Latest management interview
Here are my notes from their December concall.
08.12.2021 (Investor meet)
- CNG cylinder business and other value added business can achieve EBITDA margins of 20% with lower working capital requirement. Company is already transitioning the value added business segment to cash and carry model leading to improved working capital
- Pricing contract with customers: 40% on quarterly basis, 40% on monthly basis and the remainder on spot basis
- Gas cylinders: The only two domestic players are Supreme (capacity: 0.5 mn) and Time technoplast (capacity: 1.4 mn). The current tender orders from OMCs will be served by these two. Next 2-years capacity of Time Technoplast is fully booked
- Will reach pre-covid business levels in FY22
- 12-15% EBITDA margins on packaging business with ROCE of 13-14% which can go to 17%. Cannot improve working capital situation much due to industry structure
- Imports 60% of raw materials, with new HEML plant coming up import will be gradually reduced to 40%
- Battery segment will be divested, currently its getting very good traction with orders from reputed clients like Tesla in their solar segment. The orders will increase visibility so that the entity can fetch good value
- FY25 revenue target is ~5000 cr. with ROCE of 20%, with established to value added products mix of 55:45 (a similar debt profile as of today will be maintained with debt not exceeding 2x EBITDA)
- FY22 CAPEX ~ 140-150 cr. (growth capex of 70-80 cr. and remaining is maintenance capex)
- For a 1 mn cylinder capacity, capex required is 60-70 cr. and project completion is 6-8 months. Not planned any capex for the pipe and tehpaulin products
- Current capacity utilization: 70-72% (on consolidated basis), Division wise breakup
o Packaging: 70%
o IBC: 75%
o Battery: 50%
o Infra related business: 50%
o Automotive: 50%
o LPG Cylinder: 75%
o CNG cylinder: 90% (on a small base) - Based on existing capacities, company can achieve annual turnover of ~4000 cr. For the additional 1000 cr. to reach 5000 cr. by FY25, cumulative capex that is required is 500-600 cr. (including maintenance capex)
Disclosure: Invested (position size here)