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"The Jambhavan Diaries"

Why I am bullish on Everest Industries? Part - I

Disclaimer: The views expressed in this blog are my personal opinion and should not be considered as an investment recommendation. Please consult your financial advisor before making any investments. 

Company Profile:

Everest was established in 1934 and has over 8 decades of experience in building products. It is the pioneer of fibre cement
products in India. The company offers a complete range of roofing, ceiling, wall, flooring & cladding products and preengineered
steel buildings for industrial, commercial and residential applications. The Company has introduced modern  
products & solutions to meet the contemporary requirements of the construction industry. The Company’s building products
and solutions are available in more than 1,00,000 villages and 600 cities in India and also in many countries globally. The
Company has designed and erected more than 2,000 Pre-Engineered steel buildings across 275 cities in India.

The Company’s businesses are divided into two distinct business segments - Building Products and Steel Buildings. Building Products segment contributed 63% to the company’s revenue and includes Fiber Cement Roofing Sheets, Fiber Cement Boards, Rapicon Wall panels and their accessories.The Steel Building segment accounted for 37% of annual revenue. In this segment the company offers customized building solutions in steel such as Pre-Engineered Steel Buildings, Smart Steel Buildings, Metal
Roofing and Cladding.

 

Since Everest Industries has it's plant locations quite spread out, it could cater to a wide range of customers and save ample of freight costs. It puts this company in a competitive advantage.

Capacity

  1. Building Products Plant -8,65,000 MTPA
  2. Steel Building Plant - 72,000 MTPA

 

Products:

  1. Steel Building Solutions: Pre-engineered buildings & Smart Steel Buildings
  2. Roofing: Fiber Cement, Hi-Tech, Rooflight, Durasteel Roof, Roofing Accessories, Prima Steel Roof
  3. Boards & Panels : Ceiling Solutions, Wall Solutions, Flooring Solutions, Cement Planks
  4. Solar

Market Opportunity

 

                          

 

  

Competitors

  • Visaka Industries
  • HSIL

Business Risks

 

Valuation & Stock Performance

Current Market Capitalization: 883.47 Crores

The stock underperformed last year because the sector facing a huge headwinds due to lack of demand. Exports were subdued due to economic slowdown in the middle eastern countries. With increase and stabilization in oil prices, the demand for the building products is set to pick up in the next couple of years. Commodity cycle to play out in FY19. 

As of 13 February 2018, the stock is trading at 561.35 per share at a price earnings multiple of 19.65 based on December'17 earnings. 

Debt to equity < 1, PB = 2.38, Price to Sales < 1, Current Ratio > 1, Sales Growth - 5 year > 15%, 

Most importantly, the company is able to convert most of its profits into cash reasonably. 

The stock has consistently paid dividends over the past five years. Moreover, the market capitalization of Everest Industries increased from 223.51 crores in 2014 to 883.47 crores. 

If we compare the metrics with it's competitors, the stock is trading at a discount. 

Shareholding Pattern

Promoters - 48.36%

Public - 51.64%

Key Triggers

  • "Housing for All" Scheme

  • As per the population census 2011, 54% of the Indian population still lives in the housesmade from kuchha roofs. As farm incomes improve, so do aspirations of the people to improve the quality of their living. Roofing caters tothe basic human requirement of providing shelter in the form of Pucca roof. The ‘Infrastructure’ status being accorded to the affordable
    housing sector in Budget 2018 should be a big boost to the entire lowcost housing segment.

Marquee Investors:

  1. HDFC Mutual Fund - 2.65% (December 2017)
  2. Vijay Kishanlal Kedia - 3.89% (December 2017)

Concluding Remarks

With the government's key reforms  centered on rural households and affordable housing, there is a huge potential for this company going forward in the next five years. Even if the company captures 10% of the market share, the market capitalization of the company could double or treble in the next 2-3 years. Last but not least, Everest Industries being a market leader in the building products segment cannot be ignored because of the infrastructure opportunities available in India.

I will share my in-depth analysis about the industry and competitors in my subsequent blog.

Thanks.

 

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