Surya Roshni Limited (SURYAROSNI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Surya Roshni Limited Q4 FY '23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raju Bista, Managing Director at Surya Roshni Limited. Thank you, and over to you, sir.

Yes. Thank you very much. Good evening, everyone. On behalf of Surya Roshni Limited, once again, I extend a warm welcome to everyone for joining us today in the call. On this call, we are joined by Mr. Tarun Baldua, who is Executive Director and CEO of Steel Operations; Mr. Jitendra Agrawal, CEO, Lighting and Consumer Durable business; our CFO and Company Secretary, Mr. B.B. Singal, along with SGA, our Investors Relation Advisor. I hope everyone had an opportunity to go through the financial results, press release, and investor presentation, which has been uploaded on the stock exchange as well as on our company website. The company reported a new record top-line and profitability for FY '23, with the revenue almost touching INR 8,000 crores mark. The company continued to strive towards achieving its long-term goal and remains well-positioned to continue the growth path for the future. During FY '23, the company continued to invest in innovation and efficiency along with focus on technology, talent and infrastructure to remain well ahead of the curve. The company has been judicious in the budgeting and capital allocation, resulting in lean and healthy balance sheet. And we firmly believe that our growth will be sustainable with a comfortable working capital cycle and balance sheet position. For the quarter EBITDA and PAT grew by 64% and 88%, respectively, on the year-on year basis. For '23, the revenue was almost INR 8,000 crores as compared to INR 7,731 crores, a growth of 3% year-on-year. EBITDA and PAT has gone up to INR 620 crores and PAT is about INR 336 crores as compared to INR 449 crores EBITDA and INR 205 crores of PBT -- sorry, PAT. The company also witnessed a healthy improvement in gross margin due to stable input cost and improved product mix. Over the past few years, company has placed its emphasis on reducing the debt and completely repaid all long-term borrowings. And with only INR 400 crores of working capital debt remaining, the company intends to become debt-free by another 1.5 to 2 years' time. Now coming to Lighting and Consumer Durable. Q4 and FY '23 revenue grew by 7% in Q4 and 16% on year-on-year respectively. The new age product lines such as LED lighting continues to grow at a healthy rate, and professional lighting, which is also an institution sale, reported a robust growth of 28% and 38% year-on year for Q4 and FY '23 respectively in terms of revenue, as well as significant inflow of the order in hand, we are witnessing the multiple green shoots in the public, as well as private CapEx cycle. We firmly believe that our professional lighting will be 1 of the biggest beneficiaries of the improvement in the CapEx cycle. The company professional lighting continued to build a strong order book and we'll continue to build this order book aggressively in coming times as well. We are confident that company consumer durable will be a key growth trigger for the company going forward. The company is well-positioned to scale up this business driven by well established distribution network and Surya Roshni brand equity. The gross margin has also improved due to operating leverage, premium products, stability in input cost, and improving market realization. There is a scope to improve margin further. The CapEx under the PLI scheme is ongoing as per the plan. This CapEx will benefit the company by lowering the cost. And the company also reduces replacement cost, which stand at 4.5% only that -- and last year, it was 6.78%, so almost we save like INR 11 crores, INR 12 crores annually. The company is investing heavily in visibility enhancement through store excellence, in-house merchandising, in-store display and direct engagement with the electrician. In FY '24, the company plan to double the advertisement spend -- cost from the current level of INR 20 crores, which will be in help to build brand visibility and increase the market share. With the company plan to enhance that outreach program through various ATL and BTL campaigns, the company will also strengthen the semi-urban and urban distribution network, which is now 1 of the largest in the industry. Now, moving to the Steel Pipe and Strip, the company top line was affected due to fall in global steel price during the quarter. However, the company reported the highest ever EBITDA per tonne of INR 9,868 per tonne during Q4 FY '23 compared to INR 5,605 on year-on-year basis. The robust growth in realization were mainly driven by the higher share of value-added products such as API coated, GI and export. As communicated in the earlier earnings call, the company reported EBITDA at INR 6,452 for FY '23, far exceeding the guidance of INR 5,500. The FY '23 robust growth in EBITDA level will serve as well it will be a benchmark for the company's future growth. With robust profitability growth, Board of Directors has recommended a final dividend of INR 4 per equity shares on the paid-up capital of the year '22-'23, subject to the approval of shareholders. The management remains committed to create wealth for their stakeholders. So total, it will be INR 3 plus INR 4, which will be INR 7 per share. Lastly, we remain confident about the opportunity that lie ahead of us. The company is focusing on geographical expansion, innovation, efficiency enhancement infrastructure and human capital to deliver the best class solution to our customers. So, now I would like to request our CFO, Mr. B.B. Singal, to share his thoughts.

