IFGL Refractories Ltd
NSE:IFGLEXPOR
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
473.25
909.2
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to the IFGL Refractories Limited Q1 FY' 23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Navin Agarwal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. It's my pleasure to welcome you on behalf of IFGL Refractories Limited and SKP Securities to this financial results conference. We have with us Mr. James McIntosh, Managing Director; and Mr. Kamal Sarda, Director and CEO with us. We'll have the opening remarks from Mr. James McIntosh, followed by a Q&A session. Thank you, and over to you, Mr. McIntosh.
Good evening, ladies and gentlemen. Thanks for joining us on this conference call. I hope you and everyone around you are safe and in good health. Along with me on the call, we have Mr. Kamal Sarda, the Director and CEO of IFGL and SGA, our Investor Relations advisers. We've uploaded the results of the presentation on the stock exchanges, and I hope everyone's had a chance to go through these.
Let me share some business highlights. In Q1 -- for the full year '23, there was some normal sale business operations globally as the intensity of COVID reduced. However, the challenges we highlighted in the last quarter to the global supply chains remain. Those are cost increases and freight remain high, particularly from [indiscernible] in China. And obviously, this is used on raw materials for supply of our plants worldwide and receipts of products from our manufacturing plants in China sold to our customers worldwide.
We have cost increases in all the raw materials, plant consumables and components used in the manufacture of the product. We haven't seen any difference in any reducing on these fronts. We've got a shortage of certain key raw materials, which also caused us a supply and demand situation. And in some cases, resulted in very high cost increases.
Energy costs across the board are still affecting the company, and our plants and equipment. And generally, inflation costs, which obviously result in labor cost increases, are affecting us worldwide. But despite all of these challenges, I mean, we posted very robust quarterly revenue growth year-on-year, and 30% growth in our consolidated results and 38% growth in our stand-alone revenue, where we received strong support from our customers worldwide for price increases in the cost in the products. Unfortunately, the ongoing conflict between Ukraine and Russia. continues to place us under pressure, particularly in the European operations with regard to the cost of gas. Halfway the World Steel Association forecasts still see some growth in steel, although it's reduced quite substantially, given the situation in Ukraine. But we feel that, just based on their figures, they're saying the '22, we've got a slight growth showing and also '23 we look at a normal growth coming in also.
Obviously, as refractories are a key product used in the manufacture of steel and we operate within a growing market, it's very important for us, especially, and India were growth productions for the steel industry here are outpacing all other areas of the world, that we have our very strong situations here in our company with regard to manufacturing and technology.
And it's very important for us to stress, as we had in the last conversation, that we've got a very robust and targeted CapEx expenditure for our -- actually the largest in the company's history.
[Technical Difficulty]
James, you may please go ahead.
We started construction of a new state-of-the-art research and technology center, which will be built in our core manufacturing location in Odisha. This will enable the company to improve its raw material and intellectual property database, expand its products and improve our technological approach to sustainable material and technology development. We've also now completed and rolled out a new brand identity and will shortly complete the modernization of our website, which is aimed at improving our interface with customers, prospective employees, suppliers and all of our stakeholders. And our approach in the ESG will be strengthened. And we've recently signed an agreement with our global [ consultants ] in this area, which will focus eventually in the Indian operations. And then after that, we'll be everyone on globally.
We are very confident that our continued robust sales growth worldwide along with our future capital expenditure will enable us to continue expand our business with the focus to quality and technology, supported with our long-established foundations of cost effectiveness to -- and improve profitability.
With this, let me now hand over to Kamal Sarda for his comments.
Thanks, Jim, for the quick overview of the business. Let me give you a small short brief on the business performance. Revenue of quarter 1, as James said, strong growth in India has been [ robust ] on the basis of some increased prices, increased volumes and a good order book from the customers. Profitability was impacted on account of the raw material prices, operating expenses, including logistics, energy charges and other -- and also the foreign exchange the [ repeated ] depreciation vis-a-vis dollar. Overseas subsidiaries operating costs also increased more than those of the parent company because of logistics that played a greater role. And consequently, there was a margin pressure on these entities as well.
Give you a small brief overview of the financials. On the stand-alone, the total income increased by 38% and closing in the quarter at INR 226 crores. EBITDA was up by 3% year-on-year over INR 28.5 crores. EBITDA margins reduced to 12.6% compared to 17% in the corresponding quarter. PAT was about INR 12 crores compared to INR 13.4 crores in the corresponding quarter FY '22.
