KRITI INDUSTRIES LTD - Q3 FY 21 RESULTS ANALYSIS

 

KRITI INDUSTRIES LTD

Q3 FY 21 RESULTS ANALYSIS

PVC PIPE MANUFACTURER

15+ STATES & UTs

32+ACRES - STATE OF ART PLANT

600+ DEALERS & DISTRIBUTORS

800+EMPLOYEES

Kriti Industries (India) (in Cr.)	Dec '20	Sep '20	Jun '20	Mar '20	Dec '19	YOY	QOQ
Net Sales	221	90	155	71	151	47	146
Raw Materials	138	90	94	57	94	47	53
RM%	63	100	61	81	62	0.59	-37.6
Interest	2.92	2.32	2.94	4.54	4.52	-35.4	25.86
P B T	23.72	7.25	9.32	1.99	5.66	319.08	227.17
Tax	5.97	1.74	2.47	-4.5	2.17	175.12	243.1
N P T	17.8	5.51	6.84	6.49	3.49	4096	222
NPT MARGIN	8.03	6.12	4.4	9.14	2.31	247.62	31.21
Equity	4.96	4.96	4.96	4.96	4.96	0	0
Basic EPS	3.58	1.11	1.38	1.31	0.7	411.43	222.52

 

 

Yearly Results of Kriti Industries (India) (in Rs. Cr.)	Mar '20	Mar '19	Mar '18	Mar '17	Mar '16
Net Sales	534	569	428	365	462
RM%	75.83	84.19	82.14	80.59	78.94
Raw Materials	405.09	478.74	351.26	293.74	364.88
Interest	17.26	14.77	12.53	12.08	15.85
P B T	21.56	10.47	14.1	13.24	19.32
Tax	2.32	3.85	4.87	4.37	7.63
Net Profit	19.24	6.62	9.22	8.87	11.69
NPT MARGIN	3.6	1.16	2.16	2.43	2.53
Equity	4.96	4.96	4.96	4.96	4.96
Reserves	98.84	80.33	74.61	65.39	57.53
Equity Dividend (%)	15	15	15	15	18
Basic EPS	3.88	1.33	1.86	1.79	2.36

 

MP  57.95    

PE   4.05      

52 Week Range    10   70.95           

Volume         66,571         

             

3 year CAGR growth      

Revenue 12.30% 

Net  Profit             30.40% 

Operating Profit   15.80% 

             

Price Performance          

1 Week         -1.11%

1 Month        -0.94%

3 Months       61.20% 

1 Year           194.91%      

3 Years         11.34% 

STRENGTHS

Promoters increasing shareholding QoQ

Rising Net Cash Flow and Cash from Operating activity

Company with high TTM EPS Growth

Strong Annual EPS Growth

Good quarterly growth in the recent results

Growth in QUARTERLY Net Profit with increasing Profit Margin (QoQ)& (YOY)

Book Value per share Improving for last 2 years

Company with Zero Promoter Pledge

Recent Results : Growth in Operating Profit with increase in operating margins (YoY)

rising net profit margins - quarterly as well as TTM basis

OPPORTUNITIES

current TTM PE Ratio less than 3 Year, 5 Year and 10 Year PE

Profit making Companies with High ROCE and Low PE

Negative to Positive growth in Sales and Profit with Strong Price momentum

Highest Recovery from 52 Week Low

Stock with Low PE (PE < = 10)

Shareholding Pattern

Promoters have increased holdings from 66.16% to 66.34% in Dec 2020 qtr.

Institutional Investors holding remains unchanged at 0.0% in Dec 2020 qtr

Kriti Industries LTD.(KIL) was founded in 1982. The trusted choice of experts, farmers and common man, its brand kasta is one name that resounds to all. With the capacity of 1,10,000 tonnes per annum, KIL offers the most extensive range of plastic products in india. KIL manufactures premium quality piping products and solution, accessories, gas piper, telecom ducts, submersible pipes and casing pipes.

