IGI Logo

Capex augmented, High value inventory behind, New geographies to add volumes and reduce earnings volatility

Result Highlights

* Volume de-grew by 12.9%q/q and 13.6%y/y to 0.74MT (YSEC est. 0.89MT) in 3QFY22 due to unseasonal/extended rains in focused markets and Net Realization/t (Blended) stood at Rs4,489/t (3.8% q/q & 6.2% y/y).

* Company reported revenue to Rs3337mn (YSEC est. Rs3887mn) lower by 9.6% q/q and 8.3%y/y in 3QFY22 due to weak demand in the southern regions because of unseasonal/extended rains.

* EBITDA declined by 23.8% q/q and 55.7% y/y to Rs463mn (v/s YSEC est. Rs717mn) in 3QFY22 due to unprecedented cost escalation (for RM, freight and fuel cost) coupled with weak demand scenario resulted in margin deterioration by 260bps q/q and 1483bps y/y. While prices for imported pet coke/imported coal has fallen by 36.4%/16.4% sequentially which will start reflecting from subsequent quarters.

* The unitary power/ freight cost increase by 36.3/-4.8% q/q and 127.9/2.1% y/y respectively, resulted in blended EBITDA/t decline by 12.6% q/q and 48.7% y/y to Rs623/t in 3QFY22.

* Adj. PAT de-grew by 74.7% q/q and 89.2% y/y to Rs53mn for Q3FY22 due to sharp fall in operational profit and increase in interest expense leading margin to report at 1.6% (-411bps q/q & -1202bps y/y)

* Gross debt increased to Rs12567mn from Rs7737mn sequentially resulted in Net Debt/Equity moved to 0.73x from 0.59x.

Our View

Heavy rains, lack of availability of sand/labour affected the demand and pricing in focused markets of company. Escalated RM and fuel/freight cost has dented operating profit in Q3FY22. Hence, we slightly trimmed our volume expectation for FY22E/23E by 5.2%/2.7% while believe that pricing scenario to improve as price hikes are taken by company. Increased our NSR estimates by 8.1% respectively for FY23E resulting in revenue to move up by 5.3% for FY23E. Additionally as high value inventory scenario behind us, we upgraded our EBITDA estimate for FY23E by 16.2%. With the commencement of the Satguru and Jajpur plant company’s first phase of capex is completed toward 10MTPA; leading to less earning volatility on the back of geographical diversification. Net Debt/EBITDA is expected to sharply come down in FY23E to 0.5 from 1.9 in FY22E backed by better operating profits. At CMP, stock trades at 11.4/5.4x EBITDA on FY22/23E. Thus, we retain our BUY rating with a TP of Rs322 (earlier Rs321), valuing stock at 7.3x EV/EBITDA on the FY23E estimate.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer