Satia Industries Ltd Q3 FY22 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 1
Margin
Category 3
Fundraise
N/A
Order
Yes
Capex
Yes
3 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 1- Satia Industries projects total paper production of around 2.3 lakh tons next year, combining existing and new capacities.
- Revenue projection for the next financial year is approximately Rs. 1,500 crore based on current price realizations.
- The new machine (PM4) commercial capacity of 1 lakh ton per annum started production in February 2022 and is fully booked for February.
- Plans to increase agro pulp capacity from 200 tons to 250-300 tons and wood pulp from 120 tons to 300 tons within five months to reduce import dependency.
- Expansion into value-added papers like copier paper, wedding card base, paper cup stock, and carry bags to replace single-use plastics.
- The cutlery segment is planned to expand with potential addition of six more machines after initial capacity utilization.
- Export plans to contribute 10-15% of total production by next year.
- Expect increased market demand due to shortage and government’s single-use plastic ban starting July 2022.
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Fundraise plans
See what Satia Industries Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- Upgrading wood pulping capacity from current 120 tons to 300 tons within next 6 months, involving a spend of around Rs. 65 crore.
- Increasing agro pulping capacity from 200 tons to 250-300 tons over the next 3-5 months through in-house modifications.
- Investment in a new continuous pulping process to increase capacity and save steam consumption.
- Possible future expenditure of Rs. 50-60 crore on a new biomass-based boiler using rice straw or other biomass within next two financial years.
- Expansion into cutlery business: Two machines already installed and commercial production started, awaiting food safety approvals; plan to add six more machines of 2 tons per day capacity post successful ramp-up.
- Capital Work In Progress (CWIP) of around Rs. 450 crore, with major cost capitalization expected by February as PM4 machine has started production.
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Margin guidance
Category 3- Satia Industries projects top-line growth to around Rs. 1,500 crore next year, driven by increased production capacity (PM4 machine with 1 lakh ton per annum capacity).
- EBITDA margins are expected to remain balanced despite rising raw material costs due to fixed cost absorption with higher production.
- The new paper machine (PM4) is expected to contribute Rs. 25-30 crore in annual revenue at 70-80% capacity utilization initially, potentially increasing with full utilization.
- Expansion in agro and wood pulping capacity (upgrading to 300 ton/day) will improve backward integration and cost-efficiency within 6-7 months, boosting profitability.
- Introduction of value-added products (copier paper, wedding card stock, paper cup stock) targets higher realizations and margin enhancement.
- Cutlery segment expected to contribute meaningfully post food safety approvals, with potential to expand the product line.
- Depreciation expense will rise by approximately Rs. 50-60 crore annually due to capitalized expansions, impacting net profits.
- Earnings growth is supported by strong order books and expanding export potential (10-15% of production).
Order book
Yes- Satia Industries has a strong order book of over 25,000 tons for two months for its existing capacity.
- The production from the newly commissioned paper machine PM4 (1 lakh ton per annum capacity) is also fully booked for the month of February.
- Additionally, the company has recently received another order of 9,000 tons from the Rajasthan School Textbook Corporation.
- Given these orders, the company does not anticipate any shortage of orders for its current production capacity in the near term.
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What Satia Industries Ltd's management said in earlier quarters
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