Surya Roshni Limited (SURYAROSNI) Q4 FY23 Earnings Concall Transcript

Surya Roshni Limited (NSE:SURYAROSNI) Q4 FY23 Earnings Concall dated Apr. 27, 2023.

Corporate Participants:

Raju Bista — Managing Director

Bharat Bhushan Singal — Chief Financial Officer

Analysts:

Manan Poladia — MKP Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Surya Roshni Limited Q4 FY 23 Earnings Conference Call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I now hand the conference over to Mr. Raju Bista, Managing Director at Surya Roshni Limited. Thank you and over to you sir.

Raju Bista — Managing Director

Yeah, thank you very much. Good evening everyone. On behalf of Surya Roshni Limited once again I extend a warm welcome to everyone for joining us today in the call. On this call, we are joined by Mr. Tarun Baldua, who is executive director and CEO of Steel operations; Mr. Jitendra Agrawal, CEO of Lighting and Consumer Durable business; our CFO and Company Secretary, Mr. BB Singal. Along with SGA our Investors Relation Advisor. I hope everyone had an opportunity to go through the financial results, press release, and investor presentation which has been uploaded on the stock exchange as well as on our company website.

The company reported a new record top-line and profitability for FY23. With the revenue almost touching INR8,000 crores mark. The company continued to strive towards achieving its long-term goal and remains well-positioned to continue the growth path for the future. During FY23, the company continued to invest in innovation and efficiency along with focus on technology, talent, and infrastructure to remain well ahead of the curve. The company has been judicious in the budgeting and capital allocation resulting in lean and healthy balance sheet and we firmly believe that our growth will be sustainable with a comfortable working capital cycle and balance sheet position.

For the quarter EBITDA and PAT grew by 64% and 88% respectively on the year-on year basis. For ’23, the revenue was almost INR8000 crores as compared to INR7,731 crores, a growth of 3% year-on-year. EBITDA and PAT has gone up to INR620 crores and PAT is about INR336 crores. As compared to INR449 crores EBITDA and INR205 crore PAT. The company also witnessed a healthy improvement in gross margin due to its stable input cost and improved product mix. Over the past few years company has placed it’s emphasis on reducing the debt and that’s completely repaid all long-term borrowings and with only INR400 crore of working capital debt remaining the company intends to become debt-free by another one-and-half to two years time.

Now coming to lighting and consumer durable. Q4 and FY ’23 revenue grew by 7% in Q4 and 16% on year and year respectively. The new age product lines such as LED lighting continues to grow at a healthy rate and professional lighting which is also institution sale reported robust growth of 28% and 38% year-on year for Q4 and FY ’23 respectively in terms of revenue. As well as significant inflow of the order in hand, we are witnessing the multiple green shoots in the public, as well as private capex cycle. We firmly believe that our professional lighting will be one of the biggest beneficiaries of the improvement in the capex cycle.

The company professional lighting continued to build a strong order book and we’ll continue to fill this order book principally in coming times as well. We are confident that consumer durable will be a key growth trigger for the company going-forward. The company is well-positioned to scale-up this business-driven by well-established distribution network and Surya Roshni brand equity. The gross margin has also improved due to operating leverage, premium products, stability in input cost, and improving market realization. There is a scope to improve the margin further. The capex under the PLI scheme is ongoing as per the plan. This capex will benefit the company by lowering the cost and the company also reduces replacement cost which stand at 4.5% only and last year it was last year it was 6.78%, so almost we saved like INR11 to INR12 crore annually.

The company is investing heavily in visibility enhancement through store excellent, in house merchandising, in store display, and direct engagement with electrician. In FY ’24 the company planned to double the advertisement hence cost from the current level of INR20 crores, which will be in help to build brand visibility and increase the market share. With the company plan to enhance that outreach program through various ATL and BTL campaigns the company will also strengthen the semi-urban and urban distribution network which is now one of the largest in the industry. Now moving. To the steel pipe and strip. The company top-line was affected due to fall in global steel price during the quarter. However, the company reported the highest-ever [technical issue] INR9,868 rupees per ton during Q4 FY ’23 compared to INR5,605 rupees on year-on year basis.

