Everest Industries Q4FY17 Concall Summary

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 Financial and business highlights

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  • Quarter 4 showed a good recovery over Q3.
  • Market share of building product segment and particularly roofing increased to 15%+ compared to 14% last year.
  • Demonetization no longer impacted the business negatively, where the demand increased in the month of March which helped the sales come back to normal level.
  • Sales volumes for Q4 FY17 were 174,000 tonnes versus 188,000 metric tonnes last year, though it was 127,000 tonnes in Q3 FY17.
  • Exports were 2.5% of the total sales, they have declined significantly.
  • Plant utilization improved to ever-increasing demand.
  • Initiatives taken to improve working capital management has resulted in the total borrowing by Rs. 58 crores.
  • Educating the traders and related communities on cashless transactions has enriched the loyalty from them.
  • OSubstantially reduction in other expenses in Q4FY17 compared to same quarter last year and even if in the current year it is the lowest other expense compared to other quarters due to the optimization measures.
  • EBITDA margins have almost halved to 3.2% from last year. This is largely due to black swan events which have happened in this year. The company expects to pick up pace in the coming financial year. The reduction in the stock also had an accounting impact.
  • One time cost of about Rs. 9 crores for various projects like Parivartan (hard stop), Everest and Middle East. Such projects will help increase the market share
  • Everest is the market leader in Middle East, but the volumes and prices have drastically reduced of late.
  • Debts:
    • Maturity of long term debts as on 31st March 2017 is till 2022.
    • Whenever, company has a positive cash flow, it can make a pre-payment.
    • Some of the long terms are repaid during this year
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 Everest Super Color:

  •  The company launched Everest Super Color, a premium fiber cement roofing sheet with anti-fungal and water repellent properties across the country. The demand for this product is expected to sail through the coming years.
  • TV campaigns in Eastern India for Everest Super Color will start paying dividends in the coming years.
  • The company is working towards a few different projects for different geographies for which initial results are good

Middle East business:

  •  In Middle East, demand for company’s product is low due to poor social and economic scenarios there. It is expected to come back to normal soon.
  • Fixed cost does not occur in the standalone Everest at Middle East. Fixed costs are related to typical security, insurance, some statutory dues which is a minor amount.

 Roofing business:

  •  The country is coming to terms to Demonetization which will stable the Indian economy along with a good harvest season will help in increasing demand for roofing products.
  • For roofing, if the GST slab is 18%, then the company’s customers will benefit by paying a lower price as well the company will benefit in the form of expansion. Though these benefits cannot be enjoyed in the 28% slab.
  • No government regulations regarding roofing products.
  • In the roofing business, the company has a market share of 13%. There are 2 companies bigger than Everest industries in this segment.
  • Western India showed a decline in demand for roofing even when Gujarat and Maharashtra did well on GDP level. This was mainly due to bigger penetration of metal roofing in these areas. But people are shifting their focus back to fiber cement products due to them being more comfortable.
  • The company did promotional TV campaigns in southern and eastern parts of India for roofing. Efforts are being made to replicate such campaigns in the western parts too.
  • Tatas have done a phenomenal job in the roofing business and imitating them would make Everest more successful. But the company’s product lines are different from them. The company’s focus is on improving the realizations, improving the margins through value added products like Everest Super Color.
  • The marker lacks behind us in the sense that Everest Industries has 2 unique product lines.

 Boards and Panels:

  •  Central Government’s alignment over increased and time bound focus on implementing Smart City project will increase the demand for boards and panels in the urban and semi-urban areas.
  • Sales of boards and panels in the building segment for the entire year in FY17 is roughly 110,000 tonnes. Percentage contributed towards revenue of FY17 is around 14.2% versus 15.3% last year.
  • Margins on the boards and panels business are significantly better compared to roofing and steel business.
  • There are 3 product lines for making boards and 2 lines for making panels. Capacity for boards would be around 150,000 tonnes and utilization around 70%-75%. This is inclusive of the 30,000-process improvement based expansion.
  • No capacity expansion planned or have happened in the last 1-2 years significantly. Only at the Nasik factory, a small capacity addition took place but more focus was on product improvement.
  • The company is committed towards educating architects, trainers and related communities on using modern methods of construction through various channels for smarter, safer and quicker construction.
  • Boards and panels are selling quite a bit in exports and the company is strong in these segments.
  • Boards is not only a replacement for plywood but also bricks.
  • Everest’s Boards are cheaper than Marine ply and BWP (boiling water proof ply) by 15-20% but costlier than CPE (commercial ply).
  • The company is further looking to establish and strengthen the boards and panels brand, since a lot of new entrants are coming up in this market.
  • Company has plants of fiber cement boards in Southern, Western and Northern parts of India but the penetration there is very low. The market is not more than 60%.
  • The company aims at carrying stock of fiber for not more than 45 days.
  • For April, demand forecasted is good and industry is likely to go up by 5%-7%.