On the consolidated, which includes all our subsidiaries in the U.S. and Europe, the total income increased by 30% to INR 360 crores. The consolidated EBITDA was down by 3% to INR 34.5 crores. EBITDA margins were 9.6% compared to 12.9% in the corresponding quarter. PAT was about 14.6% compared to 17.9% in the corresponding quarter. We continue to remain debt free, with a strong balance sheet, cash and cash equivalents stood at about INR 234 crores on the consolidated balance sheet as of June 22.
With these, I'll now leave the floor for any questions on these financials.
[Operator Instructions] We take the first question from the line of Lakshmi Narayanan.
Yes. My first question is that if I look at your gross margin, are you pleased to operate in a particular band of 50 plus, right? And this quarter has been a little disappointment. So if I look at on the next 3- to 5-year perspective, what is the band of gross margin you'd like to operate? And do you think that it's possible for you to hold on to?
Yes. So I think we still maintain the margins which we have told in the past. This quarter, suddenly, the rupee depreciation, the continuous increase in freight cost, timing difference of price increase and usually a global slowdown in the steel industry affected all those things. So maybe this is the primary reason, but we still maintain that these margins which we said about 15% generally, EBITDA margins over a period, we will be able to maintain.
So the gross margin decline is attributable to what factors, if you just break the gross margin decline because usually the material margin would be around 50% plus, right? So if you look at it, what has actually -- how do you attribute that? How much is for currency devaluation or currency issues? And...
I'm not ready with -- Mr. Lakshmi Narayanan, I'm not ready with those sort of breakup as such. But it's primarily a composition of all those factors, raw material cost, price increases, logistics cost increase, ForEx, the rupee depreciation, all put together has [indiscernible]. So I don't have the breakup. We don't -- we normally don't maintain that way.
And's by when you think you said -- we will come back to that in the next 2, 3 quarters or it will take even more time?
Let's wait for a couple of quarters. Let's see how things unfold in the Russia-Ukraine situation and then maybe we'll have more clearer picture. Things are evolving, so we'll wait.
Got it. Got it. Sir, just one suggestion, it will be helpful.
Can I -- can you pass on this? I think I requested the operator to restrict the question to one. Because I have another call after this. Can you -- maybe we can have it separately Mr. Lakshmi Narayanan.
This is Navin Agarwal from SKP, [Operator Instructions]
We take the next question from the line of Hitesh from Axa Capital Advisors. [Operator Instructions]
Sir, can you help us understand how does the pricing work with the domestic customers? What I'm looking for is what are your contract or the tenure of the contract. And what was the price hike that was taken probably in this quarter or at least in the last 6 months, if you could elaborate on that?
The domestic contracts are generally on a 6 months to 1-year contract, but off late it has been like a 3 to 6 months because the user industry wants a shorter term because of price volatility. We've got price increases in the last quarter, quarter 4. This current quarter, we have got some price increase, but still we are talking to the customers. So that's how these are negotiated on a -- now it is a short-term basis, it's like 6 months, 3 months to 6 months' time.
Sure. Just a follow-up, if you can quantify the price hike? And in the event that the raw material prices, if they cool off, we will benefit from the cooling off of RM in the next 3 to 6 months?
These all these pricing impact or will be discussed when the contract renewal takes place.
We take the next question from the line of Sanjay Nandi from Ratnabali Investment Private Limited.
Sir, on a console note, if we compare with the peers and with our company, we could find that we have a good healthy top line growth on a Y-o-Y basis. But if we compare the EBITDA, that margin's got like dipped a bit like significant on a Y-o-Y basis, whereas its peers have raised out like an uptick in the margins on a Y-o-Y basis. So what is like held responsible for arresting of our margins on a Y-o-Y basis? Like what has been a laggard for these things?
If you look at our stand-alone results, you take both these things together, the impact is there in the stand-alone results. If you look at the EBITDA margins of stand-alone has increased from 17% to about 13%. So that has been transferred to the consol results. And on the cost impact, I think I mentioned already the impact on the gross margin. We've already discussed that.
Sir, is it because of our product basket, which we are trading like those are not...
