Everest Industries Q3FY18 Concall Summary

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 Financial Highlights

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  • Revenue for the quarter jumped from last year 268 crores to this year of 294 crores.
  • EBITDA has grown from a negative 7 crores to a positive 21 crores.
  • PAT has reversed from a loss of 14 crores to a profit of 9.4 crores.
  • In terms of 9 months performance, EBITDA reported was 68 crores versus 20 crores year-on-year and a healthy growth on EBITDA margins from 2.2% to 7.28%.
  • PAT for 9 months has gone up from a loss of 10 crores to a profit of 31 crores and margins have also improved to 3.3% versus a negative of 1.12% in the last year for 9 months performance.

Building Products

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  • In building products business, volumes have grown 27% YoY from 1,27,000 metric tonnes to 1,61,000 metric tonnes.
  • Revenue is up from 153 crores in Q3FY17 to 179 crores.
  • In Q3FY18, PBIT of Rs 26 crores was booked as compared to loss of 4 crores in Q3FY17. Building products business has done well.
  • For building product segment, biggest raw material is fiber which is imported. But dollar is expected to remain stable. Hence expected EBITDA margin will continue to be 6-7%.

Steel buildings

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  • Steel buildings topline was slightly lower than the previous year mainly due to the accounting for GST versus the accounting for sales tax and excise under the earlier regime.
  • The steel building volumes are up marginally by 2.5% to 14,753metric tonnes compared to last year.
  • The revenues are down, 109 crores versus last year 113 crores.However, Quarter-over-Quarter (Q2 vs. Q3 FY18) revenues have grown by 2.3% from 106.6 crores to 109 crores.
  • PBIT reduced from 6 million in Q3 FY17 to 1 million in this quarter.
  • For steel building business, on a ROCE level, margin target is 20% and on an EBITDA level, margin target is between 5-7%.
  • The realization per tonne has gone down Q-o-Q for both the building products as well as the steel product segment due to 2 reasons:
  • 1. Accounting method: Everest added excise duty on revenue from operations for the previous year payment while the GST is currently netted off from the overall total income. So it is to do with the netting off of the GST and the excise duty.
  • 2. Also, whatever benefits Everest derived out of GST, they hadto pass it on to the end consumer which is bringing down the pricing.
  • As Everest is passing on the GST benefits, it means EBITDA would be neutral and margin won’t be affected.

Industry Scenario

  • GST is no longer a business impediment. Things are stabilizing.
  • GST methodology on bill-to-bill matching, incentives by state governments, accounts of old credits are still issues which need to be handled, but it is no longer an impediment on a day-to-day business.
  • The general economy is picking up but the demand growth in the real market is not as buoyant as the stock market growth.
  • The industry scenario is good especially with auto industry attracting large investments.
  • The general private investment cycle is yet to pick up fully, though it is expected that in the coming few months, things should start picking up significantly here.

Value-added products

  • In both roofing and boards business, value-added segment sales increased and that helped us increase revenue growth compared to the volume growth.
  • In the boards business, value-added products contribute like 25-30% of the revenue and as far as roofing is concerned, it is around 6-7%.
  • Management is pretty sure that contribution of value-added products will significantly ramp up over the next few quarters.
  • The margins improved essentially on account of higher volumes; lower raw material cost,a better product mix in terms of more value add products and a cost reduction in marketing expensesand overheads.
  • The margin is lower than expected on account of provisionsEverest have made on some old outstanding.


  • On the export side, the market continues to be dull.
  • But Everest has made some breakthroughs in the European market and that should pay some dividends in the near future.
  • There are some boards called type A which are unique to Everest which cannot be made by any other competitor in the country.
  •  Everest during an exhibition in France displayed their product and got a decent response. They started selling small quantities in the Western European countries. It is a good beginning.
  • But the current focus totally in domestic market and there is little hope of improving export market in the coming months.

Steel business

  • 100% of the steel building business is due to new construction as there is limited scope for recurring demand in this area.
  • Reasons which dented the steel building performance:
  • 1. Provisioning on some debtors (Rs.3.25 crores).
  • 2. Increasing steel prices.
  • Everest has considered all the necessary provisions aligned with the accounting principles.
  • Compared to September 2017, prices of steel plates have gone up by Rs. 4,000-5,000/tonne and for coated steel, it has gone up by Rs. 20,000/tonne.
  • There has been a sharp upward movement in prices for the last 4-5 months and they have not stabilized as of now.

Hedging of Steel prices:

  • There is a trend of increasing steel priceand in any large orders, Everest is trying to build in steel price regulatory charge so that they do not get affected by it.
  • For any long term projects, Everest is building in clauses that “any impact in steel prices particularly on account of change in government policies will have to be borne by the customer or if there is any change on account of customer that if he delays a project for whatever reason either because of payment or technical issues, that will have to be absorbed by him”.
  • But for normal projects of 4 to 5 months duration, Everest continues to be exposed to variation in steel prices as there is no defined strategy.

