Everest Industries

Particulars 2016 2017 2018

Operating Profit Margin 7.14 4.2 7.78
PATM (%) 2.53 0.32 3.99
ROCE (%) 12.13 4.58 14.46
ROE (%) 10.58 1.16 13.8
Receivable days 28.39 31.51 23.69
Inventory Days 68.47 72.39 69.21
EBITDA Growth (%) 10.79 -51 112
Total Debt/Equity(x) 0.74 0.58 0.21
Current Ratio(x) 1.14 1.11 1.2
Asset Turnover(x) 1.34 1.22 1.44
` 2015-16 2016-17 2017-18

Building Steel Building Steel Building Steel

Share in Revenue 63% 37% 63% 37% 65% 35%
Capacity 810000 72000 865000 72000 880000 72000
Production 709433 47347 662463 47161 775894 53032
Capacity Utilization 88% 66% 77% 66% 88% 74%

Narration Mar-16 Mar-17 Mar-18

Cash from Operating Activity 100.50 59.42 150.53
Cash from Investing Activity -33.58 -11.08 -18.79
Cash from Financing Activity -79.33 -86.40 -123.01
Net Cash Flow -12.40 -38.05 8.74
FCF 66.92 48.34 131.74
Dividends Paid 763 766 159
Directors remuneration

 From table 1 it can be seen that the operating profit margin of the company have
remained same over the period of time. The operating margins were lower in 2017
because of the demonetization. The profit margins have improved as the company has
performed better because of increase sales volume.
  The ROCE has improved from 12% to 14%. This increase is mainly because of the
increase in Net profit and reduction in debt of the company. The ROE has also improved
which means that the company is able to generate more profits for its shareholders.
 The receivable days of the company have reduced which shows that the credit policy of
the company is strict and customers are paying early because they are able to sell the
products further in less time. The inventory days have remained constant over the
period which is a positive sign. The asset turnover has increase which shows increased
capacity utilization.
 In the year 2017-18 the EBITDA has increased by 112% which is mainly contributed by
increase in sales of building products by 10.71% and increase in steel building sales by
5.30%.
 The debt to equity ratio of the company has reduced significantly which is because the
company is continuously repaid the loans. This shows that the company is generating
good amount of cash flow each year. As it can be seen that the company has generated
good amount of cash from operating activities and all the cash is used for repayment of
debt. Only a little amount of cash is kept for reinvesting in the business. If we look at
the Free Cash Flow of the business the company is able to generate good amount of
Free Cash Flow. This can be used for reinvesting but the company is using it to meet its
financial obligation.

Positives for the business

 Fiber cement roofing industry in India has a market size of Rs. 3900 Crores and the no of
players in the market are very less. The large six players have around 80% market share
and Everest is one of them with around 18% market share. The demand for this mainly
comes from rural economy because this method of roofing is affordable and durable
and people in rural areas are moving to Pucca houses from Kuccha houses.
 Various government initiatives like MSP, focus of housing and etc will boost income of
rural sector and which in-turn may increase the demand of Fiber cement roofing. This
 will increase the demand for company’s products as Everest’s target market is rural
sector for these products.
 The prices of roofing sheets have came down as these products are now taxed at the
rate of 18% instead of 24% according to GST Act.
 Everest has recently launched ‘Everest Super’ and ‘Everest Hi-tech’ (Industrial Product-
Non Asbestos) which is a product that is more advanced than previous fiber sheets. This
is priced at premium of 25% in comparison to older sheets.
 Fiber Cement board industry is growing at the rate of 20-25% CAGR over the last five
years. The industry is very attractive as more and more Industries and residents are
moving from plywood to Fiber Boards.
 The company caters to domestic as well as international market by this category of
products. The major exports are done to Middle-east countries. Currently the Fiber
board segment constitutes around 15% of total sales of the company. This segment is
high profit generating segment. The capacity of production is 1.5 Lakh MT.
 Everest also offers steel building solution and has completed over 2200 projects. The
order book of the company stood at 30,000 MT. These buildings are gaining popularity
in Industrial Sector as the warehousing needs are increasing, businesses are moving
towards the steel buildings.
 The production of steel buildings has increased significantly from the year 2016 for the
company. Also Everest has completed various projects of clients like reliance industries,
Technip, etc. This shows that the company has gained popularity in this segment. The
company is focusing on increasing revenue from this segment in future years.
 Also, Everest has started to provide Solar Compliant pre-engineered buildings are
economy is moving towards green production. This segment has not gained popularity
as of now but will soon grow multiple times.
 The management is having good work experience. Mr somani has morwe than 25 years
of experience in real estate, construction, building products and textile industry. The
managing director of the company has done his Post graduation from IIM-A and has
great work experience. The management seems to be honest as they have mentioned
 about all the risks they can face in their business and also delivered what they have
mentioned in their reports.

Negatives for the Company

 The roofing industry is facing slowdown in growth. However the demand of products in
Industrial sector will increase. The company has introduced new products which are
focused towards industrial segment. Also, various government initiatives for rural
economy will increase the demand of company’s products in rural areas.
 Reduction in oil prices and local conflicts in Middle East countries has led to decline of
40% in exports of Boards and Panels segment products. These issues may take time to
stabilize. However the company is now focusing on domestic demand only.
 Increase in Steel prices has affected the company’s steel buildings business. The steel
prices have seen a sudden increase of 35% which has affected the company’s margins.
However the sales have increased but if the steel prices will not become stable the
company may face difficulties in sustaining in this segment as the company’s order
books are huge and the company will have to execute the contracts at lower prices.
 The products of the company have Asbestos as raw material which is hazardous to
health. This may be banned by the government in future. But the company has
developed new product which is Asbestos free.
 The company is utilizing almost 90% of the production capacity which is good but the
company dosent has any CAPEX plans as of now. So the question remains that how will
the company meet the increasing demand of the products in future years.
 The managerial remuneration increased by 24% in comparison to the previous year
where as the percentage increase in salaries of employees was 6%.

Conclusion

From the above points and data it can be concluded that the company has performed well in
the current year. The debt levels have also reduced. The major issue is that the company’s
production capacity has been utilized around 100% and with no CAPEX plans I doubt how the
company will grow. Also, rising steel prices are a concern for the company and any further
increase will lead to losses from the steel building segment which is currently contributing 35%
of sales.