The Nikkei average edged up by 0.30 percent to 39,500.37 while the broader Topix index finished marginally lower at 2,742.15.
Posts in category All News
China’s Shanghai Composite ends down 0.53% (08-11-2024)
Focus shifted to stimulus announcements from China later in the day as the meeting in the Standing Committee of the National People’s Congress ends.
Electrosteel Casting – Ductile Pipe King (08-11-2024)
Some important points from the November 2024 concall:
Risks
● Raw Material Price Volatility: While recent trends show a downward correction in raw material prices, especially coking coal, this volatility remains a risk factor. Electrosteel mitigates this by using back-to-back contracts for 5-6 months of their order book, but a sudden surge in prices could impact profitability, especially for the 25% of the order book that remains open.
● Competition: The DI pipe market is witnessing increased competition. While Electrosteel is a leader with a 19% market share, new entrants or aggressive expansion by existing players could pressure margins.
● Government Policy Changes: Government initiatives like Jal Jeevan Mission and AMRUT 2.0 are significant demand drivers for Electrosteel. Any policy changes or funding cuts to these programs could impact order inflow.
● Geopolitical Risks and Ocean Freight: Electrosteel aims to increase its presence in export markets. Geopolitical uncertainties and fluctuations in ocean freight costs can impact export volumes and profitability. The Russia-Ukraine conflict is a relevant example impacting global trade and shipping costs.
● Blast Furnace Stability: The recent shutdown and slower-than-anticipated stabilization of the blast furnace at the Srikalahasthi unit highlight operational risks. While management is working on solutions, recurring issues could impact production targets and profitability.
● Execution of Greenfield Project: Electrosteel is investing in a Greenfield project to expand capacity. Delays or cost overruns in this project could strain finances and impact future growth prospects.
Future Sales and Margins
● Sales Volume: Electrosteel expects to reach a sales volume of around 850,000 tonnes in FY25, a 13.8% growth compared to FY24. The company aims for 900,000 tonnes per annum by FY26 and 1 million tonnes by FY27, demonstrating a growth-oriented strategy.
● EBITDA Margin: Management expects to maintain an EBITDA per tonne of INR 15,000 to 16,000 in the near to medium term. This translates to an EBITDA margin range of 16% to 18%. They believe this is achievable due to stable demand, operational efficiencies, and potential benefits from softening raw material prices.
Overall:
Electrosteel Castings Limited presents a positive outlook on sales growth driven by government initiatives, capacity expansion, and a robust order book. Management is optimistic about sustaining healthy EBITDA margins. However, risks like raw material price volatility, competition, and successful execution of growth plans need careful monitoring.
Godawari Power – Any Trackers? (08-11-2024)
More than growth, I see these as attempts to diversify business profile from ‘iron dependent’. Management has alluded to Steel as hedge to iron ore bet as well, when inquired about steel investment being RoCE dilutive in nature. Though at very good RoCEs.
Large capex is being done across the industry to increase Iron Ore mining. Lloyds, NMDC and Captive iron ore mines from large steel players. And it is (and likely to remain) a commodity.
Investment in these 2 business line is not substantial. Approximately cashflow generation from 1 quarter.
Option value can be provided. If management sees opportunity to scale and generate value, they will do it. And, they are likely to have cash generation for that.
Disclosure: Invested.
Wonderla Holidays (08-11-2024)
Wonderla Holidays –
Q2 FY 25 results and concall highlights –
Currently operational amusement parks –
Kochi ( since 2000 ) – 94 acres, 56 rides
Bengaluru ( since 2005 ) – 82 acres, 60 rides
Hyderabad ( since 2016 ) – 52 acres, 52 rides
Bhubneshwar ( since 2024 ) – 51 acres, 21 rides
Company makes 30-40 pc of its rides – in house, has a talented set of technicians for the same. Rest are imported
Q2 financial outcomes –
Revenues – 67 vs 75 cr ( down 10 pc )
EBITDA – 2.6 vs 26 cr ( down 90 pc ). Company incurred a one time launch cost for the Bhuvneshwar Park @ 4 cr in Q2. Also had to incur additional hiring costs for the Bhuvneshwar park which further compressed the EBITDA margins
PAT – 15 vs 13 cr ( due deferred tax reversals )
Park wise footfalls, revenues in Q2 –
Kochi @ 1.39 lakh. Revenues @ 19.8 vs 24.7 cr
Bengaluru @ 1.96 lakh. Revenues @ 28.4 vs 31.6 cr
Hyderabad @ 0.92 lakh. Revenues @ 13.5 vs 16.1 cr
Bhuvneshwar @ 0.24 lakh. Revenues @ 5.3 cr
Heavy rains in South India in Q2, landslides in Kerala did impact the footfalls
Added multiple rides to the Hyderabad park in Q2. Spent 15 cr on the same
New Park @ Chennai should go live in Q3 FY 26
Raising 800 cr via QIP – in order to fund expansions in future ( it ll be a mix of Equity 600 cr and Debt of around 200 cr – roughly ). This should be enough for company’s expansion for the next 5 – 7 yrs
A new – large size park in a city like Mumbai / Delhi should cost around 700-800 cr. For a tier 2 city like Mohali / Indore, it should cost them around 200 cr
Intend to add a min of 3 / max of 5 parks in the next 5-6 yrs
Saw encouraging footfalls in the month of Oct 24
Aiming to hit > 3 lakh footfalls in the first full year of operations @ Bhuvneshwar Park
It takes a min of 18 months to set up a park from scratch ( post all the clearances )
Company has surplus land in all their current parks. Company will keep adding rides to their existing parks to utilise the same
Current ticket : non ticket revenues are 75:25. Aim to drive it towards 60:40 in next 4-5 yrs
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
Bharat Bijlee slumps as Q2 PAT slips 33% YoY (08-11-2024)
Bharat Bijlee tanked 15.58% to Rs 4,029.95 after the company’s net profit declined 32.63% to Rs 18.79 crore on 6.15% fell in revenue from operations to Rs 394 crore in Q2 FY25 over Q2 FY24.