I think I told in the previous thing that the cost increases are due to raw material price increase, the rupee depreciation either in dollar rate increase and all these factors.
But sir, if we are -- if we export something for rupee depreciation, we'll get support for us, right, sir?
We are majorly exporting in Europe. So euro appreciation has also impacted the margin.
Okay. And what about the domestic things, sir, like the other things? Other companies have raised a Y-o-Y increase in margins. So I'm just trying to understand like what is like...
I'm only talking about my company. This is the impact, not [indiscernible] tell you about others.
We take the next question from the line of Saket Kapur from Kapur Corporation.
As been explained by you in the opening commentary, just a follow-up to that, is the raw material pass-on has happened completely? Or are we expecting any further reduction in margins? And when are we going to, again, rejoin that band of 15% on a consolidated level? When can we see the improvement in the other geographies other than India, sir? So if you could outline to us where are we in the midst of that.
I think most of that I have already answered in my previous comments. The raw material margins -- sorry, the margin improvement we'll wait for quarter 2 and quarter 3 until we know we have a clarity on continuity of the of the economic situation worldwide. You have the Ukraine-Russia war impacting everywhere. And so we'll wait for 1 or 2 quarters more until we have more clarity, but our target is to remain at 15% plus EBITDA net.
Okay. And on the utilization level, sir, this is directly also proposed to the utilization levels. So in the global geographies, what kind of utilization levels are we expecting going ahead because of these [indiscernible] in the market?
As of now, we are at the same levels as we were in the past.
Okay. So it is only the pricing thing, the factor that you are unable to comment today, it's not about the visibility of the deliverables?
No, no, not really.
[Operator Instructions] Let me take the next question from the line of Viraj.
I did have one question. The CapEx, which we are incurring between '23 and '24, can you just provide some color in terms of what product categories will [indiscernible] towards? And will it be for the domestic market or so a mix of domestic and exports? So I'm asking this on the backdrop because if we look at all players in the industry, both private and let's say, everyone is like going back on capacity expansion. So just trying to understand, is there enough demand or other avenues available for this kind of a facility to be [indiscernible], sir?
Jim, would you like to take this question? Or should I?
Sure. I mean, for me, it's the CapEx that we have and the presentation, there's a slide that shows the breakdown of the CapEx according to the manufacturing sites, obviously, from the point of view of manufacturing, our objective there is to improve our manufacturing capability and then also expand our capacity. So for example, if we were to look at the Visakhapatnam project, all of the expenditure that we plan to invest in Visakhapatnam are in new product areas for the company. These new product areas will undoubtedly benefit us both in India predominantly and, to a lesser extent, on the export side.
For the Kandla plant, because it's based in the SEZ, our objective for that plant is more or less export. So all of the expansion that we plan there is going to benefit our export business. For Odisha, this is a combination of both the expansion of capacity in our manufacturing but also INR 20 crores of the expenditure for the research and technology center. The new research and technology center will benefit the company worldwide in terms of new products and developments of new materials. I hope that answers your question.
So can you just kind of provide more color on what new products we are looking at?
What specifically new products we are looking at?
Yes. The capacity expansion is happening are in what product areas?
No, I wouldn't really want to go into the detail on that.
We will come back to you on this in possibly a few more months when we complete that or when we finalize those. These are plants. There are certain products which are getting added. There are certain expansions in our existing product line also. So maybe we can have a bit more detailed discussions after some more time.
We take the next question from the line of Sahil Sanghvi from Monarch Network Capital.
Can you please explain what exactly has impacted our performance at El Ceramics where we are seeing margins dipping to almost breakeven levels right now? So I mean, apart from these reasons that you've already provided for the stand-alone business, can you be more -- a little bit more detailed explanation on what is happening and how are we handling that? How can we see some recovery over there?
Yes. I mean really in EI Ceramics, we have -- now a good expansion in terms of the sales. Without a doubt, we're really being caught out with the scale of the cost increases that we face there. And not only the scale but also the speed at which they'll start the plant. I would say that we're certainly on an [ even keel ] from the point of view of understanding where we need to go. And that for the next, I would say, for the next couple of quarters, we'll see a gradually improving situation back to where we normally would be in terms of percentage profitability. The tremendous support with our customers and we'll get basically our [ time situation ] just now between cost increases and realization of our price increases in the market.
