MOSL: SANGHI INDUSTRIES (Buy)-Volumes impacted by unavailability of fleet
Sanghi Industries: Volumes impacted by unavailability of fleet
(SNGI IN, Mkt Cap USD0.3b, CMP INR88, TP INR130, 48% Upside, Buy)
- Volumes remain flat YoY: SNGI’s 1QFY19 volumes including clinker were flat YoY at 0.67mt due to unavailability of fleet for road movement following e-way bill implementation. Realizations at INR4,114/t (-5% YoY, +1% QoQ) were lower than our estimate of INR 4,191/t – higher prices in April-May were offset by lower prices in June. Revenue fell 4% YoY (but grew 8% QoQ) to INR2.7b, in line with our estimate.
- Cost curve impacted: Unitary cost grew 4% YoY (and 1% QoQ) to INR3,465/t, led by higher power and fuel cost at INR1,232/t (+18% YoY, +13% QoQ). Other expenses/t increased 56% QoQ due to INR32.2m of forex loss in 1QFY19. EBITDA/t stood at INR649 (-35% YoY, -2% QoQ). EBITDA declined 34% YoY (but grew 5% QoQ) to INR434m v/s our estimate of INR480m. Power and fuel cost/t increased due to lower availability of low-cost lignite at 27% in 1QFY19 v/s 83% in 1QFY18 and increase in coal prices. Interest cost at INR123m declined 34% YoY and 29% QoQ due to re-pricing of high cost debt of INR3.3b with lower interest cost. Hence PAT at INR199mn declined 37% YoY for 1QFY19.
- Management commentary: (1) Strong growth in underlying markets of Gujarat at 15% YoY and Maharashtra at 9% YoY; (2) Freight cost/t declined QoQ due to reduction in lead distance; (3) Lower proportion of PPC sales at 33% v/s 38% in 1QFY18 due to unavailability of flyash.
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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