Surya Roshni Ltd
NSE:SURYAROSNI
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Surya Roshni Ltd
Earnings Call Analysis
Q1-2025 Analysis
Surya Roshni Ltd
Surya Roshni Limited reported solid growth in Q1 FY '25, with revenues reaching INR 1,893 crores, up slightly from INR 1,875 crores year-over-year. The company achieved a remarkable 36% increase in EBITDA, totaling INR 159 crores compared to INR 116 crores in the prior year. This improvement highlights their operational efficiency despite a challenging market environment.
The company's EBITDA margin improved significantly from 6.2% to 8.37%, marking an increase of 217 basis points. This rise can be attributed to effective cost management and a strategic focus on value-added products within their Steel Pipes and Consumer Durables segment.
Surya Roshni has declared itself a zero-debt company, boasting a cash surplus of INR 160 crores as of the end of Q1 FY '25. This strong financial position not only provides stability but also grants the flexibility to pursue new growth opportunities.
In the Lighting and Consumer Durables segment, revenues increased 3% to INR 385 crores from INR 375 crores in Q1 FY '24. The professional lighting segment showed impressive growth of 18%, benefiting from infrastructure projects. Additionally, the fan business experienced a substantial 43% volume growth, driven by enhanced distribution and energy-efficient products.
The company has ambitious plans with an expected revenue growth of 12% to 15% for FY '25, primarily supported by elevated consumer aspirations and government infrastructure initiatives. They aim to achieve an EBITDA of INR 180 crores for the lighting business, focusing on high-margin product offerings and cost control.
Despite a general downturn in government projects and some price erosion in steel, Surya Roshni's Steel Pipes and Strips business demonstrated resilience with a 7% volume growth. They emphasize value-added products which now account for 46% of their total revenue, helping to buffer the impacts of fluctuating prices in the steel market.
The company currently holds an order book valued between INR 600 crores to INR 700 crores, mainly from the oil and gas sectors. To support future demand, they have begun capacity expansions, including a new spiral pipe plant with an expected capacity of 60,000 tons that is set to begin operations by December '24. This expansion reflects their strategy to enhance production capabilities, expected to increase capacity by an additional 15,000 tons per month by the end of FY '25.
In conclusion, Surya Roshni Limited is on a solid growth trajectory supported by strong financial performance, strategic planning, and an unwavering commitment to operational excellence. The company remains well-positioned to capitalize on future market opportunities within both its Lighting and Steel segments.
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Ladies and gentlemen, good day, and welcome to Surya Roshni Limited Q1 FY '25 Earnings Conference Call.
This conference call may contain forward-looking statements about the company that 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. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Raju Bista, Managing Director of Surya Roshni Limited. Thank you, and over to you, sir.
Yes, thank you. Good afternoon, everyone. On behalf of Surya Roshni Limited, I once again extend a very warm welcome to everyone for joining us today.
On this call, we are joined by Naresh Singhal, Executive Director of Steel Operation; Mr. Jitendra Agrawal, CEO of Lighting and Consumer Durables; and our CFO and Company Secretary, Mr. Bharat Bhushan Singal; and SGA, our Investor Relations adviser. And I hope everyone had an opportunity to go through the financial results, which was probably published today.
Moving on to the overall financial performance highlights. We are pleased to report a healthy operating performance for Q1 FY '25, despite the slowdown due to general election, some few 8%, 9% price erosion on steel part, but our continued focus on value-added products in Steel Pipes segment and offering innovative products in the Lighting and Consumer Durables, we have been able to give a very healthy kind of EBITDA margins improvement.
EBITDA for Q1 FY '25 increased significantly by 36% year-on-year to INR 159 crores from INR 116 crores in the previous year. The EBITDA margins improved by 217 basis points, reaching to 8.37% compared to 6.2% in Q1 FY '24. This improvement underscores our ability to optimize costs and improved profitability even in a challenging market environment.
We are proud to state that Surya Roshni Limited is a zero-debt company, with a cash surplus of INR 160 crores as of the end of Q1 FY '25. This strong financial position provides us with the flexibility to invest in growth opportunities and navigate any market challenges.
