Hello Sir,

Hope you are doing well.

Recently, I was going through the con-call of Sahyadri Industries which deals in Asbestos and non-asbestos flat sheets and boards.

While the demand for the products seems stable, the industry is reeling under the pressure of surge in raw material prices.

As a result, despite the increase in sales, almost all the companies from the sector have reported lower margins and profits.

In general, we like looking at companies which have done well in the past but currently going through a tough phase as a lot of times one can get good companies at cheaper valuations in such scenarios.

Below, we have shared interesting insights from the Q1 FY 24 con-call of Sahyadri Industries to understand the current situation and the outlook for the company. Hope you find the details useful for your own investments or to add the stock to your watch list.


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Sahyadri Industries – Insights from Q1 FY 24 con-call of the company

– Industry Details

  • The rural economy has witnessed a growth at a slow pace over last few quarters and the current operating environment has presented significant challenges for the businesses in this industry
  • The steep hike in raw material prices such as asbestos on account of geopolitical tension between Russia and Ukraine, coupled with the surge in freight and fuel costs, resulted in a rise in the overall expenses
  • The raw material prices had risen rapidly during FY23, having said that, the increased raw material prices is the new normal for the overall sector
  • As regards the new capacity whosoever is bringing, I think mainly it is coming in the non-asbestos business, and there I think there is a big gap between the demand and supply and the market is going to be much bigger as we progress

– Performance

  • Sahyadri Industries registered a topline growth of 18.1% on Y-o-Y basis
  • We have undertaken 5% to 6% of the price hike on our products to offset the hike expenditure incurred towards the raw material cost
  • If you compare the 1st Quarter of the last year, compared to that the fiber cost itself has increased by 44% and in the mix, it works out 50%, that works out 22%, and against the increase of 22%, hardly 5% to 6% has been passed on and in addition to that other costs have also increased
  • Now the Q2 again, there may be some reduction, but for Q3 and Q4 there is all chance that partly we may still get a price increase

– Capacity

  • In Q1 FY24, the capacity utilization was 94% whereas it was 85% for the corresponding quarter last year
  • 69,000 tons is my total capacity of all the plants. Out of that, Perundurai plant, that new line which started is 6000 tons
  • We have two segments, one is the non-asbestos, second is the asbestos
  • if we see the roofing, asbestos is 50,000 tons and boards is 19,000 tons. Out of that 19,000, around 6000 is the asbestos and the balance is the non-asbestos, but we can produce 19,000 non-asbestos, and we can produce 19,000 asbestos also. So, it is a mix of both, depending on the demand

– Value added products

  • As I am maintaining that the value-added endeavor is 25%. Presently, we are at 17%-18%
  • I think we have the internal target to reach 25% at the end of say Q4

– Raw material

  • Raw material mix – Asbestos is around 50%. Balance is others
  • I don’t think the price increase would be there in the raw material. Only the impact, maybe if something goes in the dollar rupee equation Northward or Southward


  • Our capacity expansion in Maharashtra state for manufacturing of non-asbestos cement board plants having capacity of 72,000 metric tons have been initiated. The land has been identified and land acquisition is in process
  • Also, the Company is in process of setting up a new unit of Orissa state of manufacturing asbestos corrugated sheets of 1,20,000 metric tons
  • the CAPEX would be completed either in the Q4 of FY 25, that means FY24-25 or the early of FY 25-26 and once it is completed, it will start at the rate of 60%-70% capacity utilization. So, in FY25-26, we may get the benefit of around, say Rs. 40-Rs. 50 crores additional revenue



Disclaimer: This is not a recommendation to buy/sell Sahyadri Industries. The securities quoted are for illustration only and are not recommendatory.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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