Please find below the report shared with Alpha/Alpha + members on Everest Industries (NSE Code – Everestind) in Oct’11 at Rs 135.
We are pleased to share with you Alpha recommendation for Oct’11.
Key Investment Highlights
Improving demand scenario: The government is targeting a sustained economic growth of over 8% this year. This growth would include a 4% growth in the agricultural sector, 10.30% in industrial, 11% in construction and 9.60% in the services sector. Everest operates in these key sectors and will benefit from the anticipated thrust by the government. The demand for EIL Building Products is strong in rural, commercial and industrial sectors.
Demand for pre-engineered buildings (PEB) and ready to use building products Â is growing swiftly for efficient project management. Manufacturing industries like automobile, power, textiles, engineering goods and services like logistics, warehousing and infrastructure are large users of PEBs and their rapid growth has a positive impact on Everest Industries Ltd. Improved economic scenario and revival in industrial activities shows great potential for PEB industry in India.
Government Initiatives: Increased expenditure on rural and infrastructure developments with an aim to provide adequate shelter to the rural poor, the Government of India, has introduced programs like Indira Awas Yojna, Golden Jubilee Rural Housing Finance Scheme, Pradhan Mantri Adarsh Gram Yojna, Productive Housing in Rural Area and Rural Housing Fund etc, are rapidly expanding the demand for building products. Government thrust on developing backward areas will lead to an increase in construction of schools, housing and hospitals which is the positive note for the Everest Industries Ltd.
Brand Everest: EIL is a pioneer in roofing segment with 76 years of experience and offers a wide range of solutions for various building and housing construction needs. Over the years, its strategic investments in technology have allowed it to continually introduce innovative products in the market. EIL enjoys approx. 14% market share of the AC roofing industry in India.
In the recent past it has done work for companies like Ericsson, Walmart, Vodafone to mention a few.
Pan India presence: EIL has the most extensive distribution network with nearly 6000 sales points spread across the country and servicing over 1,00,000 towns and villages. In near future, company is planning to add few more retail outlets to tap the increment growth in demand of building products. To support the wide network and high demand of its products from the various parts of the country, company has developed its 5 manufacturing facilities located at different parts of the country.
Capacity expansion: EIL has decided to set up a Fibre Cement roofing plant with a capacity of 100,000 MT. This plant is expected to commercialize in next few months. With this the total installed capacity will increase to 810,000 tonnes which will further help EIL to ramp up production and meet the rising demand in the future.
Robust growth and turnaround in Steel Building Division: Since the commercialization of Steel Building division, this segment has shown a robust growth in top line by growing at a CAGR of 33% backed by incessant flow of orders to the company. The order book at the end of FY11 stood at healthy amount of Rs. 100 cr + thus showing a strong visibility of revenues for the coming future. It has shown an operating profit in FY11 compared to a loss of Rs. 8.16 cr in FY10. This turnaround has helped company improve its margins and EPS in FY11. Going forward we believe this segment to grow at a rapid pace and be a major business for the company.