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In India, building materials sector has experienced a consistent growth and business expansion. The thrust in infrastructure development, coupled with the uptake in real estate demand is positive for the sector.
Source: Shankara Building Products Investor Presentation
Shankara Building Products is India’s one of the India’s leading organized retailers of home improvement and building products and is aiming for consistent 20-25% growth in sales over longer term.
To understand the company better, we have shared notes from the Q3 FY 24 con-call of the company:
Before that, a few days back, we released our new stock recommendation for our Alpha and Alpha + Members
Company’s main growth and profit driving segment has grown more than 10x in terms of sales and profit in the last 10 years. We believe it has the potential to double its PAT in the next 3 yrs
For details on the stock click HERE
Shankara Building Products – Notes from Q3 FY 24 con-call
– Market Conditions:
- Challenging quarter due to rising inflation, higher interest costs, and flooding in some regions such as Chennai and coastal Andhra Pradesh
– Financial Performance:
- Despite challenges, achieved 22% YoY revenue growth for the first 9 months of FY24
- Non-steel revenue grew significantly (35% YoY), increasing its share to 11% of total revenue (up from 9% last quarter)
– Non-steel growth drivers
- Private label, Fotia Ceramica within the tile segment. 40% YoY increase in tile segment revenue and expanding presence across South India
- Sanitaryware: Revenue up 40% YoY
- Future Focus: Growing electrical and paint verticals
– Steel performance
- Tonnage recovering well, exceeding pre-pandemic levels
- In FY19 – 5,00,000 tons, COVID year it dropped to 3,42,000 tons, FY23 it crossed around 5,15,000 tons and already at 4.5+ lakh tons by Nov 2023
– New Geographies
- Western region contributing 10% of revenue (growing 50% YoY)
- Central region contributing 3% of revenue, with plans to open new fulfillment centers in Maharashtra and Madhya Pradesh
- Targeting 2-3 new stores per year in strategic locations
– Demerger
- Demerging building materials marketplace business
- Indicative split: Marketplace revenue – Rs. 2,775 crore, Manufacturing revenue – Rs. 677 crore (for 9 months)
- Marketplace business is poised for higher margin accretion and enhanced return indicators
- Demerger scheme approved by board, awaiting stock exchange approval (expected completion in 10-12 months)
– Guidance
- Marketplace EBITDA margins expected to be 3.5-4% by FY25
- Overall revenue growth target: 20-25% annually
- Confident in maintaining 40% growth for non-steel and 20% growth for steel verticals
(End)
Disclaimer: This is not a recommendation to buy/sell Shankara Building Products. 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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