Hello Sir,
Hope you are doing well.
Recently, I was going through the details of Visaka Industries.
Like Sahyadri Industries, this too is in the business cement roofing sheets which are largely used in rural areas and currently facing the issue of high raw material prices.
What’s interesting is that in the overall turnover, the share of cement roofing sheets is going down and the contribution of new age products like Vnext or Atum is increasing.
ATUM is basically Solar Cells embedded into Fibre Cement Boards making it a composite Solar Roof.
Below, we have shared interesting insights from the Q1 FY 24 con-call of Visaka 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.
Sometime back we released our new stock recommendation for our Alpha and Alpha + Members.
It’s a sub 3,000 crore market cap, fast growing Specialty chemicals company
The company has introduced new import import substitute products, expanded aggressively over the last 4-5 years, started reducing debt and available at only ~11 times last 5 years average net profit
You can get this new recommendation along with other recommendations, by subscribing HERE
Visaka Industries – Insights from Q1 FY 24 con-call of the company
– General
- Over the last 4 decades, the company has established itself as one of the leading building construction material providers and a dependable synthetic yarns manufacturer in India
- In the last 2 years, Visaka has invested in new and additional manufacturing capacities of our Vnext fiber cement boards and panels and our cement roofing as well
– Performance
- The company has achieved a revenue of Rs 447 crores for the current quarter. The building products revenue for the quarter stands at Rs 385 crores and the textile turnover is at Rs 62 crores
- The building products revenue for Q1 FY24 stood at Rs 385 crores against Rs 391 crores in FY23 Q1 and EBIT of Rs 27 crores as compared to Rs 53 crores in Q1FY23
- The synthetic yarn revenues for Q1 FY24 stood at Rs 62 crores against Rs 88 crores in Q1FY23 and EBIT for the quarter for yarn segment stood at Rs 8 crores as compared to Rs 12 crores in Q1FY23
– V Next
- Vnext boards are an eco-friendly alternative product to plywood and gypsum board, wherein the product is both fire and termite resistant
- Vnext has seen a tremendous growth in terms of volume of almost 43% over the past year
- The capacity utilization of Vnext in Q1 FY24 has stood about 85% and is expected to increase in the coming quarters
- We are glad to announce that the product Vnext is also part of the new parliament building as well as the Surat Diamond Bourse
- In order to meet growing demand for our products, we have done a 72,000 metric ton of greenfield expansion at West Bengal’s Midnapore, which is expected to be operational in September 2023
- We are seeing a very bullish outlook of almost around 25% to 30% in terms of growth rates in this space
- We can expect 15% EBITDA margin in Vnext
– ATUM
- The solar cells are embedded into the fiber cement boards making it a composite integrated solar roof
- We have patents for ATUM, as some of you may already be knowing, in India, USA, and South Africa
- We have done projects for Mahindra, BPCL, Piramal, and the Rainbow Hospitals and several others in the first quarter
- In the ATUM, if we do about 30 megawatt, we would be seeing anywhere between Rs. 85 crores to Rs 90 crores in terms of revenue. And 60 would be double of that, around Rs 170 crores to Rs 180 crores
– Raw material
- The increase in main raw material costs, i.e., the chrysotile fiber, has impacted the margins drastically compared to our previous year’s compare to this quarter
- Asbestos pricing – In terms of fiber costs, actually the fiber costs have gone up by almost 22% to 25% in terms of last year what we have seen and we have been able to offset hardly 2% in terms of increasing our selling price for that space
– Borrowing
- The company has gross debt of Rs 410 crores which is considered as moderate due to aggressive expansions that we had undertaken in the recent years
- With better performance and cash flows in the coming quarters, we expect our borrowings to come down and with lesser interest costs
– Guidance
- We are optimistic about the industry as a whole given that the building material segment is expected to grow at a pace of 8% to 12% for the next 4 to 5 years
- The Vnext business, which we started from scratch in 2008, now would likely touch around Rs 450 crores by the end of this year 2024, and as informed, targeting a turnover of Rs 1,000 crores by the year 2030
- We, as a company, had taken up a goal to make our legacy business to new-age business in terms of revenues to equalize, and we are very happy to share that by FY25, we should see a 50:50 ratio in terms of new businesses to the legacy business
(End)
Disclaimer: This is not a recommendation to buy/sell Visaka Industries. The securities quoted are for illustration only and are not recommendatory.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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