Tag - capex

Now comfortable with organic as well as inorganic growth – Shree Cement

Update on the Indian Equity Market:

On Monday, NIFTY closed 0.3% higher at 16,496. Top gainers in NIFTY50 were HCLTECH (+4.3%), TCS (+2.1%), and NESTLEIND (+2.0%). The top losers were GRASIM (-3.1%), ADANIPORTS (-2.8%), and M&M (-2.6%). The top gaining sectors were IT (+1.7%), OIL & GAS (+0.4%), and FINANCIAL SERVICES (+0.4%) while the top sectoral losers were MEDIA (-1.7%), AUTO (-1.5%), and REALTY (-1.0%).

Now comfortable with organic as well as inorganic growth – Shree Cement

Excerpts of an interview with Mr. HM Bangur, MD of Shree Cement (SHREECEM), aired on CNBC TV18 on 20th August 2021:

  • SHREECEM saw good average prices in 1QFY22 and management expects prices to remain good. The issue is on the raw material cost pressure. Commodity prices have increased almost 2x vs last year.
  • SHREECEM has hedged fuel upto end of November 2021, meaning energy prices for 2QFY22E will remain at par with 1QFY22.
  • Despite this, management agrees that cement prices have to increase eventually or else margins will suffer for the entire industry. The current commodity cost pressure cannot be endured by companies for a long time.
  • SHREECEM targets to have volumes of 27 to 28 mn tonne for FY22E, translating to a low growth YoY.
  • EBITDA per tonne for SHREECEM should sustain around 1QFY22 levels of Rs 1,481, with a band of +/- Rs 50.
  • Demand in the Northern and Southern India has been good. There is a seasonality factor in Eastern India where demand picks up only after October. There have been no surprises on the demand front. Pressure on demand has subsided after the April-May period as the Covid-19 cases reduced.
  • SHREECEM has about Rs 64,000 mn cash on book. The capex intensity for last 2 years was lower due to Covid-19 disruption. SHREECEM had completed their QIP just a few months before the onset of Covid-19 in India in 2020.
  • On the subject of cash utilization, SHREECEM is planning to order a 4 mn tonne cement unit in north India in the next 1 month.
  • Unlike before, SHREECEM is now comfortable with inorganic growth as well and is looking for acquisition opportunities. Till now were averse to acquisitions- now comfortable with both organic and inorganic growth. Capex gap for 2 years due to covid that’s why there is cash acquisition as did QIP just before covid.

Asset Multiplier comments:

  • In FY21, despite impact of covid-19 on the revenue, Cement companies in India managed to maintain good EBITDA levels due to good pricing, cost optimization, fuel mix optimization and increase in use of green power.
  • Demand for cement in India is expected to remain healthy due to Government’s push on infrastructure, roads and railways, housing and rural development.


Consensus Estimate: (Source: market screener, investing.com websites)


  • The closing price of SHREECEM was ₹ 25,854/- as of 23-August-2021.  It traded at 35x/ 30x/ 25x the consensus earnings estimate of ₹ 741/ 866/ 1,019 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 27,718/- which trades at 27x the earnings estimate for FY24E of ₹ 1,019/-


Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

FY22 to be a game changer – Dixon Technologies

Update on the Indian Equity Market:
On Thursday, Indian equity markets snapped a two-day losing streak with the Nifty50 closing 1.5% higher at 11,449. RELIANCE (+7.3%) was the top gainer after reports of potential investments in its retail arm, Reliance Retail. BPCL (+6.0%), and ASIANPAINT (4.2%) were the other lead gainers in the index. INFRATEL (-4.8%), HINDALCO (-2.9%), and TATASTEEL (-2.3%) led the losers. Among the sectoral indices, PSU BANK (+2.5%), MEDIA (+1.3%), and FINANCIAL SERVICES 25/50 (+1.01%) were the top gainers. METAL (-1.1%), and PHARMA (-0.01%) were the only sectoral indices to end in the red.
*Nifty Financial Services 25/50 is a new capped version of the Nifty Financial Services index.