  •  In the steel building segment, volumes for this quarter increased to 16,000 metric tonnes from 14,000 metric tonnes in the corresponding quarter last year. They are expected to increase over the next year.
  • Risk mitigation clauses for future contracts with customers has been introduced to help the company maintain its margins.
  • This clause is not applicable for small volatility or shorter, smaller projects. This clause is widely applicable to projects which would go on for 6 to 12 months (bigger projects). 
  • Gross margins have substantially reduced compared to the same quarter last year. This is due to the cost of production on a larger quantity versus the smaller quantity and the direct costs associated with them.
  • Last year, the steel prices fluctuated a lot and hence the company would have benefitted from these clauses had they been in place.
  • Protection measures taken by the government like MIP (Monthly Income Plan) and anti-dumping duty may result in increasing steel prices on a consistent basis. The company expects the steel prices to be stable with a slight upward bias. Even after this, the demand will continue to rise.
  • Volatility which was there due to government intervention is now coming to terms and hence, steel prices will become stable. The company’s margins are also expected to become stable.
  • The steel business is viewed by the company as a low capital business with high returns. No return on revenue expected but ROCE and target ROCE should be in the excess of 20%. Total capital employed in this business is about 120 crores.
  • The government is planning to develop 200 low cost airports in Tier II and Tier III towns across the country wherein Everest’s modern steel building technologies can be promoted to put in use.
  • The company’s order book for steel building as on 31stMarch 2017 stands at 32,000 metric tonnes which is exactly what the company expected. Utilization is constantly enhanced across all the plants in the country.
  • The total value of order book with Rs. 90,000 a tonne is around Rs. 290 crores.Such orders are executed over a span of 6 months with 4000-5000 tonnes each month.
  • The company purchased 50,000 tonnes of steel worth Rs. 225 crores.

 CAPEX for FY18:

  •  The company is not planning to open any new factories in India.
  • CAPEX will be limited to carrying out modernization and small initiatives related to value added products.
  • Debottlenecking across all the factories that will result in a capacity enhancement of about 100,000 tonnes. This will be called virtual factory.
  • 1 crore for 1000 tonnes of boards required per annum. Logistics cost is around Rs. 15,000 to Rs. 20,000 per metric tonne for boards which is quite a significant amount.
  • A typical boards plant would cost around Rs. 75 crores. 

Evolution of products:

  •  The company is not partial towards any product. Following are the evolution of different products which are underway:
  • Roofing:
    • Roofing business is mostly in rural areas. Therefore, market penetration is the key there which is being addressed.
    • Everest Super Color which is spread across 4 plants is starting to enter the market which will yield better revenues and profitability.
    • Make prototypes available to customers who are near the company’s factories and low freight areas.
  • Boards and Panels:
    • Smaller countries than India like Australia, Thailand consume boards 10 times more as compared to India.
    • Low awareness and hence the company is targeting the architects and interior designer community.
    • Major program of teaching the carpenter, aluminium erectors to understand and learn how to use them.
    • About 75% districts of the country do not have a fiber cement board’s presence and hence it needs emphasis.
    • Main motive of the program is to increase the size of the market and increase the number of people who can use it.
    • Results are expected to drastically improve after Q3 FY18.
  • Steel:
    • Sharp changes in the steel prices and hence protection clauses are being setup.
    • Better project execution is needed which will reduce the wastages at the factories and the sites.

 Buildings Business

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  • Capacity Utilization of building products (roofing and boards) is 80% and for steel, it is 75%
  • Building product segment industry is expected to grow atleast by 10% and Everest Industries is aiming to grow more than the industry standards.
  • Whenever a new project comes up, the company compares the available options and opts for the one which gives a better NPV.

 Asbestos Business

  •  In asbestos business, the industry demand went down by 12%-13%. The South region was affected on a large scale because Tamil Nadu experienced one of the worst droughts and Everest is the market leader there. The Northern parts are doing extremely well.Eastern and Western Parts are doing normal though the decline of 12% was largely due to them. This data is of last few months of FY17
  • The asbestos prices depend on the dollar price as well as the price of the dollar itself. Since the price of the dollar has reduced and hence the purchase price of asbestos has gone down. This reduction is not significant compared to the reduction between 2015 and 2016