Surya Roshni rallies 5%, nears record high ahead of Q4 results

The stock was trading close to its record high level of Rs 522 touched on February 9, 2018

Shares of Surya Roshni moved higher by 5 per cent to Rs 510.90 on the BSE in the intra-day trade on Tuesday ahead of its January-March quarter (Q4FY21) results, slated to be released later in the day. The stock of the company, engaged in steel pipes and strips, lighting, and consumer durables business, was trading close to its record high level of Rs 522 touched on February 9, 2018.

For October-December quarter (Q3FY21), Surya Roshni had posted an 80 per cent year on year (YoY) jump in profit after tax at Rs 56 crore due to increasing share of high margin products, cost optimization and improved operating efficiency. Revenue grew by 13 per cent YoY at Rs 1,578 crore while cash profit rose 49 per cent YoY at Rs 101 crore over the previous year quarter.

In the past one month, the stock has rallied 42 per cent after ICRA Ratings, on April 28, reaffirmed credit rating to ICRA A1+(CE) for Rs 200 crore stand-by letters of credit (SBLC) backed commercial paper program of Surya Roshni (on the credit enhancement by its bankers). "The rating reflects strong credit quality and ensures a very strong degree of safety regarding timely payment of financial obligations by company," it had said.

"Surya Roshni’s liquidity position is strong, with expected cash flows from operations remaining more than adequate to meet the debt servicing obligations as well as margin funding requirements for capex and working capital. This has enabled the company to prepay part of its term debt obligations, beyond the scheduled repayment obligations, over the past few years. The company’s strong liquidity position is corroborated by healthy cushion in the form of undrawn fund-based working capital limits,” ICRA added in rating rationale.

Surya Roshni’s all the products in steel pipes and strips segment are sold under the brand ‘Prakash Surya’ and those in the lighting and consumer durables segment (including all types of lamps, home appliances, PVC pipes, etc) are sold under the ‘Surya’ brand. Based on consolidated financials, the steel pipes and strips segment accounted for around 77 per cent of the company’s total revenues, while the lighting and consumer durables segment accounted for the balance 23 per cent in FY2020.

Going forward, the uptick in the rural demand and economy and with emphasis of Government on vocal for local, increasing production of agriculture, manufacturing and encouraging exports, demand is expected to come from the rural and semi-urban cities where the company has a strong foothold.

According to the management, the government’s Aatma Nirbhar Bharat campaign, its thrust on projects like increasing the Gas share in energy mix, enhancing the City Gas Distribution network and improved focus on domestic water segment, irrigation projects, ‘Har Ghar Jal’ scheme etc. will boost the scope of company’s business activities and profitability.