Surya Roshni soars 11% to new high with solid growth prospects
Surya Roshni shares edged up 11% to Rs 731.20, also their new high on BSE, in intraday trading on Friday on the back of large volumes and amid strong growth prospects. Over the past seven trading days, the stock has climbed 43%, compared to a 1.7% rise for the S&P BSE Sensex.
Surya is the second largest manufacturer of steel pipes (contributing 67% to EBITDA) and also the second largest manufacturer of LEDs in India. In the April-June quarter (T1FY22), Surya reported a 64% year-over-year increase in revenue to Rs 1,453 crore. The company’s profit before interest, taxes, depreciation and amortization (Ebitda) had increased 112 percent year-on-year to Rs 93 crore and cash profit grew 221 percent to Rs 76 crore.
The company’s strong order book of Rs 847 crore for API coated pipes as of the first quarter of fiscal 22 will be one of the main growth catalysts. The commissioning of the 72,000 MTPA capacity for large section pipes (up to 300 X 300 mm) with direct forming technology (DFT) at the Gwalior unit by the next quarter will also help to growth momentum, the company said.
The company is exploring export opportunities in the UK market for the supply of galvanized iron (GI) pipes and profiles for scaffolding and infrastructure, respectively, due to anti-dumping duties on Chinese imports into this region. The company said it is also looking for opportunities in the US and Canadian markets for their inch-to-inch section tubing requirements, which can be met through the DFT technology-based installation, which is underway. expansion in Gwalior. The company expects good orders for the supply of pipes to early markets and other Southeast Asian markets upon successful acceptance of trial orders, Surya said in the fiscal year annual report. 2020-21 (FY21).
The government’s ambitious spending on infrastructure projects will generate demand for pipes of larger diameter, greater thickness and greater strength, which will be met after the expansions are completed at Gwalior, he added.
“With a focus on improving the product line in the steel pipe segment, we expect margins to improve over the next two to three years. In the Lighting and Consumer Durables segment, we expect strong segment revenue growth, driven by increasing demand for LED lamps in India and also by import substitution, ”brokerage firm IDBI Capital said in its report. initial coverage on Surya Roshni.
Surya has entered the home appliance business for the past five years. “We expect this segment to experience strong growth given Surya’s strong distribution network. Historically, Surya’s return ratios have been lower for various reasons such as a lower product mix, lower LED prices, etc. Nonetheless, we expect a strong improvement in its return ratios between fiscal 21 and 23, ”the company added.
During this time, the government received 52 production-related incentive (PLI) applications for white goods (AC and LED lamps). The final list of candidates will be announced on November 15, 2021. The government is targeting around Rs 2,700 billion of component production over the next five years through this program.