Shankara Building products Q2 highlights –
Sales – 1142 vs 907 cr, up 26 pc
EBITDA – 36 vs 30 cr, up 23 pc ( margins @ 3.2 vs 3.3 pc )
PAT – 18 vs 16 cr, up 15 pc
Revenue break up –
Retail – 54 pc
Institutional – 46 pc
Same store growth at 23 pc
Introduced their own private label – Fotia Ceramica in Q2 – should help in margin expansion. Will be procuring tiles from Morbi
Received balance payment ( Rs 78 cr ) towards warrants conversion by APL Apollo – strengthening their balance sheet and will aid in debt reduction
Total retail stores – 90, spread across AP, MP, Maharashtra, Gujarat, Karnataka, Kerala, Orrisa, Goa
Growth in rental costs @ 4 pc YoY vs 26 pc growth in revenues
In process of opening two more experience centers in Maharashtra, MP
Both Steel based products and Non Steel products grew 30 pc YoY
H2 is always better vs H1 for the company as the construction activity picks up in the second half post the monsoons
Have set up a number of Stores in Stores in collaboration with Nippon paints
Intend to increase the contribution from Non-Steel business to 25 pc in next 4 yrs ( currently at 10 pc of the total business ). This should help improve their blended profit margins. Aim to reach 5 pc EBITDA margins in 4 yrs
Deterioration in cash flows should reverse in H2
APL Apollo’s shareholding ( post warrant conversion ) in the company stands at 5 pc
Company guiding for 25-30 CAGR growth for next 2-3 yrs. Well on track to achieve it in this FY
Company has closed a few unprofitable stores in the recent past. Did not mention the number of store closures
Won’t be growing the number of new stores in an aggressive manner ( likely to open 2-3 stores/yr ) as the company feels that same store growth can be buoyant for the foreseeable future. Company can double its sales within the existing infrastructure
Revenue contribution from APL Apollo products in Q2 @ 38 pc. Company shares a very cordial relationship with APL Apollo. Company has helped them a lot in expansing in South India. Don’t see them squeezing company’s margins
EBITDA margins at present for non steel business @ 5-5.5 pc. Should improve as the volumes improve
Disc: a recent buy, invested, biased, not SEBI registered
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