All the companies in the Cement Fibre Products Industry have given huge returns in the past year 👇

Let's understand what drives the industry & the risks.

Hit the 'retweet' to help us educate more investors.

A Thread 🧵
1/ The Indian roofing industry is worth Rs 42,000 Crores and is expected to grow at the rate of 6-8% cagr.

So, What are the different options & what sets them apart?
2/ Among the pucca houses, less than half use RCC slabs; the rest utilize ready-to-use house roofing products (fiber cement roofing/ metal roofing).

Comparison between different options 👇

Now, this clears the superiority of Fiber Cement Sheets, let move further.
3/ Fibre Cement sheets have existed for the last 80 years in India.

They represent a convenient roofing product in rural and semi-urban India; as ~50% of the country’s rural population lives in kutcha or semi-pucca dwellings wherein this product represents a convenient fit.
4/ It is lightweight, heat & fire-resistant, and weatherproof.

Due to its affordability and reliability as a sturdy material, its demand continues to grow in rural areas, where they are highly preferred for construction.

Note: Zero replacement required for 75+ years.
5/ Opportunity Size:

The Indian fiber cement roofing sheets market is anticipated to reach a value of 5500crs by FY26, growing at a CAGR of 3% (low growth industry).

Plus it remains highly cyclical, why?
6/ It's heavily dependent on its end consumer's financial state: Rural Economy.

- Rainfalls of last year
- Cash availability with the farmers
- Social Schemes & incentives by the Government.

Why does rural folk prefer Cement fiber sheets?
7/ Almost 60% of rural folk in 🇮🇳 use thatched roofs/tiles for their shelters. Thatched roofs need regular replacement and tiled roofs need continued maintenance.
8/ Therefore, whenever the economic conditions improve, the first choice of the rural poor is to replace the roof over their head with affordable and relatively durable products i.e. cement fiber sheets.
9/ Roofing price comparison:

Cement Fiber sheets (Asbestos) x
Fiber green sheets (Non- Asbestos) 1.4x - 1.5x
Metal sheets (Steel, Aluminium, etc) 2x
RCC (re-inforced cement concrete) 5x

Just natural to chose CFS first; note that even GST is the same for all at 18%.
10/ Now that we have established the end-use; let us understand if we can make money in this industry:

Oligopolistic Industry: Top 5-6 control 85-90% of the sales.

Total domestic AC sheet capacity 56 lakh MT, Note: the capacity is stagnant since FY11.
11/ Any Pricing power? Zero to partial (dependent on demand trends)

Have not been able to pass on RM inflation fully in the past: ranges from 35-45% gross margins.
12/ Chrysotile fiber is a key ingredient in the manufacture of AC sheets (ACS); it is ~50-55% of the RM cost and is 100% imported

A limited number of suppliers exist for chrysotile, the cost depends on their demand & currency movements

Low Negotiating power with suppliers.
14/ So what about bargaining power with customers? Again, very little.

As many substitute products exist (though they do get some benefits when steel prices increase) & also, the customer is extremely price-conscious (weak financial background).
15/ So, what separates one company from another?

Marketing & Brand Value (mindshare among the customers)
Sales, Distribution network & manufacturing network

This helps a few players sell at a premium (5-10%) in their respective markets.
16/ Another risk is a ban on Asbestos; banned in 55+ countries due to the illnesses caused by its exposure…

This decreases the terminal value for all of these companies & only HIL & Everest have given a good plan to replace them with non-asbestos sheets.
17/ To summarise, What does one need to look for to invest in this sector?

- How is the company decreasing the % exposure to asbestos sheets (for all companies other than HIL, it makes up 60-80% of their rev)
- Rural economy conditions
- Market share movement (emerging leaders?)

- Is it using its superior rural distribution network to sell other products & how are they panning out
- Cheap valuations; in most of their history, these companies have traded at less than 0.5 sales due to the reasons mentioned above

Be careful with narratives!