Roofing business


  • Everest essentially supplies the roof in housing segment. The roof is Rs. 20/sq. ft.
  • In some market people also use boards as false ceilings or as walls contributing another Rs. 20/sq. ft.
  • But in these kinds of housing projects, percentage of Everest products used is not very high.

Rural segment

  • In rural areas, Everest mostly sells roofing products. Eastern and Central India did a very big part of residential buildings using products of Everest.
  • In Northern India, major housing needs are roofing products for accessory buildings like a cow shed, tractor shed or a small warehouse.
  • The usage in factory building has come down a lot over a period of time and on a total percentage its share won’t be more than 10%.
  • Demand in rural is robust in the coming 6 months as typically people stock up for the season time and they started stocking up during the Q2-Q3 when the market pricing is low.

Asbestos Roofing segment

  • Strong growth in this segment particularly in West and North India
  • No specific projects are been identified for this growth as the the demand is widespread across lakhs of people.
  • This robust demand is expected to continue as steel pricing has increased and there is some movement back towards fiber cement roofing.

Non-Asbestos Roofing

  • The non-asbestos roofing product of Everest is called Hi-Tech. It is cement based corrugated roofing with synthetic fibers like Polypropylene and PGI as the reinforcement.
  • The product is very well accepted in industrial market.
  • The acceptability of this product among industrial customers is good, but it is not yet a retail product because the costing is significantly higher.
  • To grow in this market significantly, a lot depends upon the price value equation and in the retail market currently management do not see this becoming very large product in the short term.
  • One of Everest’s competitors has launched the product using different technology and they are watching how it performs.

Boards and Panels

  • Demand in South for fiber cement
  • Everest is not very strong as far as Andhra-Telangana isconcerned.
  • But the demand for fiber cement product continues to be very robust particularly Kerala and Tamil Nadu.
  • One major raw material for fiber cement is virgin pulp which is imported from various countries. Its price has seen a surge of 20-25% in price in last 4 months on account of the huge demand from China.
  • The surge in price of pulp would impact total cost by a factor of around 5-7%.
  • Virgin pulp is only for boards business which has relatively smaller share of overall business. So increasing cost of virgin pulp won’t impact the overall margins.

Growth of Boards business:

  • On an annual basis, the industry has grown by 5% and Everest is estimated to be grown by about 9% but boards business have grown by approximately 5% for the quarter.
  • In order for boards business to grow at 15%, Everest is using various strategies:
  • 1. Increasing physical presence in larger number of cities across the country.
  • 2. A very large training program is actually underway right nowso that people learn how to use the product.
  • 3. Focusing more on the institutional side of the businesses which seems to have grown much more than the retail side.

Other Updates

Government Contracting 

  • Everest is not doing any contracts under the steel buildings business on the government contracting because they had a couple of bad experiences.
  • But it is looking at Bharatmala project as an opportunity to sell the building products.
  • Beyond participating directly in terms of taking orders from the government Bharatmala will help Everest indirectly in two ways:
  • 1. Every time a new road gets made under the project, they will set up warehousing which will benefit Everest.
  • 2. The development of roads in interior parts should increase the demand of roofing and boards in the nearby areas.

Working Capital Days

  • It has gone down to 69 days compared to 100 days last year due to 3 reasons:
  • 1. Last year, there was a huge slump in demand which resulted in some accumulations on working capital and also resulted in slower realizations of payments.
  • 2. There is overall reduction in working capital as whatever earnings Everest made had been mostly used on repayment of bank loans which is reducing the working capital.
  • 3. Overall sales has gone up, as a result the working capital as a number of days came down.

CAPEX plan

  • As of now there are no major CAPEX plans to expand capacity in any of the business.
  • Although modernization works of Calcutta roofing factory as well as in boards business is going on which would accrue around Rs. 15 crores.
  • Another minor CAPEX plan is addition of paint line in Bhagwanpur Works that would be around Rs.4 crores.

Expansion plan

  • Physical presence has been increase in urban centers only and 70 odd districts have been added for distribution.
  • Everest is present in something like 40% of total districts in the country.
  • Everest would keep increasing their presence by 10-15% every 6 months.

Future Outlook

  • In the next few months it is expected that CAPEX cycle will return in the private sector that’d augur well for the steel building business.
  • The point concernis the rising prices of steel and keeping a close tab on it is important in case it goes beyond limits.
  • It is believed that because of increase in price of steel and stable pricing of raw materials for cement particularly fiber, demand for cement proofing will remain robust.
  • There is a lot of work which the company is doing on popularizing the fiber cement products.
  • All factors as of today point toward stable dollar which is beneficial for stability of prices of imported raw materials.