Shankara Buliding Products' Q4FY19 results (Underperformer) - Dismal performance, recovery in retail to be gradual…
Q4FY19 result highlights
- Shankara Building Products Ltd (SBPL) net sales decreased by 18.6% yoy to Rs6.2bn(est: Rs6.9bn), EBITDA decreased by 69.6% yoy to Rs164m(est: Rs357m), PAT decreased by 93% yoy to Rs16m(est: Rs95m).
- Retail sales decreased by 7% yoy (SSS was down 10%+ yoy). Channel & Enterprise (C&E) revenues decreased by 30% yoy.
- Retail EBITDA decreased by 37% yoy with a margin contraction of 340bps yoy to 7.3%. Channel & Enterprise EBITDA decreased by 90% yoy with a margin decline of 510bps yoy to 0.9%.
- Gross margins declined by 420bps yoy to 9.2% on account of lower processing margins. Staff cost increased by 3% yoy while other expenses were down 24% yoy. Resultant EBITDA margin declined by 440bps yoy to 2.7%.
- Interest cost decreased by 10% yoy on account of debt reduction and depreciation was up 8% yoy for the quarter.
Key positive: Reduction in debt
Key negatives: Continued weak performance in retail segment
Impact on financials: We have cut FY20E EBITDA by 5%. Introduce FY21E earnings estimate
Valuations & view
SBPL’s earnings growth was sharply below estimates impacted by continued moderation in Retail SSSG and continued weakness in processing margins. We expect retail sales to remain muted in the near term on account of a) higher contribution from steel/steel linked products which have been impacted by volatile steel prices, b) high base in 1HFY20 and c)weak consumer sentiment. While the company is undertaking initiatives (reducing processing business, higher cash sales, pause in store rollout) to correct the issues, the recovery in operating performance is likely to be more gradual. Reduction in debt & improvement in working capital is positive; however, the business is still evolving and we would await better execution in the retail business. Maintain Underperformer.
Shankara Building Products Ltd. Shankara Building Products Ltd is an Indian-based company, which is engaged in the business of organized retailer of home and building products. The Company's business units include retail, processing and enterprise. Retail unit's products include cement, scaffolding, msand, steel pipes, roofing solution, plumbing, electrical, paints, tiles, exterior cladding and solar products. Processing unit's products include steel tubes, galvanised strips, cold rolled strips, colour coated roofing sheets, bright rods and scaffolding. Enterprise unit's products include steel tubes, cement and other building products. Some of these Principals include JSW, Sintex, Uttam Group and APL Apollo.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.