This amounts to 4.795Cr,
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When they are the only one manufacturer in India, and many players must be looking to enter in this business and hire management skill in this business, it is good to shield top management from any poaching.
Yes, I checked the history of both the directors as well. Both have been with the company since it’s inception and have given 26+ years to it. That kind of commitment should be rewarded. One of them is also a director at Motilal Oswal, so that’s a plus point as well.
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Axis Capital is hosting the conference call. First time I think Borosil Renewables call is being hosted by a big investor house.
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Earnings Presentation
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Q3FY21 concall highlights:
| - Expansion of capacity from 450 TPD to 950 TPD. 500cr would be the estimated capex. 200 cr QIP was successful, 200 cr debt is negotiated, 100 cr internal accruals. | |
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| - Q3 91% capacity ulitilsation from the 450 TPD | |
| - Mismatch of solar glass in Oct-Dec has lead to inc in prices. 17% avg. China decided to complete the shortfall of covid in Solar glass | |
| - 16% exports | |
| - 38.3% EBITDA margins v/v 13.9% | |
| - Settlement with court case would be 6.6 cr | |
| - 2.3 GW of module glass is addressed by BRL, will become 5 post expansion | |
| - Project is expected to be commissioned by June 2021 | |
| - LT and ST contract for Gas prices to avoid risk in using benchmark prices. | |
| - Top 10 50% and top client and 10% of sales | |
| - Coal electric generation cost is almost twice of solar generation. | |
| - Every solar module require 1 sheet of glass, which will be hiked to 2 sheets of glass in the future | |
| - 40-50crs of cash flow this qtr and 90 cr in cash on B/S? | |
| - Current land can accommodate 2590 TPD inc the current brownfield | |
| - Outside China, the company is the largest producer | |
| - ROCE 20% |
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Any source where we can listen in yesterday’s earnings call?
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Adding some other points which were discussed in the earnings conf. call + recent research report niveshaay-borosil-renewables-update.pdf (565.0 KB) :
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Solar glass prices might soften from Q-1 onwards.
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Can expand capacity upto 3000 TPD in next 3 years.
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Overall demand is very strong and USA is the new market opening up. Glass prices may increase further once US announce plans.
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Q4 might be better or similar to Q3 in terms of operations.
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US administration is very positive for renewables and this is hugely positive for Renewables.
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EBITDA to OCF conversion of 90%+.
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Company is very well placed to grow in renewable energy!
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Can anyone share what’s the commodity element in the solar glass made by BR? Like how much correlation is there with the global solar prices with the margin of BR? Recently solar glass prices risen a lot but as China is increasing its solar glass production in next 2 years , how it will affect the margin outlook in coming future.
Thanks!!
There is no correlation in global solar prices vs solar glass prices. Solar power prices are reducing as the world is getting better at increasing the efficiency of existing solar modules. Today, the best solar modules have efficiency of anywhere between 18 to 25 % and every year we are pushing this limit further. The downward pressure on solar prices is also cause around the world manufacturing capacity for solar modules is increasing which leads to economies of scale.
Comparing solar glass price with solar power price is like comparing components of a Reliance oil refinery with the global crude oil price.
China is increasing existing solar glass capacity by almost 50% this year and this trend may continue. However, demand for solar modules will keep growing faster than supply for at least the next decade. The increase in capacity in China is also cause the demand for glass glass (both sides glass) solar modules is increasing with Chinese govt making it mandatory that at least 60% of all new plants need to have double sided glass solar modules.
Total current supply of solar glass is about 18000 tonnes per day, 90% of this capacity is in China with majority of it being concentrated with just two players (Xinyi Solar and Flat Glass).
Margins for BR should stay above 30% (even though management has guided long term margins to stabilize around 25%).
The commodity element of solar glass for BR is limited to the point that they are price takers rather than price makers. Whatever price China decides, the world has to follow. Tomorrow if Adani sets up a new solar glass plant and starts selling 20% cheaper than BR, they will have to follow suit and cut down prices.
Since BR has a significant first movers advantage, I expect them to remain price makers in India even if two other companies tomorrow set up a new solar glass plant.
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I was quite interested to speak to people in the solar industry regarding the decrease in solar energy prices - and following conversations with industry people point an interesting outlook on how solar is evolving.
There is a lot of conversations about decreasing solar energy prices, and that’s pretty true. NTPC coming into the market in a big way has made the solar power generation industry very price competitive. Eventually, this is a positive/negative depending on what side of the fence you are on, but for the growth of solar is a large positive as a large thermal behemoth is pushing solar energy, and being less than half the per unit price of thermal energy, for customers who only care about getting the power, shifting to solar is becoming more and more feasible. This reduces profit margins for solar energy installation players, but consequently makes them need to focus on more localisation and several of them might even set up their own solar panel manufacturing soon to bring down costs for a critical element. Eventually the demand for solar panels and hence solar glass should see a great uptick from this increasing industry competitiveness.
In my opinion this situation seems to be a win win long term for borosil renewables. I would envisage a large expansion of potential customer base and higher business from the existing base. Even if solar glass comes down in price, there seems to be a long runway for growth ahead, simply because this will follow in from the growth in solar altogether. I would be glad to hear further expansion plans other than current capacity addition as overall this seems like an opportunity where ambition should possibly outweigh prudence considering the current industry dynamics.