Sir. And just one follow-up question from the previous participant, like you have addressed that, a few of the capacities like especially, Vizag will cater largely to exports. So do we still expect stand-alone...
No, no, no. Not Vizag. Vizag wouldn't be export, that would be Kandla.
Okay. Okay. Sorry. Sorry for that. So the proportion of exports from our stand-alone business will still hover around 55% to 60% going forward? Or do we expect to reduce that?
No, I would think the percentages would stay about the same camp, Kamal, yes?
Yes. Yes, it would almost maintain because we are expanding in Kandla also.
We take the last question from the line of Saket Kapur.
Sir, regarding the benefit of this R&D plant that I think the INR 20 crores, if I'm not mistaken, is what we are investing. So if you could give us some understanding what the thought process going ahead, what -- how well is this R&D plant going to make a difference to the product profile for the company? And also, sir, for our foreign companies, the other companies in the same geographies, at what time does the trade segment?
We are at, I think, the book value of INR 259 are trading at 1 time. So if you could give us some color. Other listed companies in the different geographies, if you have that data with you. So just to have a comparable.
Can we discuss offline on this? Can you -- you can give me a call later on. You can take the [ Sheinik ] along with -- or Navin ji, in SKP and then we can talk. Because it's a big question, so we can [ start off ] separately.
We take the next question from the line of Raj Shah.
My first question is regarding that, I think there has been a [ reset ] where we have sort of [indiscernible], if you could throw some light in this. And there's one other thing that I'd like to suggest the management regarding the call. A lot of times and when management is saying, I will just take this question privately, we'll just have [indiscernible] on this situation. So then in order to enhance the corporate governance, I request the management to disclose the transcript of all the private calls that take place.
Just -- I'm just taking the last question first on the first question, I'll let Mr. Jim answer to it. Why I said because there is a time limit to our taking these calls. I have another -- we have set a time limit for this. So because this question was large, one of these questions will take a little longer time. That is why I said, okay, we can have a discussion separately. I don't have any intent not to tell you or not to tell them. Just because the question [indiscernible] that's the reason why I'm taking this call...
If you ask a question, what's the benefit of our research center, that's not a question which you can answer in 2 minutes or 5 minutes. I mean that's a very, very in-depth question from the point of view of material development, product development, corporate development. There's a lot of things which go into that. So it's a very simple question, but it's not a simple answer. And obviously...
I understand that. I completely understand there's a time value with the management. But just my request in order to enhance [indiscernible] standards...
Yes, we'll take that.
It would be great if you could disclose all the transcripts out there on the public domain.
We'll keep that in mind. And what we'll do is we'll take -- we'll try and keep a longer time schedule for this.
Sure.
Raj, your point is well taken. This is Navin Agarwal. And as Mr. Sarda said, we'll try to have a longer call in future. If you can just go ahead with your question right now, because there are a few other people.
Yes, I asked my question. I asked my questions.
James, you're taking this question, please?
Sorry, what was the question?
Question as we have recently [ fired 2 or 3 ] different directors. I think it is over the breach of contracts. If you could just throw some light on the same, because they own 15% of the company, so that's a quite a bit overhang on the company's stock.
I'm sorry, I really don't understand your -- I can't make you at all.
Jim, Jim, can I come here?
Yes. What was -- I really don't understand what you're saying, sorry.
Yes. So I think, Jim, they were asking the removal of directors. I think we have the AGM notice, which states the details of that. And beyond that, I think we have nothing more to add.
We take the next question from the line of Subham Agarwal from Equitas.
Sir, my question is regarding the CapEx that we have outlined. So out of the 3 CapEx that we have mentioned, can you help us understand the time line of each of the projects by when is it coming on? And also, if you can help us understand what is the total potential revenue that we can achieve out of this? And again, the time line that we'll be able to manage that?
So the time line is already mentioned in the presentation, which we have said, it is FY '24 of the time line. Overall, I think that's what we have already mentioned in FY '23 and FY '24. They will come in phases. So that is where -- so FY '24 is the final time line when we'll complete our total expansion and program that. And on the top line growth, we normally take, say, a level of about 3x, 3.5x of CapEx. So you can assume that 3x to 3.5x of the CapEx. It will take anywhere between 3 to 5 years' time till we reach level. So maybe you can keep an outer limit of [ 5 ].
But on the time line base, FY '23 and '24 very broadly. So can we consider this at the outer limit of '24? Or do we have some plan coming before that?
