Surya Roshni LtdQ1 FY23Industrial Products

Surya Roshni Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Targeting ₹3,250 crore in sales over the next 3 years, up from earlier ₹2,500 crore vision.
→Expected 12%-15% CAGR growth in steel pipe volumes over next 2-3 years.
→Aim to reach 1 million ton steel pipe sales by FY25 with EBITDA of ₹7,000 per ton.
→Long-term goal to achieve 1.5 million ton capacity in steel pipe segment within 4-5 years via CAPEX of ₹300-400 crores.
→Lighting segment targeting ₹2,500-3,250 crore sales with addition of new products worth ₹500-600 crore.
→Professional lighting grew nearly 40% last year; expecting it to be a major growth driver.
→Consumer durables and fan appliances grew 25%, seen as a new growth segment.
→Volume growth for pipes expected at 12%-14% minimum for next year.
→Expansion in export markets like US and growth in API and spiral pipes segments planned.

Margin guidance

Category 3

→Surya Roshni targets a CAGR growth of 12% to 15% over the next 2-3 years.
→They aim to sell 1 million tons of steel pipes by FY25 with an EBITDA margin of ₹7,000 per ton.
→The company aspires to reach ₹1,000 crores EBITDA from ₹620 crores currently.
→Lighting segment’s revenue target is ₹3,250 crores in next 3 years with an EBITDA of ₹450 crores.
→EBITDA per ton benchmark achieved in FY23 is considered the minimum target for future.
→Export markets, especially the US, and higher margin API pipes are expected to drive growth.
→Working capital debt is expected to be eliminated within 1.5 years, improving financial health.
→EBITDA per ton may normalize but will remain substantially better than earlier years.
→Dividend payout total ₹7 per share recommended, signaling confidence in earnings sustainability.

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Fundraise plans

→The company aims to become completely debt-free within the next 1.5 years; currently, it has only ₹404 crores of working capital debt remaining.
→There is no mention of any new equity fundraising.
→The company plans significant CAPEX of ₹300 to ₹400 crores over the next 2-3 years to expand capacity and invest in new plants.
→CAPEX funding will be managed through internal accruals, promoter/shareholder funds, and efficient working capital management.
→The company is focused on maintaining a lean and healthy balance sheet with positive cash flow and no long-term borrowings.
→No specific plans were disclosed for raising fresh debt or equity in the near future.

Order book

Yes

→The company mentioned that the pipeline stock and order booking for API pipes is in a good position.
→There has been a de-growth in export orders to Europe and UK, but the US market has opened up for exports.
→Orders for the domestic trade segment are already growing well.
→There is optimism that export and API pipe orders will see better growth in the coming year.
→The company targets a steel pipe volume growth of around 13-13.5% next year, moving from 785,000 tons to close to 900,000 tons.
→The improved order book reflects good positioning in both domestic and select international markets, especially in the oil and gas pipe segment.

Capex plans

Yes

- Serious CAPEX plan of ₹300-400 crores planned over the next 2-3 years for growth and capacity enhancement. - ₹75 crores investment approved for setting up a 24-inch ERW pipe plant at the existing Bhuj facility, targeting peak turnover of ₹600 crores. - CAPEX to help reach nearly 1.5 million tons capacity in steel pipe segment within 4-5 years. - Focus on GP plant setup in Hindupur and DFT plant ramp-up in Gwalior contributing to capacity growth. - Continuous quarterly or alternate quarter investments to debottleneck and modernize existing plants. - Investment of ₹25 crores over 5 years under PLI scheme, ₹10 crores already invested, focused on innovation and smart lighting. - Expansion to enhance premium product manufacturing and gain export market share, especially for API and 24-inch ERW pipes. Overall, ongoing and planned CAPEX aims at capacity expansion, technology upgradation, and strengthening product mix for sustainable growth.

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