Background: Asbestos Cement sheets are one of the most important building material (for real estate and infrastructure sector in particular) purely for their strong, non-corresive, weather-proof aesthetic nature. The industry till last year was not doing too well, but the late last year infrastructure push and more recently the real estate revival has initiated a strong revival in the sector. Shayadri Industries is one the leading players in the industry and has also launched a product that would include it the business opportunity of Swach Bharat Abhiyaan.
The Company: Shayadri Industries (SIL) was established by Mr. LB Patel as New Sahyadri Industries Ltd in 1994. The company is a part of the Swastik group, and is into the business of producing building material solutions and manufactures asbestos-cement (AC) sheets under the famous “Swastik” brand apart from anti-theft Doors, Flat sheets, Pre-Fabricated Building material and now modular Toilets. . The company has four plants across states and a new fifth plant is starting production this FY which is going to give a major boost to both topline and bottomline in the coming quarters. SIL also operates and sell power from its three wind farms which has a combined capacity of 23.2 megawatts.
Business: The company has a diverse product portfolio, SIL offers new technologies for metropolitan, urban and rural spaces in South Asian, Middle East and African countries and ofcourse india. The company has very strong brands in its space and enjoys a good and strong brand recall.
- “Swastic” : Swastik roofing sheets are manufactured from a quality blend of fibre and portland cement, using the most modern manufacturing techniques and the latest process control equipments. The AC sheets are ideal for roofing and side cladding of Industrial sheds, godowns, poultry sheds, houses etc.
- Modular Toilets: The company has more recently, added a very strong product in its arsenal in the form of “Swachalay”. Swachalay Toilet Blocks are modular in design, supplied in the form of a kit, and can be erected on site within hours for a comfortable and hygienic use by the residents. Made using Cemply fibre-cement sheets and doors and Swastik Roof, these safe, secure toilet units are ready for sanitary fittings to be installed before use. Swachalay are ideal for use in residential, school, tourist spots and inhabitants from the tribal or hilly terrains. The product is already very well received by the customers and given the government push for rural sanitation, this product could be a game changer for Shayadri.
- Flat Sheets – “Cemply” flat sheets are used in interior designs and in exterior use in industrial, commercial, and residential construction and finds application in False Ceiling, Partitions, Paneling and Wall lining, Cold Storage, Table top, Cable Trench Covers, Sign Boards, Back lining of cupboards, duct covers in multi-storey buildings, Kitchen Cabinets, Furniture, Storage Shelves etc.
- Entasafe – Entasafe is India’s first premium anti-theft main door and one of the world’s most advanced Main door systems. Entasafe doors are constructed from durable pre-treated steel, with elegant wood grain finish (FYI: in US and Europe approx 70% of residential main doors are steel doors). These are side hinged doors for putting directly to the brick work opening, hence very easy to install.
- EcoPro – EcoPro, which is a wood-free, light weight and asbestos-free alternative to conventional materials and asbestos products.
- SILBUILD – This is the “Pre-Engineered” Building solution brand from Shayadri that finds applications in Mass Housing, Low Cost Accomodation, Defence Housing, Educational / Hospital Buildings etc. With the affordable housing push and housing for all projects, this product should get another major push.
- Wind Power
Sahayadri Industries has set up 31 windmills in Maharashtra, Rajasthan and Tamil Nadu totalling to an output capacity of 23.12 MW. Indian Wind Power Association adjudged Sahyadri Industries Ltd.’s Wind Mills as “Best Performing Wind Farms” in the Years 2006-07, 2007-08, 2008-09, and 2010-11.
Valuations: This dividend paying company is trading at less than 0.25 times its FY14 sales and at 5.5 times FY 15 EPS. The company was facing trouble with its performance owning to extreme downturn in housing and infrastructure sectors but to counter it, it evolved itself very well. Firstly, it gave a huge thrust to exports (which were comparatively non-existent earlier) and secondly, it started evolving its product line to introduce high margin non-infrastucture related products. “Swachalay” is the first product launched under this initiative. The results are here to see. The company has given a strong turnaround performance in the H1 and is expected to continue the same in H2 and beyond. With the sanitation push of the indian government, the company is expected to bag major contracts moving forward. “Swachalay” has been received very well by the customers. With the dramatically improving bottomline, the dividends this year should also increase big time. Also, with the fifth plant becoming operational this year, the topline would increase substantially and the plan would also add to the bottomline, as the company would save significantly in freight charges. Also, with the decreasing debt, the company’s bottomline would get a further fillip.
Technicals: The company has given a strong multi-year breakout above 87 levels recently and therefore, on back of significantly improving fundamentals of the company, the upmove could be significant.
The company has evolved itself very well, and most of its brands are one the best in the respective area. The sanitation push of the government should give a strong push to the sales of “Swachalay” brands of modular toilets which is already very well received by the customers. With the Vijaywada plant coming on stream, the topline along with bottomline should get a major fillip. Last but very importantly, the company has decided to double the exports which should significantly improve the bottomline. The company in its interview to Businessline also mentioned about they being confident of “doubling” their exports as well as turnover this year. They have already delivered 50% growth in topline H1 YoY and considering the interview was given in the last week of Nov, management would clearly know what they have to do in the H2 and if they indeed come to anywhere close to what they are indicating, the growth could be tremendous.
Disclaimer: No holding in the stock, but it is safe to assume that I may or may not invest in future. Also, the above stock view is my personal view in individual capacity. For rest, please look at the About page.