Visaka Industries hosted a conference call on Feb 23,2022. In the conference call, the company was represented by Mr G Vamsi Krishna -JMD, Mr S Shafiulla-CFO and Mr Vinay B-Investor relations-head.

Key takeaways of the call

The performance of the company in Building's material division and yarn division has been good in Q3FY2022.

Revenues for the quarter stood at Rs 353.8 cr. Overall revenues for the quarter has grown by 26% YoY and 21% QoQ. EBITDA for the quarter stood at 12.5%.

EBITDA for 9 months stood at 15.5% as a whole.

Building materials revenue for the quarter stood at Rs 259 cr. EBITDA for building segment stood at 10.7% for the quarter.

Building materials segment revenue has grown by 17% YoY for 9M ended Dec 2021. Strong growth in volumes has led to healthy growth. Building segment margin for 9 months ended 2021 was 14.8%. Decline in margins was due to increase in input cost and logistic cost.

There was an increase in input cost to the tune of Rs 10% and the company is trying to pass on the price increase. The company has taken a price increase of Rs 5 in the quarter and plans to take more such hikes. The company expects logistic cost to normalize in next 6 months.

Vnext business of the company has done exceptionally well and for the second consecutive it has recorded the highest ever quarterly revenues. Domestic segment has out performed exports. Exports has also improved. Vnext business has grown with volumes and expect higher share of revenues for the full year FY2022. Vnext is a B2B business and targets Rs 50 cr revenue in FY2023 and is targeting revenues around Rs 250 cr with 12% plus margin.

The company's new board plant located in Coimbatore is also operational from Jan 1, 2022. Capacity addition is around 50000 MT and it will further add to the top line and bottom line going forward. The company has incurred CAPEX of Rs 90-100 cr and the unit will contribute revenues to the tune of Rs 100 cr. The company expects to touch peak utilization by the next financial year end.

Working capital days is around 45-60 days for boards and the ROCE is around 13-14% PA. The board division is growing in the range of 30-35%.

The expansion at Raebareli plant will be completed by current financial year and will help the company to increase the market share in Northern India.

Synthetic yarn division has outperformed the expectations and has reported revenues of Rs 85 cr in Q3FY2022 with very good margins. The market has recovered from covid levels and the company expects improved contribution from synthetic yarn.

The ATUM division has improved revenues when compared to previous years. Revenues on QoQ basis has grown by 20%. The company done some exciting projects during the quarter for Indian Railways, Manipal Hospitals. The company expects its ATUM division to reach 100% capacity utilization in 2023-24. It been 3 years since the company launched the product. It did around Rs 7-8 cr revenues in the first 2 years and expects to do revenues of around Rs 16 cr in the current financial years. The company expects good demand and better utilization in the coming years.

The company is targeting revenues of around Rs 90 cr by FY2024 from ATUM division for 30 MW capacity. Post which the company plans for a capacity expansion which will take the revenues of ATUM division to Rs 150.0 cr

The company's solar cells are imported while all other things are manufactured in India for solar roofing, the company plans to procure solar cells from people manufacturing solar cells in India including Tata's and Adani's.

The AUTM charge has set up 100 electric charging stations and plans to add another 150 by the end of FY2022 taking the total number to 250. The company also plans to partner with other electricity chargers setting companies who are showing good growth traction.

The company plans to build solar charging stations using its Vnext and ATUM products. The charging stations will be technology agnostic in which all vehicles including 2,4 and 3 wheeler can be charged.

Usually, the July and Dec quarter is a off-season quarter for the company's traditional roofing business. Roofing business did well when compared to volumes in Dec quarter. However, there was pressure on margins due to increase in input cost and logistic cost overall and the company will take adequate measure for the profitable growth in coming quarters.

EBITDA margin stood at 12% for both the divisions in FY2021. The company earns around 10-15% of its revenues from value added products and the company plans to increase the contribution of value-added products which will drive the EBITDA margin to upward of 15%.

The company exports boards to the tune of 30% to countries including Middle East, Nepal, Europe and Sri Lanka. The company returns are better in the domestic market and plans to increase the market share in domestic market.

The immediate competitors for the company in boards segment are Everest Industries, Ramco and Swastik.

The company will not have any impact due to Russia crisis as of now on its imports.

The current revenue mix is around 66: 34 between asbestos and non-asbestos and the company plans to take it to 50:50 between them.

Demand outlook: The omicron had an impact for a week time, but the things are coming back to normal and company expects positive demand in Q4FY2022. The demand is also recovering in rural India.

The company expects north and east market in India to grow and plans for expansion. Also focus on rural housing from the Government of India will help the company to gain volumes in FY2023.