Only thing that bothers me in this story is the EBITDA margins. Company says impact of commodity prices has no impact on margins. But when lead prices collapsed in FY15 margins halved from 9% in FY14 to 4% in FY15 and FY16.
See this statement from FY15 annual report, “International lead prices have been cooling off for almost a year now. From about $2,200-2300 a tonne in July 2014, prices on the London Metal Exchange have dropped by over 25%, to around $1,800 a tonne now. One of the major reasons for this was slow demand in China. With China accounting for 55% of global lead usage, slower consumption in China curtailed demand. The Chinese economy grew at its slowest pace in 24 years in 2014. Hence, while refined lead usage in China was expected to go up by 7.4% in 2014, it actually moved up by only 2%.”
So is the company being truthful when it says commodity prices don’t impact their margins? Against this backdrop please note most commodity prices are collapsing be it PVC or copper. Can someone tell what is happening to lead prices?
By the way even I analyzed it after Kacholia bought. I could not make peace with the CFO and the drop in margins in FY15 (v/s management commentary that there is no impact on margins of commodity price movements)
I believe a competitor is Pondy Oxides which is in the same business as Gravita. Its smaller and trades at lower multiples and BTW Exide is its customer (not Gravita’s)
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