Now coming down to the Lighting and Consumer Durable. We achieved a revenue growth of 3% despite the challenges of price erosion in the consumer lighting segment, which was about 9% in Q1 FY '25. High capacity utilization at our manufacturing plant has positively driven EBITDA through better operational efficiency. We have introduced new and improved products across various segments to meet the growing consumer reference -- for consumer preference for energy-efficient, high-quality and aesthetically pleasing products.
The professional lighting segment saw an impressive of 18% growth, driven by strong performance in infrastructure and industrial projects. In professional lighting, we are also focused on indoor and solar lighting to capitalize on growth opportunities.
We have also launched higher-performance street lights, offering a smart value proposition with a lower cost of ownership. The appliances segment witnessed a 15% volume growth, our fan business recorded an exceptionally 43% volume growth due to increased distribution channels and introduction of energy-efficient products.
We have entered into a very new product segment of Mono Block Residential Pumps via launch of Surya Water Pumps in the month of July itself. The market size for such pump is around INR 1,000 crores in India, and it's growing fast, driven by Har Ghar Nal Se Jal scheme of Government of India.
We anticipate revenue growth of 12% to 15% for FY '25, driven by the rising aspiration of consumers and government focus on infrastructure and industrial capital expenditure. Our target is to achieve an EBITDA of INR 180 crores for lighting business for the financial year by focusing on higher-margin products, cost management and leveraging the benefit of PLI scheme.
Now moving on to the Steel Pipes and Strips business. The steel pipe segment demonstrated commendable resilience and adaptability in Q1 FY '25 despite a slowdown in government projects due to general election and steel pipe erosion. We have witnessed a 7% of volume growth in the steel segment. Value-added products such as API, spiral and galvanizing pipes constitute about 46% of our total revenue in Q1 FY '25. This focus has helped us mitigate the impact of price erosion in steel prices.
We have a good order book of approximately INR 600 crores to INR 700 crores as of 30th June '24, primarily from the oil and gas sectors. We have commenced trial run of -- for the 8-inch pipe leading to the capacity additions of 50,000 tons per year at Bahadurgarh facility, with commercial operations set to be start very soon.
The modernization of cold-rolling plant at Bahadurgarh is expected to commence operation in Q3 of FY '25. The spiral pipe plant at the Gwalior facility, with an annual capacity of 60,000 tons, is on the trek to begin operations by December '24. All this expansion will enable us to increase our production capacity by around 15,000 tons per month from the last quarter of FY '25.
So looking ahead, we anticipate robust growth across our pipes segment in coming quarters, supported by the Indian government's significant infrastructure initiatives, the stabilization of steel prices at current level and the government's increased emphasis on infrastructure development, both will for our future prospects. And we expect 12% to 15% volume growth in steel pipe segment to FY '25.
Our focus on strategic capacity expansion and technological advancements position us well to meet the increasing market demand, particularly in the water infrastructure and energy sectors. In conclusion, we remain dedicated to driving growth, expanding our capabilities and maintaining our leadership in the market.
And now I will request our CFO, Mr. B. B. Singal, to share his thoughts.
Thank you, respected MD, sir, and a very good afternoon to all the participants on the call. For the quarter, the revenue was INR 1,893 crores as compared to INR 1,875 crores. Q1 FY '25 EBITDA and tax stood at INR 159 crores and INR 92 crores, up by 36% and 56% as compared to INR 116 crores and INR 59 crores, respectively, for the same period last year.
Significant improvement in EBITDA in Q1 FY '25 was on account of sharp spurt in EBITDA per ton of our Steel Pipes and Strips business and steady uptick in operating performance of our Lighting and Consumer Durables segment.
In Lighting and Consumer Durables, for the quarter, their revenues stood at INR 385 crores as against INR 375 in Q1 FY '24. EBITDA and PBT stood at INR 35 crores and INR 26 crores, registering a growth of 5% and 1%, respectively.
