Surya Roshni hits over six-month high, surges 29% in 7 days post Q1 results

Margins improved by 217 bps reaching to 8.37% on account of significant improvement in operating profitability of steel pipes biz and stability in the margins of lighting and consumer durable biz.

Surya Roshni share price today hit an over six-month high of Rs 714.95, surging 5 per cent on the BSE. The stock extended its rally on Tuesday after Surya Roshni company reported a strong set of numbers for the quarter ended June 2024 (Q1FY25) with healthy growth outlook.

In the past seven trading days, the stock has soared 29 per cent. It is trading at its highest level since February 8, 2024. Surya Roshni share price had hit a record high of Rs 841.50 on January 11, 2024.

Surya Roshni is engaged in two segments - lighting and consumer durables business, and steel pipes and strips business. The steel pipes and strips business manufactures a wide range of products and is the largest manufacturer of GI pipes in India and is the largest Exporter of ERW Pipes. The consumer durable business offers a variety of Fans and Home Appliances.

 

In Q1FY25, Surya Roshni reported a healthy operating performance despite the slowdown due to general election, and around 8 per cent-9 per cent price erosion on steel parts. But the company's continued focus on value-added product in steel pipe segment innovative product in the lighting and consumer durable – the company has been able to give a very healthy kind of adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) margins improvement, the management said.

Ebitda for Q1 FY25 increased by 36 per cent year-on-year (Y-o-Y) to Rs 159 crore from Rs 116 crore in the previous year, on account of sharp spurt in Ebitda/tonne of steel pipes and strips business and steady uptick in operating performance of lighting and consumer durable segment. Ebitda margins improved by 217 basis points reaching to 8.37 per cent compared to 6.2 per cent in Q1 FY24. The margins expansion on account of significant improvement in operating profitability of steel pipes business and stability in the margins of lighting and consumer durable business.

The company's profit after tax jumped 56 per cent Y-o-Y at Rs 92 crore. Revenue remained flat at Rs 1,893 crore in Q1FY25 against Rs 1,875 crore in Q1FY24.

The fan business has done exceedingly well in Q1FY25. It recorded a volume growth of 43 per cent. The margins in this business also witnessed improvement. “The hot summer in India & launch of many products in previous quarter enabled us to increase our market penetration in this category,” the management said.

Meanwhile, Surya Roshni has entered into a very new product segment of Mono Block Residential Pumps via launch of ‘Surya Water Pumps’ in the month of July itself. The market size for such pumps is around Rs 1,000 crore in India and it is growing fast driven by 'Har Ghar Jal Yojana' scheme of Government of India.

The management anticipates a revenue growth of 12 per cent-15 per cent for FY25 driven by the rising aspiration of consumers and the government's focus on infrastructure and industrial capital expenditure. The company's target is to achieve an Ebitda of Rs 180 crore for lighting business for the financial year by focusing on higher margins product, cost management and leveraging the benefit of PLI scheme.

Looking ahead, the management anticipates robust growth across pipe segment in the coming quarters, supported by the Indian government's significant infrastructure initiatives. The stabilisation of steel prices at the current levels and the government's increase emphasis on infrastructure development bode well for future prospects. 

The company said it is on track to achieve its stated Ebitda guidance in the range of Rs 500 to 525 crore for FY25, with Ebitda/tonne expected to sustain at similar levels to what we achieved in Q1 FY25.

The company's growing steel export business strengthens its positive outlook, driven by significant orders on hand. Additionally, the anticipated increase in the contribution of value-added products is expected to enhance the division’s profitability. Overall, the division is well-positioned for sustained growth, supported by its strong market presence and emphasis on higher-value products, Surya Roshni said in its FY24 annual report.

The company said it projects a good growth in its Lighting division for FY 2024-25, even as it navigates some price erosion challenges. The company continues to launch new products in this segment, adapting to the ever-evolving needs of its customers. Additionally, Surya Roshni anticipates strong performance in the Consumer Durables segment, assuming the Indian economy continues on its current growth trajectory.