Concall Notes Q4FY18 – IEX, SKF India, GHCL, Welcorp

IEX Q4FY18 Concall Update

  • Expecting demand growth of more than 6% in this year vs 5.3% last year
  • In 17-18 there was increase in buying by distribution companies, increase in buy bids by almost 20%
  • There was reduction in sell bid due to coal supply shortage
  • Prices started increasing from month of august, price increase was 35% higher than last year i.e. 3.26 Rs
  • Coal production has increased in march qtr, if trend continues, coal supply issues will be resolved
  • Imported coal prices have reduced from feb month (22% in last 45 days), if trend continues, will be good on supply side
  • Reduction in operating expenses was possible due to acquisition of technology
  • Will be saving 12-14 crores rs in income tax due to 25% bracket
  • Open access volumes decreased by 38%, 24 bu to 14.8 bu
  • Distribution companies volume increased by 91%, 15.78 bu to 30.14 bu
  • No. of active clients have gone down due to increase in clearing prices
  • Solar and Wind trading has started
  • Share of distribution companies was almost 67% vs 40%
  • In case of discoms top 10 buyers accounted for 86% vs 77%, Gujarat was one of the biggest buyers
  • Last year we added 225 participants in electricity portfolio and total 460 overall (electricity and REC)
  • There were lot of deactivations ~900 which reduced the active no. of clients leading to loss of annual income from such clients
  • We are in discussions with different stakeholders for gas transmission exchange
  • Dividend payout at 60% vs 80% yoy; future payout ratios will depend on oppotunities; will try and maintain 50% payout


SKF India - Q4FY18 Concall Update

  • New MD joined from 1st April
  • Annually sales up 4.5% and PBT up 28%
  • Quarterly sales up 11% (Adj GST) and PBT up 28%
  • Growth in Car segment was flattish, truck grew by 19%, Tractor grew by 28%, After market vehcle grew at 13%, 2 Wheeler grew at 25%
  • Expect to see traction in wind business from July quarter
  • Hub 3 project is delayed as the customer is facing quality issue on field, it has gone for re validation of design and awaiting approval in japan
  • Hub 3 has capacity of 500,000 pieces and can be increased to 700,000 pieces with minimal capex
  • No greenfield expansion, but will invest 100-150 crores per annum for next 2 years in brownfield expansion
  • Capex will be for mix of new products and existing products
  • Traded goods were 38% vs 41% last quarter and manufactured goods were 62% vs 59% last quarter
  • Out of 23% revenues which comes from industrial products - 6% comes from Railways, 1% from Energy and Balance 16% from other industry
  • Inspite of increase in steel prices, have managed to control raw material cost to sales ratio
  • Price increases are hard to get with major OEM's though we are fairly compensated
  • Service business is just 2% of total revenue but we provide a bundled offering which helps us to build an image of entire solution provider
  • Market share have remained stable at 27-28%
  • Revenue mix is 50 % from Auto OEM (29% Auto OE, 12% After Market, 10% exports)and 50 % from Industrial OEM (25% from Indutrial OE and 25% aftermarket)
  • No forex hedging is done, majorly imports and exports are in Euros
  • Asset T/O as it is a capex heayv industry is around 1.5-2 times


GHCL Q4FY18 Concall Update

  • Company aims at maintaining margins of FY18 despite of rising input cost.
  • 31% of company’s revenue comes from inorganic segment and 58% of the revenue from textile segment.
  • Textile business is facing headwinds and the improvement is expected in FY19 as according to management revenue and margins seems to be bottomed out. Though revenue fell EBITDA margins improved from 0.6% in previous quarter to 5.7% in Q4.
  • Company launched a new concept REKOOP- blending cotton with recycled polyester from PET which is considered environment friendly and would be beneficial in US market
  • Brownfield expansion of 1.25 lacs MT of soda ash facility to be completed in 2 years which would then result in volume growth. Volume growth in FY19 is expected to be around 4% as plants are already running 97% utilisation. It is difficult to increase utilisation level from here.
  • Overall EBITDA margins up by 280bps to 25.2% in Q4 as compared to 22.4% in previous quarter.
  • Company reduced its debt by 117 crores bring debt to equity ratio to 0.79. It is further expected to reduce to 0.65
  • Company’s D/E won’t cross 1:1 given its expansion plans
  • ROCE stands at 17% and ROE is 22%.
  • Shutting down facilities of soda ash in China over environmental concerns. China exported over 2mn MT to the global market which would now considerably decrease and would be advantageous for other global players. Even capacity shifting in China is beneficial for other players.
  • Turkey coming up with additional 2mn MT capacity of soda ash. No other big capacity coming up.
  • CAPEX done by the company:

FY18 – 281crores

FY19E – 330crores on soda ash and 85crores on textile.

FY20E – 300crores on soda ash and 80 crores on textile.

  • Greenfield expansion of inorganic segment to be executed in FY22. Acquisition of land is expected to be completed this year. This expansion will be funded from combination of debt and equity. 1000-1200 crores will be funded through internal accrual.
  • In textile business company continue to face competition from Pakistan and Bangladesh.
  • Doubling of sodium bicarbonate capacity. Benefit of this will be seen in FY19. Soda ash is a raw material for producing sodium bicarbonate
  • Will consider demerger of textile and inorganic division at right time.


Welcorp Q4FY18 Concall update

  • Low volumes in Q4 was due to Higher base in Q4FY17
  • Profitability will be higher in 1st half and weak in 2nd half
  • Cash conversion cycle
  • Gross debt reduced by 400 crores in FY18
  • Net debt at 739 crores down by 685 crores in FY18
  • Capex will only be for replacement, CFO will be used to bring down debt
  • Order book - 1.6 million tonnes valued at ~10000 crores - some of which are deliverable in FY 2020
  • Bid book - 3.9 million tonnes - 2-2.5 million tonnes is in North America
  • America seeing early signs of revival
  • Domestic market is competitive, strong demand in Irrigation and river linking. City gas distribution, North east connectivity and oil and gas segment will see strong traction
  • Ebitda / tonne - Dropped from 7600-7700 / tonne to 6000-6200 rs
  • HSAW is predominant portion of orderbook
  • Every new order has better margins than past orders from Jan onwards
  • Looking to cross 1 million tonnes volume this year also
  • Water segment in saudi is api apipes but histrocally it has been non api pipes
  • In terms of Raw materials, we are hedged for immediate requirements but not for 2 years down the line
  • Finance cost on working capital side will be higher as steel prices are higher
  • Working capital cycle expected to be in range of 40-45 days
  • Our debt repayment will be around 200 crores on global basis




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