Skipper Q4FY18 Concall Summary

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Financial Highlights

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  • Revenue grew by 24.6% to Rs. 2074 crores
  • Net sales increased to Rs. 593 crores from Rs. 564 crores compared to corresponding quarters last year
  • EBITDA increased by 25.2% to Rs. 274.93 crores
  • Reported EBITDA increased to Rs. 108.58 crores from Rs. 101 crores in the corresponding quarter
  • Operating margin slightly increased to 13.3% as compared to 13.2% in FY17
  • PBT increased by 23.1% to Rs. 152.77 crores against Rs. 124.09 crores in FY17
  • Reported PBT and PAT numbers were at Rs. 74.08 crores and Rs. 49.53 crores respectively
  •  Board of Directors has recommended highest ever dividend of 165% for FY18
  • Requirement of Forex derivative gain to be reported on mark-to-market basis has resulted in increased profitability numbers of previous year
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Engineering product business

  • Engineering product business continues to demonstrate robust performance 
  • Secured or favourably placed in new orders worth in excess of Rs. 620 crores for engineering products, supplies from PGCIL, SEBs, telecom and solar companies and for various supplies across Europe and Southeast Asia
  • EBIT margins jumped due to execution of some high margin contracts
  • Company will have virtual monopoly in the upgradation of Northeastern infrastructure project

Polymer Business

  • Polymer business is expected to grow at around 40% in coming years
  • No plan of hiving off polymer business into separate entity
  • Performance of polymer business remains challenging due to uncertainties surrounding GST and after effects of demonetization
  • Robust demand from agricultural as well as construction sectors for polymer piping business

Plumbing Business

  • Share of plumbing business to be increased as it has better margins
  • The split between agriculture and plumbing business is targeted to be 50:50 as compared to 65:35 last year

Capacity

  •  Total installed capacity is 265,000 tonnes per annum
  • Utilization of capacity is close to 90%
  • Capacity has been enhanced by 35000 tonnes during the year
  • Capacity addition of about 30,000 tonnes in upcoming year
  • PVC capacity is around 51000 per annum; utilization is nearly 50%

Approvals

  • The company has received approval from core in railways for manufacturing of traction masts
  • Projects worth in excess of Rs. 40,000 crores have been announced to connect North-eastern states to rest of the country
  • Logistically well positioned to target these projects
  • Got approval in Mexico and Canadian Welding Bureau which qualifies the company to supply to North America as well
  • Strategy is to keep getting approvals and to keep interacting with customers in order to bid and secure projects

Order Book

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  • Total order book as on March end is Rs. 2627 crores
  • Well diversified between domestic, PGCIL and private players, SEB and exports
  • In the order book, 44% is PGCIL, nearly 40% is SEBs and other domestic customers and rest is exports
  • Bulk of the order book would be in SEBs, private developers and telecom in domestic side in upcoming years
  • Total order book to sales is at approximately 1.5x of last year sales
  • Growth from increased participation opportunity from export, Northeast and east India states like Jharkhand, Bihar and Odisha.
  • Ordering in TBCB has been dull this year

Growth Prospects

  • PCGIL’s plan to build intrastate transmission projects by tying up with SEB will give boost to industry
  • States like Karnataka, Tamil Nadu, West Bengal, Andhra Pradesh and Telangana are increasing T&D spending to reduce AT&C losses and building infrastructure on high voltage lines
  • Flagship programs like Saubhagya, IPDS and DDUGJY disperse good investments and opportunity in this sector
  • Diversified portfolio will enable to tap opportunities in sectors like railways, solar and telecom and reduce its overdependence on a particular industry
  • Confusion among channel partners led to deferment in placing newer orders and holding onto their inventories
  • With effects of demonetization, GST and RERA waning off and revival in the economy coupled with GST benefits for organized players, growth to get back to 35 to 40 % during the year
  • One of the lowest cost producers of TBCB globally
  • Focus is to maintain a balance between growth and margins
  • Devaluation of Rupee has made Indian products more competitive
  • Customers in 30 to 35 countries

Vector Consulting

  • Vector Consulting Group to assist in polymer operations by implementing theory of constraints
  • Operations will be managed through a full-based replenishment system ensuring high availability at distributors with lower inventory in company’s supply chain
  • It will also aid in setting up and developing partnership with plumbers and contractors through a long-term loyalty program across relevant product range

Working Capital

  • Manufacturing of own raw material, MS Angle, extends working capital cycle by 45 to 50 days
  • Slight increase in overall debt number in the working capital

CAPEX

  • Total CAPEX plan is around Rs. 75 crores
  • CAPEX in engineering product business to be Rs. 55 crores including capacity expansion, maintenance CAPEX as well as test bed
  • CAPEX in polymer business to be around Rs. 20 crores including fittings, CPVC, HDPE as well as pipe business
  • CAPEX for FY18 was Rs. 61 crores

JV with Metzerplas

  • JV with Metzerplas is expected to start operation by October 2018.
  • Location of JV is Hyderabad, work has already started
  • Total CAPEX is about $4 million of which Skipper’s portion is about $2 million
  • To be funded by partly debt and partly equity

Debt

  • Total gross debt number is around 498
  • Debt with current maturity is around 45 crores
  • Debt to equity ratio stands at 0.78 as compared to 0.83 last year

Raw material prices

  • Not affected by increase in raw material prices
  • Any increase or decrease in raw material prices is passed on to the consumers
     

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