Thank you, respected MD sir, and a very good evening to all the participants on the call. The company reported a good set of numbers for Q4 as well as for financial year '23. For the quarter, EBITDA grew by 64% and PAT grew by 88%, respectively, on year-to-year basis, EBITDA to INR 254 crores and PAT to INR 156 crores. For financial year '23, the revenues stood at INR 7,997 crores compared to INR 7,731 crores during FY '22, a growth of 3% year-on-year basis. EBITDA and PAT stood at INR 620 crores and INR 336 crores, a growth of 38% and 64% year-on-year respectively. In Lighting and Consumer Durables, for the quarter, the revenue stood at INR 431 crores, a growth of 7% year-on year basis. EBITDA and PBT stood at INR 42 crores and INR 35 crores, a growth of 23% and 36% year-on-year basis respectively. For FY '23, the revenue stood at INR 1,545 crores, a growth of 16% year-on year basis. EBITDA and PBT stood at INR 122 crores and INR 90 crores, a growth of 15% and 25% respectively. Revenue growth for the quarter as well as the financial year was driven by value-added products, such as LED lights, downlighters, as well as professional lightings. In Steel Pipes and Strips, during Q4, current financial year FY '23, the company's EBITDA and PBT grew 76% and 110% to INR 212 crores and INR 181 crores respectively. EBITDA per metric tonne stood at INR 9,868 per metric tonnes compared to INR 5,605, a robust growth of 76% year-on year basis. For financial year '23, revenue grew by 1% year-on year to INR 6,452 crores, while EBITDA and PBT grew by 45% and 80% year-on-year respectively. EBITDA per metric tonne stood at INR 6,496 compared to INR 4,648. The company has reduced debt by INR 176 crores in financial year '23 and continues to remain long-term debt free. Finance costs has reduced by 30% in FY '23. Debt-to-equity ratio reduced to 0.22x against -- as on 31st March '23 as compared to 0.37x as on 31st March '22. The company continued to maintain positive cash conversion cycle. The working capital days stood at 59 days during Q4 financial year '23. Working capital days for Lighting and Consumer Durables stood at 53 days in Q4 financial year '23 compared to 60 days in Q3 financial year '23, while Steel Pipes and Strips working capital days at 61 days in Q4 financial year '23 compared to 62 days in Q3 financial year '23. For Q4 financial year '23, ROCE improved by 16.5% from 23.6% to 40.1%. ROE improved by 12.8% from 22% to 34.8%. Similarly, for financial year '23, ROCE improved by 670 basis points from 16.2% to 22.9%. ROE improved by 560 basis points from 14.1% to 19.7%. With this, I conclude the presentation, and we can now open the floor for further questions and answers.

[Operator Instructions] The first question is from the line of [ Manan Poladia from MKP Securities ].

So, sir, my question is regarding the new CapEx announcement that you guys have just put out for the INR 75 crores, I think, in Madhya Pradesh or -- I didn't read exactly where. Anjar district, right, Kachchh, Gujarat?

Yes, yes.

Yes. So, I would like to understand what is our revenue potential that comes out of this 100,000 metric tonne per annum ERW pipe plant. What would be the peak revenue potential at 100% [ cap ] utilization?

[Foreign Language]

Great. So, I'm aware of this company [Foreign Language] Secondly, I would like to congratulate you on the fantastic set of results that you guys have put out. I genuinely appreciate [Foreign Language]. That's really showing on the numbers as well. That's a fantastic set. Also, I have one more question for you. We have discussed the merger several times on the call, and I know usually [Foreign Language]. But I would just like to know, has it been discussed by the Board at all?

See, I'll tell you [Foreign Language]

Correct, sir, absolutely.

[Foreign Language]

I'm aware, sir. I'm completely aware, sir. My question is only based...

[Foreign Language]

Correct, sir. Correct, sir. We would also like to hear that from you obviously. And my question was only based on the fact that there were some rumors flying around in the press today in the afternoon that I'm sure you are aware of.

[Foreign Language]

Obviously, sir. I don't expect you to comment on it. I completely understand. My question was just based on the fundamental side.

But I'm with you, and [Foreign Language].

I really appreciate the answer to my questions.

Our next question is from the line of Bhavesh Chauhan from IDBI Capital.

I would again like to congratulate on stellar performance, margin performance in Steel Pipes division. Sir, I would just like to understand, even in product mix, I can see that API, Spiral giving you INR 12,000 EBITDA per tonne. But even Black Pipes is yielding you INR 5,000 per tonne is very surprising. I would like to know the management's comment whether these kind of margins are sustainable.

[Foreign Language]

[Foreign Language]

[Operator Instructions] Our next question is from the line of Mr. Rahul Jain from Systematix.

