But i see PAT has increased ?
I said topline growth is lagging
Pat has grown much led by other income i.e. freight
Q3 results were decent as Other income saved them, but going forward topline growth need to be accelerate to continue momentum
They incorporate freight costs, integral to product costing due to weight, under “other income.” While technically part of core business income, they employ an unconventional accounting method for it.
This is a incorrect, they spent 15 cr. capex already in 9MFY24. In Fy23, it was 19 cr. So they are reinvesting quite a bit in the business.
Agree to your point on stagnant sales.
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Yup was telling same about other income
That’s the point, i beleive they need to do more Capex, if they are entering new products as they suggest in full capacity revenue can be 10-15% higher… which I feel it’s not satisfactory
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One more thing to be noted is always they had other income and assume this will continue but topline is the concern
Correct me if am wrong…
And also how about tailwind in this sector ? And how geekey will capture that?
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Other income is normal in companies. It becomes a concern when other income is greater than Actual business income
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It’s their part of core income i.e. freight
So nothing to worry
Topline is the main concern
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Harsh any idea… how they compute freight? As exports have fall, but freight one has increased
Do the freight only consider export one or overall?
Always confuse in anticipating this item in future
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I dont really understand this well, even at AGM management didnt explain this very well. But I guess their volumes might be higher in recent times, and with correction in commodity costs, overall revenues look muted. But this is just a guess.
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Do not post one liners which does not add any value & save the precious forum space.
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I am sharing notes from their AGM24 below.
1. Can you please breakdown our 3% sales growth in FY24 into volume vs realization growth?
4.12% increase in volumes
Stainless steel fasteners are doing well in domestic market - 7.51% of FY24 sales (vs 6.72% in FY23). Expect to penetrate more customers in FY25
2. Our export was down in FY24, are we facing increased competition in our products being sold to USA? What was the volume decline we witnessed?
3. Can you please tell us more about competition in USA? Are Chinese suppliers back and are they impacting our growth? What’s our diversification plan beyond USA?
Exports down due to competition
Competition in US: huge competition from Chinese and global suppliers.
4. “Other payables” reduced to 33 cr. (vs 41 cr. in FY23). Can you again explain how it is different from “Trade payables” and why are we continuing with this non-conventional practice? We don’t see any other listed companies following this practice
Other Payables: general practice
5. We show cash taxes paid under cash flow from finance which should be shown in cashflow from operations. I request to please rectify this in subsequent annual reports.
Will talk to auditors
6. In FY24, we spent 21 cr. in capex. However, we don’t see any increase in capacity in any of our products. Instead we see a decline in our nails capacity (from 30,000 MTS PA in FY23 to 25,000 MTS PA in FY24). Can you please explain this discrepancy and give a breakup what this capex was spent on?
7. What is our capex plan for FY25 and what growth do we envisage this year?
Not done any major expansion – refurbishment + upgradation to maintain outputs
300 tons capacity added
35 cr. capex in FY25 – to increase wires (from 30k tons to 48k tons) – running at peak capacity in FY24
8. What was our capacity utilization in our different business segments in FY24? We used to report production numbers earlier but this data was missing from last couple of annual reports. Can you tell us production numbers for FY24?
9. What utilization are we operating at and what is peak revenues we can generate from this capacity?
46’500 MT production - 83.38% utilization (97% utilization in galvanized wire, 36% in stainless steel fasteners)
10. In the USA, we sell through a promoter owned entity “Geekay Wires USA”. Why do we require to sell via a promoter entity and why can we not sell directly by incorporating a subsidiary in USA?
Geekay wire USA has a customer base already
11. We have lent 15 cr. to ASP Pvt Ltd and taken approval to lend upto 50 cr. Can you tell our plans for ASP Pvt Ltd? Its not even a subsidiary, yet we are lending large sums of money here.
ASP: profitable co, will help them grow in fasteners
12. In our industry, most peers make 5-7% EBITDA margins whereas our margins are much higher. Are FY24 margins sustainable and what kind of normal margins should we expect?
Diversified customer base with a lot of products
10-12% PBT margins are sustainable
13. Our receivables over 3 years has consistently been around 99 lakhs for several years now. Why are we not writing it off?
Management believes receivables are fully recoverable
14. In the spirit of better governance practices as we scale, I request management to atleast organize a half-yearly conference call so that investors can be updated with the company’s progress.
Will consider
Other points:
- Raw material for products is almost same (but different grades and sizes)
- Margins: Galvanized wire: 14-15%, stainless steel fasteners: 10-12%
- Market for galvanized wire is mostly domestic
- In last few years, added new products (stainless steel nuts and bolts), expanded capacity, and are adding newer products
- Freight income: part of sales value and is shown differently under invoices due to customer requests
- Market is good currently, 8-10% expected revenue growth
- Optimistic for next-3 years (big OEMs + solar sector)
Disclosure: Invested (sold shares in last-30 days)
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This Update would be Biased, so don’t take it as recommendation and do your own study:
Feel Geekay is still a good company, but management seems to be out of the track & also business can face some headwinds in near future. Reason:
- Topline Growth is almost stagnant from last 6-7 Qtrs. Bulk of the PAT growth was due to improvement in Margin
- Company has done Capex but the fruit hasn’t been seen till now
- Margin was expanding due to SS Products & Falling commodity prices (Might reverse from here on)
- Why? FED & Many Central Bank has started lowering rates (Commodity & Int Rates has inverse relationship). So, commodity prices can rise from here on & Geekay able to transfer it to customer might be a question!!
- ASP Pvt Ltd lending (Why would anyone invest in other co. if they can compete with them; Geekay size is small they can use that to expand its Biz rater than others)
- Valuation: It was cheap due to ASM/ESM reason… Now PE is at 15-16x (Near to its Peers) with company not showing much growth it might be near to its fair value
- Base Effect: Now last 4 Qtr base is also high (So might face low to no growth from here on)
In short, Antithesis comes out to be more than growth outlook with Geekay showing No Growth, Margin can fall due to commodity prices can rise from here on, Capex not utilised at most, Management want to invest in other fastner company, Base Effect & Valuation turns out to be fair
Some Positive are:
- Borrowing cost is decreasing & CFO is also Positive & Rising); Can see Deleveraging benefit
- As in AGM says they can grow 8-10% & margin can rise due to new products or (if commodity price rises & still they able to pass on then) ; If that played still then again it can see good momentum with Margin Expansion, Deleveraging
Track such things; will too track if they can walk the talk (Then again it might look lucrative bet)
No Reco
P.S: Not Invested Now (Sold it near 95-100 levels & from their also it is 10% up)
- I might be totally wrong in this, so do ur analysis before doing anything
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