Navigating the Emotional Roller Coaster of Bear Markets

Bear markets are a roller coaster of emotions. At times, it’s hard to even recognize whether you’re in one or not. This uncertainty arises because bear markets don’t always follow a single pattern—they come in various forms. Consider the sharp one-month decline during the 2020 COVID-19 outbreak, marked by sudden rebounds. Amid the panic, some market participants were calling for markets to be shut down(link), only to later dismiss it as a temporary event. Or think back to the slow and grinding decline of 2017-2019, where the market slipped quietly and relentlessly.

Bear markets or corrections are often selective in nature. Not all stocks fall equally—some segments are hit harder, especially the ones that led the previous bull run. Experiencing a bear market is a unique journey, depending on when you entered. Those who invested recently may see their portfolio value drop like pins in a bowling alley. Long-term investors, on the other hand, experience a different kind of pain: their wealth erodes, and they realize they haven’t fully capitalized on the prior bull market either.

Investing during a bear market brings its own set of complications. If you invest as prices fall, it’s nearly impossible to time the bottom. You might witness prices drop even further after you buy, leaving you disheartened. And if you did time it right, there’s often regret for not having purchased more. After making an investment, it’s easy to second-guess yourself when you see the stock drop the very next day, making you feel foolish for not holding out longer.

During these times, you may find yourself doubting everything—your analysis, business models, the compelling growth stories, and the next hot sector that’s suddenly out of favor. It’s disheartening to see the market’s brutal price action slicing through the narratives you once believed in, leaving you feeling disillusioned and questioning your decisions.

But as seasoned investors often say, “this too shall pass.” If you can endure the pain and stay committed to your investment strategy, you’ll emerge stronger. It’s in these challenging times that your resolve is truly tested, and your ability to maintain discipline can set the foundation for future success.

Interarch Building Products Ltd is a leading player in the pre-engineered steel construction industry in India. This company specializes in providing complete turnkey solutions, including design, engineering, manufacturing, installation, and erection of pre-engineered steel buildings (PEBs).

Operations: Interarch handles PEB Contracts on a turnkey basis and provides PEB Sales, which include metal ceilings and roofing systems, steel structures, and framing systems.

Manufacturing Capacity: They have 5 manufacturing facilities across India, with a total installed capacity of 161,000 Metric Tons Per Annum (MTPA). A 6th facility is planned in Gujarat, and they also operate three dedicated design centers.

Technological Capabilities: The company uses advanced design software, including Staad Pro, MBS, FrameCad, Tekla, and AutoCAD to facilitate design and engineering for its projects.

• The company achieved a successful IPO listing in August 2024, raising ₹600 crores. Of this:
• ₹200 crores were raised as fresh issues for capex investments.
• The rest was for offer for sale.
• Strategic Expansion: Interarch commissioned Phase 1 of their 5th manufacturing plant in Andhra Pradesh, adding 20,000 MTPA to the capacity. Phase 2 is under construction, and once completed, the plant will add a further 40,000 MTPA.
• The newly commissioned plant provides a revenue visibility of ₹150 crores per annum and is expected to contribute significantly to the company’s future growth.

Industry and Global Market Outlook:

• Global PEB Market: The market is estimated to grow from USD 19-21 billion in 2023 to USD 32-34 billion by 2028, driven by investments in public infrastructure, growing urbanization, and demand for green buildings. Southeast Asia and North America are the key growth regions.
• Indian Construction Sector: The sector is valued at approximately INR 46-48 trillion and is projected to grow to INR 74-76 trillion by FY29, driven by urbanization, infrastructure development, renewable energy projects, and government initiatives.

Indian PEB Market Outlook

• The PEB industry in India is currently valued at around ₹330-340 billion and is expected to grow at a CAGR of 10-14% over FY24-29. The organized sector is gaining a stronger foothold over unorganized players due to reliable track records, quality products, and efficient supply chain capabilities.
• Sectoral Demand:
  • Industrial/Manufacturing continues to be the largest segment.
  • The infrastructure segment is growing rapidly due to the adoption of PEBs in warehouses, cold storage, data centers, and power plants.

Advantages of PEB over Traditional Construction

• Cost & Time Efficiency: PEB structures are 40-50% faster to construct compared to traditional RCC (Reinforced Cement Concrete) constructions.

Interarch Building Products Ltd Q1 FY25 Earnings Call

• Revenue Growth: The company reported a 3% YoY growth in revenue, reaching ₹303 crores in Q1 FY25.
• EBITDA stood at ₹27.1 crores, with an EBITDA margin of 8.9%, slightly improved from 8.6% in Q1 FY24.
• PAT (Profit After Tax) was ₹20.3 crores, a 4.6% YoY growth.

Order Book & Order Wins:

• New orders worth ₹634 crores were secured in the year up to September 2024, contributing to an overall order book of ₹1,350 crores as of September 14, 2024.

Order Mix & Revenue Visibility:

• 62% of revenue came from the industrial segment, 36% from infrastructure, and the remaining from other sectors.

Future Growth & Profitability Guidance:

• The management expects 10-15% revenue growth in FY25 and 15-20% in FY26, aiming to double its revenue in the next 3-4 years.
• EBITDA Margins are guided to remain in the range of 9-10%, with potential improvements as the company scales.