Some will -- as I said, it will be in phases, partly will come. Not all the expenses will get completed by FY '24. Some of that will happen in FY '23, some of that -- but I would say a major part of that will get spilled over the FY '24.
[Operator Instructions] We have the next question from the line of Raj Shah.
Sir, capacity utilization for Q1 on a consol level?
So there are various companies with various product levels. So like some of the product levels where we have capacity utilization could be anywhere between 85%, 90%. And some will have about say 60% or so.
Is it fair to say we are at 75%? Just sort of ballpark number.
Yes, you can average out like that, yes.
We take the next question from the line of Athreya Ramkumar from [ IDMs ].
So I just wanted to know -- I mean, we have a lot of cash on the balance sheet and we generate a lot of cash every year. So I just want to know, incrementally, how we are thinking about utilizing this cash. Because I think the CapEx plans we can fund by the yearly accruals itself. So I just want to know how are we looking out for any acquisitions, or will -- so I just wanted to see your thoughts on this.
Yes. So I think we have mentioned in our presentation that the expansion which we are doing in India will be funded out of internal accruals as well as we'll take some loans. And cash, we have on our balance sheet on various balance sheet base. So that is there for any kind of opportunity to either acquire -- or maybe a bigger CapEx somewhere. So that's cash which we have been there. So as of now, that is the -- there in mind. Jim, if you want to add anything on this?
No, I don't.
Okay.
Okay. So there -- but there is nothing on the horizon?
No, we don't have anything to speak about right now.
[Operator Instructions] We take the next question from the line of Sahil Sanghvi from Monarch Networth Capital.
I just wanted to understand the current status of the freight cost and raw material cost, vis-a-vis, the one which is being reported in the 1Q FY '23 numbers. So have we seen any kind of easing on the freight and the RM cost post the completion of the quarter? Like currently, what are the states?
The increase of freight cost, the increase has stopped, I would say so. There is a nominal reduction which is being seen, okay, both in terms of the freight costs as well as some, I would not say all, some raw material, some raw material have got increased. So this has got impacted further, if you talk of the rupee depreciation because everything is majorly [ dollar ]. So rupee has depreciated by almost like 8%, 8.5% in dollar terms. So that has aggravated more than any kind of reduction, which has happened. So I would say in a nutshell, the -- there has been an increase, and that is one of the reason of the impact in this quarter.
So just to follow-up on that, sir, how much is the raw material sourcing from the domestic sourcing? How much are you sourcing from domestic?
I think in value terms in the past, it used to be about 50% imports and 50% domestic. So now it could be like a 55%, 60% is imported, 40% domestic, because the rupee has depreciated against dollar.
Okay. So I mean can we scale up the domestic sourcing and that way reduce cost? I mean is that something that is possible.
We are trying. It's not very easy to replace the raw materials. So we are trying some alternate sourcing, but I think it will take some time.
Okay, okay. And lastly, on the demand from Europe. I mean do you see that being disturbed where I mean like that will continue for 1, 2 quarters because of the steel production being hit in Europe? I mean how is that looking to turn out?
Jim, can you answer that, please?
Yes. I mean there has been, in certain areas of Europe, a slight deterioration in terms of steel making. But again, it's very difficult to really target and understand that due to any particular outside factors or is it just because of the normal close down, which occurs in certain parts of Europe due to the vacation period. I would say that most of our operations in Europe have still got very good order books. And we don't see too much of an impact going forward there. From the point of view of our Indian business, supplying into Europe, we have seen some areas of reduction in terms of takeoff, but not substantially.
Right, right, right. Got it. And just one last, how much proportion of our exports is going to Europe? I mean if you can quantify that, that will be my last question.
So out of our exports from India, it could be about 50% of that into Europe.
50% of the exposure going to Europe?
About, about. Overall, yes.
Thank you very much. As there are no further questions, I'd like to hand over the call to Mr. Sarda for his closing remarks.
Yes. Thanks, everyone. We hope we have been able to answer most of your queries. I know some queries were unanswered, but we will ensure that we have a longer time duration in the next calls. And thank you, SGA and SKP Securities for organizing this call, and we look forward to your participation in the next call. Thank you very much, and wish you all the best.
Thank you very much. On behalf of SKP Securities Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines. Thank you.