Analyse India

Dai Ichi Karkaria - Mrs S.F.Vakil, MD - 12-04-2018

• New Dahej Plant - 30000 tonne capacity in 3 different kind of plants - doubling of current capacity

• For several years we had good demand of products but could not offer due to capacity constraints, so we kept the prices high

• Now once the plant will open up we will bring down the pricing and try to maximize our order book

• We hopefully grow at 30-35% in coming year as partially plant will be started

• Will reach 95% capacity utilizations in 5 years i.e. by March 2023

• Main area of focus is construction chemicals, followed by oil fields

• Our exports will go up as we have special arrangements with Nalco Champions to buy from us apart from JV

• Invested 160 crs - so in current year we are trying to breakeven and in next 2-3 years will start showing income again

Full Interview :

OMMetals Infraprojects - Vikas Kothari, Director - 13-04-2018

• Bagged order worth 157crs from SJVN

• Order book of 700-750 odd crs contains about 14 projects

• 10 projects to be completed in next 1-2 years and remaining 4 projects will take 3-4 years

• FY 19 we are expecting good growth of around 20% in revenues

• Ebitda margins are over 15% and Net margins are around 8-10%

• As on today our core business is engineering and construction, real estate is an opportunistic investment

• Real Estate - Expected revenue of 1000 crs from projects under execution / sale at kota, hyderabad and jaipur - 200 crs already recognized

• Rest 800 crs will come in FY19 and FY20

• Real estate land bank has negligible debt, finance cost have shot up because of working capital loans

• Standalone debt is around 40-50 odd crs - Avg Wcap utilisation - 30-40 crs (9M FY18 Finance Cost = 13crs) 

• Total debt (incl some packaging debt = 80 odd crs) Borrowing cost as per Mgmt = 13%; Nos dont add up; Mgmt will check and update

• Continuously looking to monetize 1 road asset; not able to find the buyer; NHAI looking over to takeover the road

• Once NHAI takes over the road, they'll take the debt portion - debt shall reduce by 150-170 crs at consolidated level

• Total land bank - 26000 sq.m. in bandra; 4-4.5 acre land in jaipur; 10 acres in hyderabad; 10 acres in kota

• Baring the Bandra project, everything is being monetized

Full Interview :

https://www.cnbctv18.com/videos/market/expect-20-revenue-growth-in-fy19-says-om-metals-infra-34201.htm

Vmart - Lalit Agarwal, CMD - 13-04-2018

• People in smaller towns wants to buy good products from good places

• With GST coming in, Organized retail is getting the benefits

• Products that are selling in Tier-1 are also getting sold in Tier-3 and Tier-4 towns

• We operate in clusters so we dont need too many warehouses and distribution facilities

• Currently we have single warehouse in gurgaon (2.5L sq ft), will have to open few regional centres

• Capex - ₹450mn-500mn; Around ₹12mn/store and open about 30-35 stores plus some back-end investments

• 10 players like Vmart can be accommodated as the market is too large

• Mkt share of Vmart today is < 5% in the market they exist

• Promoter entity has not increased any stake, just consolidated stake to one entity

• We are focusing on tier 2 and tier 3 cities as that is where large amount of population lies

• Our customer focus is people who earns ₹20-50K/month

• Since 2012 all the stores we have opened up are without FMCG (Kiraana)

• We are doing good in apparel business which is appreciated by the customers

Full Interview :

Sequent Scientific - Manish Gupta, MD – 12-04-2018

• People confuse animal health to human pharma

• Ours is a similar indutsry to FMCG

• Animal health business is close to 900 crs on annual runrate basis

• 70% revenue comes from europe; India is less than 10%

• We are the only to have US FDA Approved Vet facility in the country

• Aspiration is to be in global top 10 in next 4 years - Revenues of 2000 crs  (Current 800 odd crs)

• Expecting improvement in margins of 200bps yoy - will be closer to 20% in next 4 years time

• Growth will come from
  • Organic growth - as it is branded generic industry; every year we claw some shares of other
  • New product pipeline - 28 products under development
  • Inorganic strategies - for some of the unrepresented market in our portfolio

• US and Australia are important veterinary geographies - Area of focus for inorganic growth

• API - As we grow in US - Growth will be price driven and not volume driven - will translate into margins

• We are focused on food producing animals (60% of global demand is in food producing animals)

• With demerger of human API business, we now are pure play animal health company

• Post demerger - effective debt is ~300 crs; have cash of 50 crs and investments in strides shares; net basis we are zero debt co.

Full Interview :

• Last year has been challenging in terms of margins - Raw material prices have gone up - Revenue side has been positive

• Demon, GST, Anti duming duty has impacted Chinese imports in India. From nearly 30% of truck radial mkt they are down to 1/3rd of that

• RM costs still have some pressure on margins due to oil prices, carbon black availability - Causing challenge to bottomline

• Going forward seeing upwards momentum on both PV and CV side

• See double digit growth coming in Q1 and Q2

• Today demand is more than supply in terms of what we can cater to PV and CV segment

• Times on revenue side are good

• 60-65% sales comes from CV segment

• We have 28-29% share in truck bus radials

• Expect CV segment volume growth in high teens

• Capex - doubling capacity in chennai 6000 to 12000 tyres/day (Currently at 9000 tyres/day)

• Hungary plant - invested 500 mn euros - (Currently at 8000 tyres/day in PV); By Sept trying to reach 16000 tyres/day

• TBR tyres to be launched this May-June in Europe

• We have done very well in europe , gained mkt share there

• Signed with AP Govt - cannot say the amount of money to be invested - still at project stage

• Looking at building capacity of 16000 tyres/day in AP - but investments will start in FY20

• Free cash flows will come in from FY19-20

• Rubber prices - not been coming off - margins would be under pressure in Q4

• RM basket still remains challenge for us and the industry

Full Interview:

• Alumina tender prices moved from 390 to 473 i.e. 21%

• Around 3M tonne (1.5 lac tonne p.m.) alumina will not be avl as partial shutdown of brazilian refinery

• Every month 1.5 lac tonne shortage will be there is alumina

• Mkt price of alumina will certainly remain at curr prices of 350-360$ levels; expect it to move to 450-490$

• Last qtr 13 shipments were made; will likely do 1.3 million tonne exports this year; 9-12 shipments made in this qtr

• Refineries working at 100% capacity

• Caustic soda is main input cost - prices gone up by 5% in last 2-3 months - it will sustain at this price - 40-40k/tonne - may be peaked at this  level

• If this kind of prices sustains, will certainly be ebit positive

• We are largest providers of logistics vehicles, primarily to Indian Armed Forces

• Earlier we used to move only people (2% of defence budget), now we move everything from missiles to bullet proof vehicles (22% of defence budget)

• Defence takes a long period, but once it comes it stays for a long period of time

• Almost 800 crs of our business will come from defence

• In last 1 year we have won 12 out of 15 tenders. these tenders are for developmental orders, once it starts converting into real things we will get cumulative orders of 5000 crs in next 5 years

• It works in stages - RFI - RFP - Make a vehicle - Development order - Trials - then bigger orders

• It is a long gestation business but not cyclical, once you are in, you are in for a long period of time

• Will stick to our core competency of automotive technology and not get into something like submarines, missiles, guns etc