Vesuvius India - Focus On Aggressive Capacity Expansion: Systematix

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Systematix Research Report

Analyst meet takeaways: We return positive post our meeting with the management of Vesuvius India Ltd.

After a decade of almost nil addition to gross block (post depreciation) Vesuvius India doubled its gross block in CY22 and is looking to incur major capex for the next two-three years.

Vesuvius India’s major shift in focus appears to be driven by the need to catch up with market growth and a more aggressive stance by its key competitor RHI Magnesita. The latter has taken significant strides in India by merging unlisted entities and through inorganic acquisitions.

We believe Vesuvius India has the necessary technological edge in a niche steel consumables segment, which forms a critical part of the steel manufacturing ecosystem. Vesuvius India enters service contracts along with sale of refractories and offers performance guarantees, etc.; it has significantly deep long-term engagements with the steel producers.

The company has asset turns of about three times, which implies near doubling of topline over the next three-five years, with Ebitda growth likely tripling from the current level.

Vesuvius India is an interesting play on India’s steel sector, which is poised to double its steelmaking capacity by 100% over the next decade to 300 million tonne. Vesuvius India is also not much impacted by the likely push for decarbonisation, as even if steel is produced by increasing electric arc furnace based technologies, the demand for refractory is unlikely to be impacted.

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