In the Steel Pipes and Strips, during Q1 FY '25, the revenue was INR 1,509 crores as compared to INR 1,503 crores. Similarly, EBITDA per metric ton stood at INR 6,065, a jump of 38%, as compared to INR 4,388 in Q1 of FY '24. Equity stood at INR 97 crores, up by 76% as against INR 55 crores last year.
Improved capacity utilization, working capital optimization and cost rationalization enabled us to become a zero-debt company, and have cash surplus of INR 156 crores in Q1 of FY '25. As on 30th June '24, ROCE stood at 22.93% and ROE stood at 16.71%. As on 30th June '24, the net working capital days stood at 67 days, inventory days stood at 51 days, debtor days stood at 38 days and creditor days stood at 23 days.
With this, I conclude the presentation, and we can now open the floor for further questions and answers.
[Operator Instructions]. The first question is from the line of [ Adit Dibadj ] from [ MSE Capital Partners ].
Am I audible?
Yes, you are.
Sir, congratulations on a good set of numbers. So we have witnessed a very strong improvement in the gross margins. So if I were to attribute between the steel pipe segment and the Lighting and Consumer Durables segment, can you give some commentary on that?
Yes. Am I audible now?
Yes, sir. Yes, sir.
Overall, margins has improved. [Foreign Language]
[Foreign Language] So going forward, can we see the 25% on a quarterly basis? [Foreign Language]
[Foreign Language] So the remaining quarter, the gross margin will improve.
Understood. And sir, just one last question before I come back in the queue. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language].
[Foreign Language]
Yes, yes.
Next question is from the line of Naveen Baid with from Nuvama Asset Management.
Just want to confirm the INR 300 crores CapEx that you have outlined for this year INR 100 crores is for those 2 plants. The other INR 200 crores, so where is it targeted?
Yes. Am I audible?
Yes.
[Foreign Language]
And this is for next year [indiscernible]
[Foreign Language]
And there is no CapEx on the LED division, Lighting and Consumer Durables division?
[Foreign Language]
And this INR 500 crores of CapEx is going to be funded entirely from internal accruals?
Internal accruals. [Foreign Language]
The next question is from the line of [ Jatin Damania ] from Swan Investments.
Congrats on a good set of numbers. [Foreign Language]
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Sir, last question on the steel. [Foreign Language]
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The next question is from the line of Shweta Dikshit Systematix Group.
Am I audible?
Yes, yes. Go ahead.
[Foreign Language]
[Foreign Language]
The next question is from the line of [ Anand Bandra ] from [ Solven ].
[Foreign Language]
Sorry to interrupt you, Anand. We are unable to hear you clearly.
[Foreign Language]
Yes.
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Okay. [Foreign Language]
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Okay. [Foreign Language]
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Okay. [Foreign Language]
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Okay. Understood, sir. [Foreign Language]
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And so I see overall distribution case through the ARPU channel. [Foreign Language].
[Foreign Language]
[Foreign Language]
Sir, the last question, sir. [Foreign Language]
[Foreign Language]
The next question is from the line of Raj Mehta from Raj Mehta Associates.
[Foreign Language]
[Foreign Language]
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Yes. [Foreign Language]
[Foreign Language]
[Foreign Language]
[Foreign Language]
Q3, Q4, yes, peak season time [Foreign Language]
Okay. [Foreign Language]
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Okay. Sir, LED business [Foreign Language]
I mean, [ Hamara ] product, Chinese production [Foreign Language]
Okay. Sir, last question. [Foreign Language]
[Foreign Language].
[Foreign Language]
[Foreign Language]
Sir, last question. [Foreign Language].
[Foreign Language]
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. B. B. Singal for closing comments.
Thank you, everyone, for joining us today on this earnings call. We appreciate your interest in Surya Roshni Limited. I sincerely, once again, thank our Managing Director, Executive Director and CEO, for sparing their valuable time and addressing queries raised by the participants who attended the call.
For any further queries, please kindly contract SGA, our Investor Relations adviser. And once again, thanks.
Thank you. On behalf of Surya Roshni Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.