Edited excerpts of an interview with Mr. Atul Lall, MD, Dixon Technologies (India) with CNBC-TV18 on 8th September 2020:
• A government panel has recently cleared $100 bn of mobile export proposals from global manufacturers.
• Dixon has submitted 2 applications under the production-linked incentive scheme (PLI) but has not received an official nod yet. It might take a week to ten days to receive official communication from the government.
• They have large contracts for exports and domestic markets lined up with big global brands. The focus is to accelerate project implementation and production is planned to start by Q4FY21.
• The government is giving a 4-6 percent incentive for manufacturing under the PLI scheme for the next 5 years, which Mr. Lall calls the government handholding in the infancy stage of any industry. There is some disability in manufacturing mobile in India when compared to China, and the scheme is helping reduce that.
• They are seeing significant traction from large global players looking to shift base from China and other countries to India.
• Year 1 is a very short period and they get barely 3 months to generate revenues in this fiscal (FY21). In year 2, in one application, there is a ceiling of about Rs 3000-4000 crore. If they get both the applications, they will be able to generate revenues of Rs 8000 crore through mobile manufacturing, which is a big leap for a company like theirs.
• There will be a small margin expansion with a large volume expansion next year, which is going to be a game-changer.
• In the LED TV segment, the order book is very strong and they are operating at 110% capacity and with the government shifting imports of a certain kind of televisions from OGL (Open General License) to a restricted category, their order book is increasing. They have already expanded their capacity from 3.6 mn to 4.4 mn units, there is a further expansion planned to take it to 5.5 mn units. This increased capacity is almost 33% of the Indian TV requirement. This second round of capacity expansion will be completed by March 2021.
• The capacity expansion is happening across verticals, including mobiles and washing machines.
• There will be significant growth in Q2 on a YoY basis. Plants for LED TV, mobiles, and washing machines are running at almost 110% capacity. Lighting being an extensive manpower-oriented segment, they had to re-engineer the lines because of social distancing is working at 80% capacity. The one vertical that is not performing as well, which is the security surveillance systems, working at 50% capacity. Overall, the business has been good.
• FY21 will be better than FY20 both on the top line as well as the bottom line.

Consensus Estimate: (Source: market screener website)
• The closing price of Dixon Technologies (India) was ₹ 9400/- as of 10-September-2020. It traded at 91.3x/ 50x/ 36.7x the consensus earnings estimate of ₹ 103/ 188 / 256 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 7936/- implies a PE multiple of 31x on FY23E EPS of ₹ 256/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Asian Paints 1QFY20 result highlights: Performance beyond street estimates, uncertain about sustainability.

Dated: 25th July 2019

1QFY20 result:

  • Consolidated Revenue was Rs 51,306 mn, 17% higher YoY.
  • EBITDA was Rs 11,563 mn, 24% higher YoY. EBITDA margin reported at 22.5%, an improvement from 21.1% in 1QFY19.
  • Net Profit was Rs 6,721 mn, 18% higher YoY.

Management Commentary:

  • Asian Paints saw double-digit volume growth across segments. Lower value products like distemper and putty continue to grow faster than premium products. In 1QFY20, decorative paints segment in the Indian market grew in high double digits.
  • Asian Paints undertook aggressive channel push in 1QFY20 contributing to the higher revenue growth.
  • Growth in smaller towns has been much higher than metros.
  • EBITDA margin improvement came from benign raw material prices and a decrease in freight cost from the new plants in Vizag and Mysore.
  •  Employee costs in 1QFY20 fully reflect the incremental costs from new plants. Other expenses will grow as production ramps up.
  • Advertisement costs are generally lower in the 1st quarter. Some of the ad costs shifted from 1QFY20 to 4QFY19 due to IPL season.
  • Management is cautious about the growth going forward. Economic conditions remain challenging and may result in a negative impact on the coatings business. Uncertainty also exists in the International business due to developments in the Middle East.

Consensus Estimate (Source: market screener website)

  • The closing price of Rallis is Rs 1,496/- on 25-Jul-19. It traded at 55x / 48x the consensus EPS for FY 20E / FY 21E EPS of Rs 27.3 / 30.9 respectively.
  • Consensus target price of Rs 1,516/- implies a PE of 49x on FY21E EPS of Rs 30.9.