Thread by @TYMFinance

Grvita India India conducted the conference call for Q2 FY22

"Focus remains on optimizing the cost and bring margins to 10%"

Here are the concall highlights 🧵👇

Business Updates:

Revenue Share:
- Domestic revenue share: 64% (growth of 47%)
- Export revenue share: 36% (growth of 96%)

• Witnessed improvement in led, aluminium & plastics.
• Volume growth grew 30% YoY, while Value Added product contributed 45% of revenue.

Industry:

• 70% of informal sector would come down to 25% in the next 4-5 year, with recent government policy.
• Gravita being the only player in this segment would be highly beneficial.

Margins:

• Overseas business contributed 76% of the total profit of the business.
• Margins from the export business is around 15-16%.
• Since last year, co is working on fully hedge model. This would make the current margins of 7-9% as sustainable. While target is 10%

Hedging:

• Currently hedging is around 20% of the total sales.
• However hedging is made on the inventory levels which co. has. These hedging on inventory is (around 25% of sales) was brought last 2 year only.
• Remaining COGS is passed on instantly to customer via contract.

Led:

• Margin improvement in the led business is due to increasing contribution from overseas business.
• While volume growth led to better economics of scale.
• Margins will change slightly, however mgmt expect 8.5-9% of the margin to be sustainable,

Aluminium:

• Operational facility in Mozambique is set up in Q2 only. However the decline in volume will be covered in the Q3.

Cost:

• With upcoming plant in Mundra, logistic cost of around 2% is saved, while there would inventory save of 8-10 days.
• Overall around 0.75-1% of the ebidta margin will be improved with upcoming expansion.
• Around 50% of the raw material is imported outside india.

New Product:

• Planning for pilot project of rubber & copper re-cycling at overseas location. Once they are successful, it would be implemented elsewhere. (this will start by this year end)
• For lithium ion, mgmt expect ~7 year for lithium ion come at big quantity.

CAPEX:

- Phase 1 expansion in Mundra- 24K Tonne
- Another 24K Tonne expansion in Phase 2
(June 23)
- Expansion in Africa Plant as well
- Chittoor Plant: 20K Tone (Dec 21)
- Ghana: 7-8K Tone (March 22)

Utilization:

• Total capacity next year would be 211K Tonne. Mgmt target to make capcaity utilization of 75-80% next year, with maximum utilization of 85-90%.
• Already invested 35cr for Mundra plant, for land & building, and certain part in Chittoor Plant

Competition:

• In led, there is Nile Ltd and Pondy Oxides. But in terms of multi location on melting capacity, Gravita is much bigger from both of them.

Other:

• Inventory build up is due to upcoming investment in the Mundra Plant.
• WC days last year was 96 days which is reduced to 77 days. Mgmt target to bring it down to 65 days till 1-1.5 days.
• Cash Conversion cycle target is 55 days.

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