Q2FY24 Concall Notes:
General Notes:
• Core rev. 80 cr (22% YoY growth), EBITDA 13cr (35% YoY growth), Op Margins 16.3%. PAT 7.6cr (81% YoY), PAT margins 9.54% reaching closer to 10%.
• Consumer sector saw a growth of 250% in vol.
• Higher EBITDA margins have been achieved due to operational efficiencies and a reduction in the price of raw material as well as corrections in sea freight
• Witnessed year-on-year growth of approximately 50% in sales in the infrastructure sector due to government’s push for use of crumb rubber modifier bitumen in road
• Consumer sector has lower realization than industrial
• Do not see any slowdown in Infra in H2. Pipeline is strong for highway construction.
Capex Updates:
Oman plant commenced production in mid July ‘23 and is already EBITDA positive.
TPE plant in Panipat and Varle plant for radial tyres will commence production in Q4FY24.
Backward Integrated player:
• There are five or six organized players in the CRM and CRMB business, Tinna is one of them
• Tinna is the only players who have access to some rubber, which is the CR in the CRM. So, as a result, it puts Tinna in a better position compared to the competition, because Tinna is integrated all the way backwards to processing the tyres and making some rubber which is then used to make CRM
• Q2 is generally a weaker quarter due to Monsoon, but this year in Q2 due to customer base diversification. Consumer sales kicked in and made up for some business lost in infra.
Margins Expansion:
Focus will be on maintaining the margins now (around 15% EBITDA).
Oman plant has cap. of 500 tonnes per month. Cap utilization currently is 100% but plan is to expand it and it will be 80-90% by the end of the year.
Exports:
• Seeing a growth of 10-12% YoY in exports markets.
• Time involved in customer acquisition is 2-3 yrs due to approval processes. Tinna has gained entry to two MNCs and working with a few other tyre companies
• Started exports to 4 new countries this year and hoping to add another 2 before the end of FY.
• Current year export will be 7% of rev and growing at 15-20%
What’s changed since 2017 for this turnaround in the business?
• Diversification into different sectors reduced dependence on one sector that was cyclical
• Worked with better quality customers and created a lot of optionality for us in terms of sectors and then within sectors customer base.
• Managed supply chain much better which resulted in overall cash conversion cycle.
Growth Outlook and Guidance:
• FY24 sales 340cr, FY25 500cr, FY27 900cr
• New capex may be needed apart from Oman, Varle, and Panipat to achieve 900cr mark, but that won’t happen until early FY26.
• Margins may improve even better than 16% by FY27.
• Tyre crushing capacity will be north of 250k tonnes in FY27
EPR Policy:
• Working with the government and something can happen next year.
• Policy says that the tyre mfg companies will have to acquire some credits from the recyclers and a recycler will generate those credits based on the waster recycling.
• If there is a mismatch between the credits needed vs credits a tyre company has got, penalties will be involved, so Tinna can easily monetize these credits in future.
• To what extent, these credits will add to the bottomline remains unknown at this time.
Disc: Invested
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