Group governance 

Kriti Group comprises three companies of Kriti Industries (India) Limited, Kriti Nutrients Limited and Kriti Auto Engineering & Plastics Pvt. Limited.

Its focus has been on adopting modern, state of art technology, building sales with strong distribution network and continuous product up-gradation by its team in close association with its key customers.

It cater to customers in Food, Feed, Pharma and Confectionery for soya value added products. The group also provide extruded and moulded plastic products for agriculture, horticulture, infrastructure for various industries and for FMCG Automobile industry. Kriti’s marketing network is spread deep down from large to small towns in over 15 states of India. Kriti’s products are exported to almost all countries in South East Asia, China, Japan and Europe.

Kriti is planning to extend its reach to individual customers to enhance its B&B share in total business volume. It is also planning to add newer Food products for its retail sales network.

Having introduced Inline drip systems, Kriti is increasing its product offering for agriculture, horticulture and infrastructure segments.

Kriti also plans to introduce new products for providing comprehensive plumbing solutions.

Kriti is in an exciting phase of its journey and is poised to leap miles ahead. We are looking to your continued support in this journey.

Businesses 

The Company is engaged in the manufacture of polymer pipes.

These comprised Poly Vinyl Chloride (PVC) and Poly Ethylene (PE) used in the downstream applications of potable water supply, irrigation, building construction and infrastructure.

The Company widened its product range to address a majority of sizes (small to large diameter across classes and ratings).

The Company possesses the capability to manufacture a variety of complementary PVC/HDPE fittings

Presence 

The Company’s headquarters are based in Indore; its manufacturing facility is located in Pithampur. The Company’s sales footprint extends largely across Madhya Pradesh, Rajasthan, Maharashtra and Telangana.

The Company enhanced its focus in additional states during the year under review, broad-basing its national presence and addressing a larger addressable national market.

Performance 

The Company registered revenues of Rs.536.08 crore and Profit after Tax  Rs.19.23 crore. The Company reported a cash profit of Rs.26.95 crore and EBITDA margin of 8.89% in 2019-20.

MANAGEMENT

Mr. Shiv Singh Mehta : Chairman & Managing Director

Mr. Saurabh Singh Mehta : Whole Time Director

Mrs. Purnima Mehta  :  Director

PRODUCTS

Agriculture

Micro-Irrigation

Building Products

Industrial Solutions

ANNUAL REPORT 2019-20

Margins growth

A focus on value-addition, superior products and the ability to capitalise on raw material price movements widened margins.

Profitable growth

The Company reported revenues of Rs.536.08 crore in FY 2019-20 in spite of a slowing economy, while generating an EBITDA Rs.47.68 crore.

Outperformance (%)

Revenues declined 6% on account of lower raw material prices while EBITDA grew 53%.

Revenue decline         6%

EBITDA growth            53%

PAT MARGIN

FY2018-19           1.16%

FY2019-20           3.62%

Lower debt

We focused on the repayment of long-term debt that strengthened our liquidity for the moment and our credit rating for the future (influencing our overall cost of mobilised finance).

Long-term debt

FY2018-19  29.95 CR

FY2019-20    23.32  CR

 

MARKET COVERAGE

We focused on increasing our long-term presence in Maharashtra and Telangana through a deeper presence across a larger number of districts.

The Company’s interest cover weakened from 2.96 in FY2017-18 to 2.52 in FY2018-19 but revived to 3.19 in 2019-20. This was largely on account of superior cost management and payback from projects

The Company’s debt cost was higher at 10.68% in FY2019-20. This ratio should ideally be read in conjunction with net debt/operating profit (an increase indicating higher liquidity)

The future

(i) enhance plant utilisation by expanding markets and applications.

(ii) market a large volume in Maharashtra at non-discounted realisations;

(iii) enter different sectors (gas and building products) to service multiple growth drivers - to sell our products through the year.

