Established in 1947, SIL is engaged in providing building material products for interior and exterior building systems and roofing solutions. SIL got listed on the stock exchange in year 2006-07. It operates through five manufacturing plants located across four states ‘ Maharashtra, Gujarat, Tamil Nadu and Andhra Pradesh, and sells its products under the brand names – Swastik, Cemply and Ecopro through a network comprising over 3,000 distributors. The company also operates nine windmills in Maharashtra and Rajasthan
Detailed Results:
- The company saw moderate revenue growth of 12% YoY due to subdued demand for the roofing business in rural areas.
- PAT degrew by 35% on a YoY basis.
- EBITDA margins degrew by 70 bps to 13.1%.
- PAT margins stood at 3.8%.
- The company declared an interim dividend of INR 2.5 per equity share of the face value of INR 10 each for FY ’23.
Investor Conference Call Highlights
- The raw material costs are at elevated levels on the back of the inflationary trend prevailing in the economy. However, it has been able to pass on the partial increase in cost to its customers.
- The stabilization of operations at the Perundurai plant resulted in increased expenditure, which impacted the bottom line.
- The 9M capacity utilization was 66% with flagship product having a high capacity utilization than roofing products.
- The capacity utilization will go to around 77% to 80% in Q4.
- The company is on track to do revenue of INR 575 crores to INR 600 crores.
- For capacity expansion in Maharashtra state for manufacturing of non-asbestos cement board, the plant having a capacity of 72,000 metric ton have been initiated & land has been identified and land acquisition is in process.
- The Company is also in the process of setting up new unit in Orrisa state for manufacturing asbestos corrugated sheets of 120,000 metric tons.
- The management states that utilisation levels for the current year were low due to low sales in Q1(their highest quarter) owing to unseasonal monsoon. The company in general gets hugely affected by monsoon due to its high concentration towards rural areas.
- Forex had a negative impact of 9% coupled with 6-7% impact on costs of raw material due to Ukraine war. The company however passed 60-70% of the cost increase to customer.
- The company doesnt hedge foreign currency imports.
- The finance costs increased due to commissioning of new capacity coupled with higher working capital by 100 Crs.
- The supplier of fibre has pricing power due to the duopoly market structure.
- The company is engaging on only FOB contracts Vs COF in exports to avoid profits burn due to fluctuation of sea freight.
- The Maharashtra capacity is expected to come live in Q4FY24.
- The pricing in exports & domestic market is similar.
- The revenue mix of asbestos and non asbestos for Q3 and 9M FY ’23 is 78:22.
- The company’s annual marketing budget will be Rs.5 Crs.
Analyst’s View
Sahyadri is the market leader in Maharashtra for AC sheets market. It reported a mediocre quarter with sluggish revenue growth & PAT degrowth due to poor demand scenario & higher inflation costs coupled with forex fluctuations & finance, depreciation costs impacting the bottomline severly.It remains to be seen how the company will deal with shift from AC roofing to galvanised iron (GI) roofing sheets, Scaling up new capex, sluggish demand scenario & raw material inflation. However, given its strong market presence & relatively high capex for its size, the company remains an interesting small cap stock to keep in one’s watchlist.