Congratulations on a good set of numbers. Sir, the kind of performance that we are seeing on the operational front, are we working on the working capital side as well, because steel inventories go up and [indiscernible] are a bit higher. So, on the cash generation aspect, do we have a plan to bring it down from, I think, 61 days that you've mentioned in the presentation to somewhere [indiscernible]. So, are we working on that direction as well? That is my first question.

[Foreign Language] Sorry, I have listened to your question. So, if you allow me, I'll be answering. [Foreign Language]

Right, right. So that is the reason.

[Foreign Language]

Right, right. And also, you have mentioned about some PLI scheme that we have an opportunity. And sir, you're investing very substantially, I think, on the advertising also you've mentioned in your call on the lighting side. So, what do you think the road map? Because we really haven't done much on the Lighting segment over the last 5 years, the EBITDA is kind of flattish. So, where do you think where the bottlenecks are to see some good growth coming in this side also?

[Foreign Language] At one time, we have crossed almost INR 180 crores EBITDA also. So, my next target will be 10% of EBITDA margin. And next, we'll be touching INR 160 crores of EBITDA.

Okay, sir.

[Foreign Language] So, mainly we are driving into innovation, [Foreign Language].

[Operator Instructions] Our next question is from the line of Mr. Dhananjay Kumar Mishra from Sunidhi Securities.

Congratulations on a very strong set of numbers. Sir, last time, I think, 1.5 years [Foreign Language].

[Foreign Language]

All the best for the team.

Our next question is from the line of Mr. Manish Bhandari from Vallum.

[Foreign Language] more than that. So, what I see today is a hard work of years. So, I have 2 questions. [Foreign Language] Bhuj plant, which is an export-oriented plant. [Foreign Language] So, at least that will make you more competitive. [Foreign Language]

[Foreign Language] for this 24-inch ERW mill. So hopefully, by next Board meeting, [Foreign Language].

[Foreign Language]

[Foreign Language]

[Operator Instructions] Our next question is from the line of Nikhil Gada from Abakkus AMC.

And congrats on very strong set of numbers. [Foreign Language]

Basically, you see, in the section pipe -- normal section price, EBITDA is almost INR 4,500 to INR 5,000. But in this, we are getting almost INR 2,500 EBITDA, higher than the normal section pipe. So, that is there. #2 is, capacity utilization has been, in the last 11 months when we started the production, has been 25% overall for the year. So, initial period, it was lower, now it has been increasing because at many of the places, we did the approvals and those are picking up very fast. Secondly, we have received good order from the export market also on large-dia section pipe, and that will also be increasing. So next year, we are expecting the normal capacity utilization for DFT section pipe.

[Foreign Language]

[Foreign Language] Is there something because of inventory benefits to [Foreign Language]? Yes, it is all company-driven through product mix.

[Foreign Language] Is it that there is some shortage in the good quality vendors like Surya, maybe others, [Foreign Language].

[Foreign Language]

Our next question is from the line of [ Rishabh Sisodia with Sameeksha Capital ].

Sir, obviously you have answered on the EBITDA per tonne guidance as well and the recent jump that has happened. So, as you mentioned, like the 10,000 tonne [Technical Difficulty] this quarter, that is not really sustainable number, and you are targeting somewhere around 7,000. So, especially in the API and the Spiral oil and gas solar pipe, we are doing close to 12,000. So, why is -- how do you foresee [indiscernible] 7,000 comes to target? Will it be driven majorly by API and Spiral pipes or the DFT section?

[Foreign Language]

The next question is from the line of Mr. [ Kuber ] from Anand Rathi.

Congratulations on a good set of numbers. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] So it will take 1 year at least. [Foreign Language]

Okay. Sir, any new launches in Steel and Lighting divisions [Foreign Language]?

[Foreign Language]

The next question is from the line of Jatin Damania from Kotak Securities.

Congrats on a great set of numbers. [Foreign Language] What is the decline in the freight cost that we have seen?

[Foreign Language]

[Foreign Language] looking for a serious CapEx plan of INR 300 crores to INR 400 crores. So, I mean, are we looking to increase the overall capacity [Foreign Language]. Are we looking to increase our capacity to 2 million tonne -- or I mean, what is the roadmap going ahead [Foreign Language]?

[Foreign Language]

[Foreign Language]

There will be 2 sort of targets. One will be very immediate and another one will be [Foreign Language].

[Foreign Language]

[Foreign Language]

[Operator Instructions] The last question is from the line of [ Mr. Vivek Gautam with GS Investments ].

Yes, sir. First of all, a fantastic number, best in the sector and industry. [Foreign Language] That's the first question. Second question, sir, [Foreign Language]

[Foreign Language] So, shall we stop now?

Yes, sir. Due to time constraints, that was the last question.

Lastly, I will just like to say one thing, and thank you very much to all the investors, shareholders. [Foreign Language] and thank you very much.

Thank you. On behalf of Surya Roshni Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.