Hope you are doing well.
Indian markets have many listed companies from the Steel tubes and pipes industry and the Lighting and Consumer Durable industry. However, there must be very few companies involved in such diverse industries at the same time and Surya Roshni is one of them.
We have been looking at Surya Roshni for some time as the company has been performing well.
While Surya is more famous for its lighting products; did you know that Steel tubes and Pipes segment accounted for 80% of its sales in FY 22 and 76% of its earnings before interest and taxes.
Overall, the numbers of the company look interesting and we therefore decided to dig deeper into the industry and have shared the details below from the Q3 FY 23 con-call transcript of the company:
Before that, few days back, we released our New Stock Recommendation for Alpha and Alpha + Members
It's a 1000 crore market cap stock, one of the largest players in its segment, has great operating performance track record, expanding aggressively and available at only ~10 times pre-tax earnings
You can get it along with other Investment recommendations, by subscribing HERE
Surya Roshni - Notes from Q3 FY 23 con-call transcript
- Lighting and Consumer Durable division
- Q3 and nine months FY '23 revenue grew by 6% and 20% YOY, driven by increased share of value-added products, along with a pickup in consumer demand during the first half of Q3 FY '23 owing to festival season
- New age line of products such as LED Lighting continue to do well
- Professional Lighting reported one of the best quarters in terms of revenue as well as project execution
- In fact, LED Street Light revenue grew by 66% and 74% respectively, in Q3 and nine months FY '23
- The company remains positive about consumer durables, considering a huge addressable domestic market
- The gross margin has also improved due to operating leverage and premium product and stability in input costs. There is a scope to improve margins very drastically further also
- Capex once operationalized is expected to lower the input costs as well as lower the external dependency
- In Q4, the EBITDA margin will be more than 10%. And the overall year last year was 8%, it will be in the plus side it will not be less this is what I can tell you now
- We believe that the lighting division segment should have a minimum EBITDA margin of 14-15% and we are working in that direction
- There are 2-3 things. Mainly, in our case, there is a big gap between our trade and other professional luminaires. The luminaries segment is a premium segment, high value and high volume. As I said last time, the industry has a 50-50 ratio. In our case, it is 75-25
- Second, we will have to include premium products in this
- When I talk about competition, I will not mention anyone's name, but in Tier 1 city, you will see the visibility of other competitors is much more than ours. So, Tier 1 city, because our visibility in Tier 2 is good, we are still behind in Tier 1. To improve that very quickly, we have appointed a long arm salesman
- I think if there is proper execution for a year or 15 months, then 12-14% is not a big deal
- As far as lighting is concerned, there should be double volume from here in 4-5 years and as far as profitability is concerned, if the top line is Rs 2,800 crores – Rs 3,000 crores then the lighting division should have an EBITDA of around Rs400 crores. That is our target and we are trying in that direction
- Steel pipe and strips division
- the company top line was affected due to continuous fall in global steel price during the quarter
- Our volume has increased by 9% in the quarter and in the nine months the overall volume has increased by 5%. We are assuming that the entire year should have around 7%-8% volume growth
- Nonetheless, with a growing share of value-added product, EBITDA per ton for Q3 stood at Rs 6,733 per ton, a robust growth of 76% year-on-year. Similarly, for nine months FY '23, EBITDA per ton is now at Rs 5,200, a growth of about 22% year-on-year
- the company is well on track to achieve 10% volume growth, along with EBITDA per ton above last time, I think I have given a number of Rs 5,000, but hopefully, we'll be doing Rs 5,500 EBITDA per ton for the whole year
- I can say that in the regular routine business, our average was around 4,000-4,200. The change that has come in our product segment, so because of that our sustainable number will be 5,000 minimum per ton. But above that it depends on whether API is exceptionally good
- The company continue to maintain a healthy momentum in order inflow for value-added products such as API coated, API export pipe, overall exports, GI pipe and other value-added pipes
- Over the years, the company has diversified its manufacturing base across the country at strategic locations to reduce the turnaround time and logistic cost
- To further strengthen this value proposition, the company is setting up expansion at Hindupur with an outlay of Rs 75 crores. This expansion is mainly aimed towards backward integration, which will help the company to reduce the cost
- The entire capex will be funded through internal accruals, and it is expected to be complete by March 2024
- Capacity utilization - if you see this quarter, it has been 72%
- The company has reduced debt by Rs 71 crores in nine months of its current financial year and continues to remain long-term debt free
- I had said that in the balance sheet of 2026, we will get debt-free. But today I am announcing that it will be 100% that when the balance sheet of FY’24 will be printed, the company will be debt-free
Disclaimer: This is not a recommendation to buy/sell Surya Roshni. These notes are as announced by the companies on exchanges and only for the purpose of information and education.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Details of Associate: Not Applicable
Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.
We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.
Disclaimer: You can access it here - LINK
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – No
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No