(iv) The offtake of polymer pipes with agricultural applications is growing year on year, largely independent of the country’s economy. The replacement of steel pipes with polymer equivalents is growing and extending to the 1200 mm diameter segment. The penetration of pipes is only 45% of the total market, indicating a vast multi-year head room. (iv) Indian government announced a major initiative to grow the national gas grid network within a time-bound programme, which is expected to translate into an unprecedented demand for polymer gas pipes;

(v) the Company intends to widen its portfolio to building pipes, addressing the large real estate sector. (vi) country’s water table is high following an extended 2019 monsoon, which augurs well for the offtake of polymer pipes.

(vi) possesses an under-borrowed Balance Sheet, low exposure in the building products and gas segments that can only grow from this point onwards, sound credit rating, short receivables cycle, adequate manufacturing capacity, credible quality certifications and a trusted brand to widen its presence from one to three downstream sectors.

(vii) Company has invested in data analytics and information sharing; the concurrence of a number of improvement-centric projects augurs well for our productivity.

(viii) Company is optimistic that this measured approach should translate into the Company growing to Rs.1200 crore revenues by 2023 derived through a deeper presence in the States of our existing presence and the addition of Karnataka.

(ix) It took a number of years to grow to more than 500 crore in revenues; Now, company expects to more than double our revenues in a fraction of the time, enhancing value for all our stakeholders

The Company’s revenues were Rs.536.08 crore in 2019-20, while reducing long-term debt by 30.19%, strengthening the platform of the Balance Sheet to sustain multi-year growth.

Irrigation investments: The government has allocated Rs.2.83 lakh crore for agriculture and allied activities, irrigation and rural development in the Union Budget 2020-21.

Government policy: The government intends to double farm incomes by 2022. Favourable policies like the Pradhan Mantri Krishi Sinchai Yojana, Swachch Bharat Mission and introduction of more Smart Cities are projected to catalyse the demand for PVC pipes. Telecom: The optical fibre market in India is projected at US$ 424 million by 2020 on account of growing adoption of smart phones, broadband services and 5G rollout. The optic fibre cable comprises tens of strands of glass fibre, each no thicker than a human hair and capable of transmitting the entire Encyclopedia Britannica’s contents in less than a second. (Source: TechSci Research).

Piped gas: Following the completion of the ninth city gas distribution bidding round, city gas distribution would be available in 178 GAs comprising 280 districts spread over 26 States and Union Territories covering more than 50% of India’s population and 35% of its GA. India also launched the tenth city gas distribution bidding round in 50 GAs spread over 124 districts in 14 States to potentially reach piped gas to 200 lakh households.

Kriti’s Competitiveness Holistic: Kriti Industries has graduated from a water transmission products company to a fluid transportation products company. The extrusion of polymer products is being adapted to other areas (gas and optic fibre cables).

National relevance: We grew our business in national priority areas likely to attract government policies and consumer traction. In view of this, our polymer extrusion business addresses increasingly relevant downstream interventions (water transmission, gas transportation and optic fibre ducts).

Broadbasing: We believe that any-market competitiveness is derived from business broadbasing. the Company broadbased its manufacturing infrastructure through capacity addition, widened its products portfolio, expanded its geographic footprint and intends to widen its presence across downstream sectors (beyond water transmission).

State-of-the art: The Company consciously invested in state-of-the-art manufacturing facilities - a higher one-time investment in exchange for a sustainable advantage (productivity, quality and efficiency). Financial conservatism: The Company believes in any-market competitiveness derived from a conservative Balance Sheet. The Company invested in building its business through accruals, paying down long-term debt and moderating its receivables.

Brand: The Company invests 1% of revenues in brand building. It generates about 76% revenues from trade partners who retail to consumers. The Company’s Kasta brand generates a consumer pull without any price discount. The brand stands for positive attributes (‘Expert ka vishwaas’, ‘bharosa’, ‘superior’,   ‘best’  and ‘peace of mind’).

