Surya Roshni Q3 Results Review - Margin Surge, Deleveraging To Drive Re-Rating: Systematix

Systematix Research Report

Surya Roshni Ltd. reported Q3 FY23 consolidated Ebitda of Rs 1.6 billion (~up 66% YoY, up 26% QoQ), 13% above our estimate, boosted by strong margin of Rs 6,700/tonne plus 76/28% YoY/QoQ (highest ever) in the steel pipes segment. The segment reported 21% higher than our estimated Ebitda at Rs 1.4 billion (up 92% YoY, up 36% QoQ), driven by-

1. strong volumes at 202 thousand tonne up 9/6% YoY/QoQ,

2. margin expansion due to higher thrust on -added products, and

3. strong demand from the transmission segment for API Pipes and 3-layer polyethylene coated pipes.

Surya Roshni's revenue in the lighting segment rose by 6%/3% YoY/QoQ to Rs 3.9 billion, inline with our estimate, with the segment recording Ebitda of Rs 0.3 billion (down 4% YoY, down 13% QoQ), 19% below our estimate, largely due to higher input costs.

The lighting market has been witnessing sluggish growth, as the longer shelf life of LEDs results in an elongated replacement cycle.

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