The robust growth in realization were mainly driven by the higher share of value added product such as API coated, GI, and export. As communicated in the earlier earning call, the company reported EBITDA at INR6,452 for FY ’23, far exceeding the guidance of INR5,500. The FY ’23, robust growth in EBITDA level, will serve as well it will be a benchmark for the companies future growth. With robust profitability growth, Board of Director has recommended a final dividend of INR4 per equity shares on the paid-up capital of the year ’22-’23 subject to the approval of shareholders. The management remains committed to create wealth for their stakeholder. So total it will be three-plus four, which would be INR7 per share.

Lastly, we remain confident about the opportunity that lie ahead of us. The company is focusing on geographical expansion, innovation, efficiency enhancement infrastructure and [indecipherable] capital to deliver the best class solution to our customer. So now I would like to request our CFO Mr. BB Singal to share his thoughts.

Bharat Bhushan Singal — Chief Financial Officer

Thank you respected MD sir, and a very good evening to all the participants on the call. The company reported a good set of numbers for Q4 as well as for financial year ’23. For the quarter grew — EBITDA grew by 64% and PAT grew by 88% respectively on year to year basis. EBITDA to INR254 crores and PAT grew INR156 crores. For financial year ’23, the revenues stood at INR7,997 crores compared to INR7,731 crores during FY ’22, a growth of 3% year-on-year basis.

EBITDA and PAT stood at INR620 crores and INR336 crores, a growth of 38% and 64% year on year respectively. In lighting and consumer durables for the quarter, the revenues stood at INR431 crores, a growth of 7% year-on year basis. EBITDA and PBT stood at INR42 crore and INR35 crores a growth of 23% and 36% year-on-year basis respectively. For FY23, the revenue stood at INR1,545 crores a growth of 16% year-on year basis. EBITDA and turn PBT stood at INR122 crores and INR90 crores, a growth of 15% and 25% respectively. Revenue growth for the quarter, as well as the financial year was driven by value-added products for the LED light, downlighters, as well as professional lightings.

In steel pipes and strips during Q4, current financial year FY ’23 the company’s EBITDA and PBT grew 76% and 110%, to INR212 crores and INR181 crores respectively. EBITDA per metric ton stood at INR9,868 per metric tons compared to INR5,605 a robust growth of 76% year-on year basis. For financial year ’23 revenue grew by 1% year-on year to INR6,452 crores while EBITDA returns PBT grew by 45% and 50% year-on-year respectively. EBITDA per metric ton stood at INR6,496 compared to INR4,648. The company has reduced debt by INR176 crores in financial year ’23 and continues to remain long-term debt free.

Finance cost has reduced by 30% in FY 23. Debt-equity ratio reduced to 0.22 against — as on 31st March ’23 as compared to 0.37 as on 31st March 2022. The company continued to maintain positive cash conversion cycle. The working capital days stood at 59 days during Q4 financial year ’23. Working capital days for lighting and consumer durables stood at 53 days in Q4 financial year ’23 compared to 60 days in Q3 financial year ’23 while steel pipes and strips working capital days at 61 days in Q4 financial year ’23 compared to 62 days in Q3 financial year ’23. For Q4 financial year ’23, orders grew by 15.5% from 23.6% to 4.01%. ROE grew by 12.8% from 22% to 34.8%. Similarly, for financial year ’23, ROCE, improved by 670 basis-points from 16.2%, to 22.9%. ROE improved by 560 basis-points from 14.1% to 19.7%. With this, I conclude the presentation and we can now open the floor for further questions-and-answers.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Manan Poladia from MKP Securities, please go-ahead.

Manan Poladia — MKP Securities — Analyst

Hi, sir, am I audible.

Raju Bista — Managing Director

Yes, yes.

Manan Poladia — MKP Securities — Analyst

So sir my question is regarding the new capex announcement that you guys have just put out for the INR75 crores. I think in Madhya Pradesh or I did

Not read exactly where, Anjar district, right, it is Gujarat.

Raju Bista — Managing Director

Yes, yes.

Manan Poladia — MKP Securities — Analyst

So I would like to understand what is our revenue potential that comes out of this 8,000 metric tonne per annum ERW pipe plant. What would be the peak revenue potential at 100% shop utilization?

Raju Bista — Managing Director

[Foreign Speech]

Operator

Due to time constraints that was the last question.

Raju Bista — Managing Director

Lastly, I will just like to say one thing and thank you very much to all the investors, shareholders [Foreign Speech] Thank you very much.

Operator

[Operator Closing Remarks]