently, sort of, on hold.
That shows the company is not optimistic under present circumstances for further expansion.
Also, twice in the concall, Mr. Kheruka was virtually crying when he said they were felt alone helpless, no-one is helping them, no reprieve from govt, he further said on full solar panel value chain, glass was the only component without any duty protection. He again mentioned they are felt alone to fight their battle all alone.
All this shows the level of concern of upcoming bad times, although I was very impressed with the transparency and honesty shown by management in answering questions.
More domestic competition coming in… shows attractiveness of this sector. Then tariff would be back on anvil as more companies would apply for protection
My notes from Q4FY23 concall:
1. ASP - 133 per mm
2. Q4 volumes were 8% higher YoY, but prices were 1% lower.
3. SG-4 started with full expenses but little revenue.
4. Domestic manufature to rise 3x current capacity in next 2-3 years.
5. Capacity is now 1000 TPD.
6. German plant is 300 TPD, operating at 90% capacity. Furnance was down and now backlive on 8th may with 350 TPD capacity with furnance good for next 5 years.
7. capex FY24 - only routine maintenance capex.
8. Taking pause from adding another 1100 TPD.
9. Import prices - 110-115 per mm.
10. exports are 25% of volume.
11. full capacity - 1800-1900 crores sales on 1350 TPD.
12. Expected margins in Germany - 10-15% margins.
13. Margin guidance - 20-25% (standalone), ~20% (console)
14. Asset turn at European plant much higher due to higher prices. Can generate 500 crores of sales.
Asahi is just a technology partner to Vishakha Renewables as far as I know and they won’t be direct competitor to Borosil Renewables.
After removal of ADD on imports of Solar Glass, companies which are foraying into solar glass with small scale will find it difficult to compete with an established company such as Borosil.
Margins for Borosil should sequentially (qoq) improve as guided by the management while balance sheet should be watched very carefully.
I don’t think margins will improve, it will be in the range of 17% - 22%, it’s still very decent. Only the investors need to taper down their expectations of 30-40% margins and calculate future values as per new margin range.
Management in the recent concall answered my question related to margins. They said Germany operations will have 10-15% margins and India operations will have around 20-25% margins. Consolidated margins should be around 19-20%.
Peak revenue from current capacities is expected to be 1800-1900 crores. Assuming 1500 crore revenue and 20% EBITDA margins for FY24, gives 300 Crs EBITDA. Historically their EBIDTA to cashflow conversion has been good.
I believe it shouldn’t be priced at more than 15x EBITDA given the commodity nature of the product and increasing supply in the market. That translates into a valuation of 4,500 crore vs current market cap of 7,000+ crore.
Disc: I hold some shares and not planning to exit, but won’t buy at these levels either.
@Sheershj Hi Sheershj, by your estimates company is trading 50% premium to fair value. As far as i know management has stopped further capex plan, and unless solar glass price increase there is not so much upside to revenue/profit for next 2-3 years.
If you don’t I am curious why you wouldn’t sell the shares? I am just trying to understand point of view differing from mine, not trying to influence/criticize your decision in anyway.
Firstly I hold a very small amount shares. Less than 3% of my portfolio.
But more importantly I find the management of this company very able. I see they have strong executional capabilities and they are honest about things. Such management discover new ways of building profitability and such management is rare.
And since it is a sunrise sector, I want to give the company and the management, benefit of doubt before completely exiting.
What would you do in my place, if I may ask? @jishnu
@Sheershj Thanks for your valuable comments.
I agree with your assessment about integrity and capability of borosil group management, I have same opinion on them.
Where I differ is, i don’t see many opportunity for them to go to parallel buiseness lines. I think other solar panel components are very different ball game. I usually exist my positions completely when i don’t have visibility on earning growth, don’t usually hold reduced positions.I am bit more of a pessimist by approach I think.
Anyway there is no one way to do it when it comes to investing, Hope borosil renewables continue to do well
Hi All, Please can someone share the % of market share in Glass Industry, identified for different sectors? Like Auto, Real Estate, Defense and Solar etc . From my understanding Auto, RealEstate, Defense is 62% , 24% for Solar and remaining sectors misc sectors. I have done this by manually calculation, it my be wrong also.