One-stop: The Company is a one-stop provider of polymer extruded products – from 20 mm to 710 mm diameter and applications extending from water to drip irrigation to gas to telecom. This has enhanced our share of the primary customer’s wallet (distributors). Manufacturing capacity: The Company broad-based its manufacturing capacity by 25% in 2018-19 and kept its capacity at a constant in 2019-20. This is one of the largest capacities at a single location across the polymer pipe sector in India. This capacity has been structured for peak requirement during the post-monsoon season. The plant usually operates at peak utilisation during this period. The objective of the Company is to enter new sectors with round-the-year applications that could strengthen the Company’s capacity utilisation (and profitability).

Product portfolio: The Company’s portfolio comprises a range of PVC pipes and fittings, strengthening its recall as a one-stop solution provider. This has increased the Company’s ability to address a larger share of the customer’s wallet. The proportion of fittings (value-added) accounted for 5.20% of the turnover during the year under review.

Product mix: The Company leveraged its rich experience in product design and manufacture to graduate to larger-diameter pipes. The Company possesses capabilities to manufacture pipes up to 710 mm diameter, addressing larger water throughput requirements and larger government outlays. The Company also developed larger diameter pipes addressing the gas sector.

Value-added: The Company is a value-added player in a commoditised space. The Company manufactured products addressing the highest quality standard and generating a premium. Value-added fittings accounted for 6% of the Company’s revenues.

Quality: The Company manufactured around a high consistent quality standard (across narrow tolerances), resisting the use of a lower price/quality of raw material to enhance profitability. This addressed the growing emergence of discerning farmers who would prefer to invest in a premium quality product when making a long-term capital expenditure (as opposed to buying low-priced products of suspect quality).

Location: The Company is present in Madhya Pradesh where 70% of the state’s population depends on agriculture.

Geographic footprint: The Company’s geographic broadbasing extended from a longstanding presence in Madhya Pradesh, Rajasthan, Uttar Pradesh and Haryana to contiguous states like Maharashtra and Telangana, the most decisive expansion after 35 years of being present principally in two Indian states.

The organisation has matured to a point – scale, brand, bandwidth, distribution and Balance Sheet – where a wider geographic footprint will accelerate its competitiveness and transform it from a regional brand into a multi-zonal organisation and pan-India presence. Micro focus: The Company has treated each district as a unique market, helping map the growing needs of individual farmers. The Company is directly present through trade partners at tehsil levels (as opposed to taluka levels for most). The result is that the Company is a market leader in Madhya Pradesh (65%) and Rajasthan (45%).

Distribution radius: The Company is engaged in the manufacture of a hollow product, making it competitive to market as close to the plant as possible. The Company prefers to route products out of the single unit but deliver with speed to its primary customers (trade partners). The Company maximised sales within 500kms of its manufacturing facility.

Distribution intensity: The Company does not just market products wide; it has also selected to market products deep within its existing footprint. This priority has been manifested in the Company reaching products down to towns, enhancing proximity to consumers and making it a preferred vendor.

Contiguous growth: The Company believes in incremental geographic expansion: from one district to the contiguous other, leveraging economies of brand spending, distribution presence and managerial bandwidth. 

Customer mix: The Company is largely a retail-focused company, accounting for 76% of revenues in 2019-20. The institutional sales generate volumes marked by long receivables; the rest of the business is largely cash and carry, strengthening the Company’s cash flow.

Sectoral mix: The Company is broad-basing its personality beyond water transportation applications towards fluid transportation. The Company intends to manufacture extruded products for application in the rapidly growing gas sector. The Company will manufacture pipes of a larger diameter for this application.

Primary customers: In the Company’s markets of Madhya Pradesh and Rajasthan, the primary customers (trade partners) are Kasta’s biggest ambassadors: they have worked with the Company for years, experienced virtually no product returns and provided the opportunity to add other dealerships to their profile. The result is that the Kriti associated has proved beneficial for their respect, status and business. The Company embarked on the creation of a similar network in the new States of our presence through a prudent selection of distribution partners based on their integrity, financial depth and long-term commitment to the business.

New market selection: The Company entered new States that represent the springboard of its future, accounting for a sizable share of the Indian extruded polymer products market. Some of these States have been affected by drought and erratic monsoons, making water storage and transmission imperative for agricultural survival.