Discl : Invested and possibly biased
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Some basics of Solar Glass
Solar Glass & Mirrors, Photovoltaics | Solar Energy<
Solar Glass & Mirrors, Photovoltaics.pdf (171.4 KB)
Questions on Borosil Renewables:
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What will be the terminal value of the business in 2030 when India has installed 300GW of solar plants (and the world, too, would have installed a very large portion of their targets) ?
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What will be the Free Cash Flow between 2021 & 2030? We know it takes 500cr for 2.5GW. If BR takes its capacity to 15GW, that is 2500cr investment. What is the expected cash flow from operation for 15GW capacity over the next 10 years?
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As new capacity comes online, what happens to solar glass price and margins? Especially, what happens to glass price from say from 2028 onwards when there is massive capacity and almost a cliff edge ,i.e., free-fall, like scenario for demand.
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I remember sterlite tech when there was optic fibre story going around and stock was bided up. Solar glass is a commodity business as is optic fibre. Price of the commodity needs to be tracked as we have seen what happened to sterlite tech when optic fibre price crashed in China.
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Thanks @Yash8042 .
Some pointers on demand scenarios from article
The Chinese manufacturer’s exuberant figures featured plans to accelerate new production capacity amid confident predictions the new U.S. administration would join China and the EU in leading the global solar charge.**
Despite “a year of challenges and surprises,” in 2020, said Xinyi, “all signs suggest that PV installations will continue to achieve robust growth in 2021.” The update added: “The market supply of solar glass is expected to remain tight in the near term.”
On that basis, the manufacturer is laying plans for four more 1,000-ton lines in Zhangjiagang, in Jiangsu province, by 2022, with another 12 facilities potentially in the works, including in Anhui.
Glass price
The rebound in solar demand after Covid disruption in the first half of the year, plus rising demand for more-PV-glass-intensive bifacial and large-format modules, helped drive up prices in 2020 and appear set to keep supply tight, with Xinyi pointing out it typically takes 1-2 years to bring a new glass production fab to life.
At one point in 2020, solar glass supply shortages drove prices for the material up 70%, although that followed a 17% fall as project development was hampered by the pandemic in the second quarter, to set a year-on-year average price rise of 12% from 2019.
With Xinyi shipping 19.6% more solar glass than in 2019, thanks to its new production lines, the company posted record gross profits of HK$6.58 billion (INR6227 crore), up 68% from HK$3.91 billion. The HK$9.99 billion revenue generated by the glass business–up 47% from HK$6.77 billion
Converging above data points with various concalls by Borosil mgmt, gives a decent idea on demand trends
China is price trend setter for glass - Which will be up over next 1-2 years given multiple demand drivers - USA demand to rise with new administration and green focus, EU and China continuing the focus, although Article paints India demand slowing but that is not factoring covid lockdown impact of 2 qtrs, India should pick up as well**
bifacial adoption will further increase demand on increased glass consumption
Price trend - realization at annual level for Xinyl is up by 47% against volume growth of 19% i.e. UNIT PRICE UP BY 20% ON SUSTAINABLE BASIS FOR short to MED TERM
Q2 20 to Q3 20 for borosilrenwable aligns with above price trend(20% unit level) and hence a good base for next 1-2 years. I.e. approx 30 cr PAT for 140 cr revenue run rate ( intact it can be slightly better given ADD and logistics/shipping needs to be added to Xinyl price base - but can leave that as buffer)
over simplistic back of envelope projections for Borosilrenwable
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CY 21 - At current capacities of 450 ton, revenue of 560 to 600 cr and PAT of 120 - 130Cr
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Next 500 to capacity will add revenue of 600 to 650 cr and PAT of 150 - 170 cr( higher profit due to op leverage)
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Combined capacity of 950 ton will look like 1200 to 1300 cr revenue and 270 to 300 cr PAT(
Current market cap is 3600 cr+.
Invested
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I have one question
When will be the proposed capacity addition will start operating?
Full capacity will be available from FY 23.
Most Chinese companies toe the govt line and run down India and Indian companies. So I would not read much into it. But the capacity addition they are talking about is alarming. There are innumerable products where the Chinese have built capacities beyond current demand, turned into price makers and killed multiple industries in other countries. Supply chain disruptions seen in Europe and USA during pandemic are primarily due to absence of local manufacturing capacity outpriced by chinese competition.
Coming to Solar Glass, I believe the current global capacity is about 20,000 tpd of which Xinyi has a capacity of 3,300 tpd, which it is increasing by another 4,000 tpd this year with 4 lines and 12 other potential lines in the pipeline. This would take the capacity to about 36,000 tpd without taking into account capacity addition by others.
Borosil Renewables is going to take its capacity to 950 tpd by FY23. By which time most of Xinyi’s planned capacities would be up and running. This would definitely push down the prices. Borosil Renewables may not be viable/ survive without anti-dumping duties. But doing so will make the solar power capacities more expensive and unviable. So there will be a catch 22 situation here. At such a high PE, investors need to look beyond next two years.
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