The End.
The world has already moved on from Asbestos due to it's carinogenic nature, other substitutes:…

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More from @AnishA_Moonka

13 Sep
Top 5 global pharma cos. (by rev)

J&J- $83B
Roche- $55B
Novartis- $49B
Merck- $48B
Pfizer- $42B

Top 5 Indian Pharma cos. (by rev)

Sun- $4.7B
Aurobindo- $3.3B
Cipla- $2.7B
Dr Reddys- $2.6B
Cadila- $2.1B

$1.6T market by FY25, Not investing in 🇮🇳's pharma growth story is a risk.
What makes us optimistic? $236B worth of innovator drugs patent expiry to happen in the next 4-5yrs.

Who are the most competitive players that will gobble up the opportunity? Indian Pharma cos.

Whether be it biosimilars or complex generics.

Src- Care Ratings
The costs of production in India is 50% cheaper than the developed markets

The cost of R&D is 1/8th the developed markets

The cost of clinical trials is 1/10th the developed markets.

+ Trained & specialized pharma workforce.
Read 7 tweets
2 Sep
Ami Organics IPO notes ⚗️

Supplies Raw materials (Intermediates) to API players (7% of revenues from Laurus Labs for example)

Hit the 'retweet' & help us educate more investors

A Thread 🧵👇
1/ Basics about the IPO.

Raising 200crs of Fresh Issue (& OFS of 370crs): will be used for repayment of debt & WC

MCap at 2200crs: EV/S of 6 & EV/EBITDA of 26 (stretched for an unknown company)

Promoters only hold 41% after the IPO
2/ An Pharma intermediates player that sells to API players focusing on high-growth therapeutics.

Caters to 150 customers (incl. Laurus, Cadila & MNC players, etc) | 50% exports
Read 12 tweets
2 Sep
Semiconductor shortages are creating some fantastic opportunities in the broader stock market; think FY24 & swing the bat.
On the contrary, the current supply crunch will help the OEMs to pass on the increased RM costs.

This will reflect in the bottom line & gross margins (OEMs have seen a 6-7% reduction from FY18) when this normalizes.
High uncertainty in the short term is the best friend of a long-term patient investor.

Look for companies that have high operating leverage play (including financial leverage), are not being talked about in the investment circles & where the promoters have everything to lose.
Read 4 tweets
24 Aug
"We are carrying Rs 27,936 crore of fixed-rate liabilities at 8.66%, largely legacy, and you can imagine the upsides when these are replaced by low-cost deposits." ~ V. Vaidyanathan, IDFC First Bank FY21 AR.
"We advise our product teams to design products in such way that it is meant to be sold to our 'near and dear' ones. We make products with transparent pricing and fees."
"We don’t pressurize our employees to 'somehow' sell high-margin products to meet fee targets. The list of our 'Customer First' features is long."
Read 14 tweets
3 Aug
Krsnna Diagnostics IPO notes: 'Let's do Good' ❓

Hit the 'retweet' & help us educate more investors

A thread 🧵👇

1/ Basics about the IPO

Issue Dates: 4 - 6 August
Issue Size: ₹ 1,211 Crore (400crs Fresh Issue & 811crs OFS)
Mcap at the upper band: 2994crs
Price Band: ₹ 933 - 954
Retail Quota: 10%

Promoter stake to go from 32% to 27% post IPO.
2/ About the company.

Krsnaa Diagnostics provides technology-enabled services such as imaging (including radiology), pathology/clinical laboratory, and teleradiology

to public and private hospitals, medical colleges and community health centres across India.
Read 13 tweets
31 Jul
Windlas Biotech IPO notes 💊

'What's in a name? that which we call a rose by any other name would smell as sweet' ~Shakespeare

Hit the 'retweet' & help us educate more investors

A thread 🧵👇

1/ Basics about the IPO 👇

Incorporated in 2001

Fresh Issue of 165crs (50 for capex | 48 for Working capital | 20 for debt payment) + OFS of 237crs (Partially by promoter & PE Tano selling out as the fund tenure is up)

~ Total raise of 402crs
2/ About the company (Not a Biotech company)

A Contract manufacturer for formulation cos. (204 in total) for Indian markets & a small domestic OTC biz

3279 products, 4 plants with 700cr tablets/capsules capacity

Emphasis on chronic (60% of rev) & complex generics (70% of rev)
Read 15 tweets

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