MOSL: SANGHI INDUSTRIES (Buy)-Cost push impacts margins, shutdown hurts volumes
Sanghi Industries: Cost push impacts margins, shutdown hurts volumes
(sngi IN, Mkt Cap USD0.4b, CMP INR98, TP INR134, 36% Upside, Buy)
- Volumes impacted by shutdown: 4QFY18 volumes including clinker fell 20% YoY to 0.62mt on account of 15 days shutdown. Realizations increased 7% QoQ to INR4,091 (est. of INR4,002), led by firm prices in Gujarat. Revenue rose 3% YoY (-9% QoQ) to INR2.5b (est. of INR2.97b).
- Margins impacted by cost push: Unitary cost rose 15% QoQ/30% YoY to INR3,425/t, led by higher freight and power & fuel costs. Thus, EBITDA/t declined 22% QoQ (+22% YoY) to INR665, with EBITDA at INR413m (-33% QoQ/-3% YoY) v/s our estimate of INR714m. The cost push can be attributed to higher RM cost/t (+INR50/t) due to procurement of high-cost clinker because of kiln shutdown. Freight cost/t increased in the quarter due to (i) freight costs of INR70-80m booked in 4QFY18 (was associated with the earlier period) and (ii) higher pilot charges (impact of INR30m). Interest cost increased 111% YoY at INR173m. PAT declined 29% YoY to INR186m (est. of INR400m).
- FY18 performance: Volumes fell 16% YoY to 2.44mt due to lower clinker sales. Revenue rose 3% YoY to INR10.2b. EBITDA margin expanded 1.2pp YoY to 21%, led by healthy pricing. Hence, EBITDA rose 9% YoY to INR2.1b, with EBITDA/t at INR885 (+INR199/t YoY). PAT rose 48% YoY to INR933m.
Sanghi Industries Limited is an India-based company engaged in the manufacturing and sale of cement and clinker. The Company manufactures and markets cement and cement products in domestic and export markets. It offers products, including Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC). The Company offers cement under the brand name Sanghi Cement. The Company produces 53 Grade OPC and PPC Cement. It provides Shakti Rath service, which is a mobile concrete testing laboratory having all the necessary equipment and facilities required for onsite concrete testing. The Company operates over 40 Shakti Raths in Gujarat. The Company has established approximately 45 consumer care centers at the cities and towns of Gujarat, Rajasthan and Kerala. The Company's manufacturing facilities are located at Sanghipuram, Abdasa taluka of Kutch district in Gujarat. Its manufacturing plant has production capacity of approximately 4.1 million tons cement per annum.
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