My notes from AGM fy23

22/08/2023

Boards and Panels Division

• The category is in nascent stages of development and management seemed quite confident of growth in size of the market.

• The co. is building the market by creating awareness among influencers (Architects/Interior Designers) and training the technicians.

• Cement, Silica and Fly Ash are important raw-material for manufacturing boards.

• The division has started contributing to profits and profitability will go up as scale increases.

• Margins for VAP are around 50% more than commoditised products.

• A greenfield expansion worth 187 cr is under way in Karnataka. The same will be completed by end of 2023. 72000 MT.

• There is a decent opportunity in export markets with higher margins. The co will focus on the same after new capacity comes up.

• The co was able to pass on rm inflation in this segment.

PEB Division

• The co is among Top 5 players in the country.

• The co has turned around this segment by undertaking complete overhaul of processes and focusing on marquee customers.

• A projects takes 3-6 months to complete, from finalisation to execution.

• The co is buffered from steel price fluctuations and 8% type EBIT margins are sustainable. Margins can improve going forward, high probability on account of extracting efficiencies.

• The co is focused on Factory and Warehousing market and is seeing a lot of repeat orders from customers.

• The co has undertaken capacity expansion in South at the cost of 125 cr.

• This segment is witnessing strong tailwinds.

Roofing

• The market will grow at a meagre 2% on volume basis. The co maintained its market share in spite of tough times. Increases in prices of asbestos fibre (25% of total cost) hurt profitability. The co was unable to pass on rm inflation. Focusing on reducing cost by developing alternate sources of supply and innovation. High rm prices persisted even in q1 of fy24 (Verify).

• Roofing is a seasonal business. March-June. Inventory peaks in March and bottoms out by June, almost halves in size. The co is taking efforts to reduce inventory days and improve WC.

General

• Past few years were focused on plugging performance gaps, becoming efficient and building management team. The stage is set for growth and co is entering an investment phase. 100-150 cr deployment every year foreseeable for next 4-5 years (Verify).

• Chairman, despite being of non-executive designation, appeared to be shaping the course of the co and keeping an eye on execution. The board has set high standards for the management are excited about future of the co

• The co reduced Tax Liability by 80 cr in the fin year gone by.

• FCF in q1fy24 is at 143 cr.

Disclosure: Invested

Tried all the products, the products appears nice with the signature fragrance of camphor

This new line will re rate the stock
Margin expansion
Top line expansion
Improvement in roce
And more drivers

Invested

Let’s not say ‘if’ and ‘hope’ is our strategy

If Polycab produces quality products, has good supply chain (distribution) and good at marketing, company will grow and generate cash and in the end investors are here to make money so they will eventually come back.
Management holds 65% in the company and 30-35% of their wealth also got eroded, I hope this will teach them a lesson and we will see better governance in future.

As per the news in Money control, Government is looking to double the Coal production by 2030 and beyond.

Peak electricity demand is rising at about 10% to 15% in India and that puts Coal India in good position to increase its mining capacity and also its revenues by 2030. Coal will continue to contribute about 50% in electricity generation till about 2040.

Stock price which was undervalued 2 years back below 200, seems to be fairly valued as of now but there could be further growth going forward.

Disclosure: Invested mainly for Dividend Yield.

Vishal Khandelwal (Safal Niveshak) always keep saying that –

Best advice ever received – “Three qualities for success: integrity, intelligence, and energy. If you don’t have the first, the other two will kill you.”

Hope that, Polycab management will stay away from such unwanted things and focus on Integrity. They will grow their own wealth much faster since they may have remaining two i.e. Innovation and Energy.

Mr. Market always overreacts as that is the nature of market, which creates opportunities for long term investors. I believe things will settle soon.

No investment as of now.