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(^) Outlook BUSINESS / (^) 22 December 2017
tiple means. Currently, Everest’s market share in
boards and panels is around 25 % and the manage-
ment expects demand in this segment to increase
over three-fold in the coming years.
The current domestic market for pre-engineered
buildings (PEB) is estimated at around # 10 , 000 crore
and is growing at 16 %. PEB results in 30 % faster con-
struction compared with traditional masonry con-
struction. Everest has emerged as the second-largest
PEB company in the country, having designed and
erected more than 2 , 000 PEBs. It has also worked with
customers to introduce risk mitigation clause for fu-
ture contracts in case of signifi cant changes in steel
prices. A recovery in private capex could also result in
rub-off on this segment in the medium to long term.
A next-gen product, solar roof is expected to cre-
ate a new market for in-roofi ng solutions. Globally,
solar roofs have started gaining traction. Everest is
incorporating solar roofs in its PEB as a complete
solution and is also arranging fi nancing for such in-
stallations. Off ering a complete solution is unique
in the PEB segment and should spur growth in the
coming years. The government’s focus to connect
tier-II and tier-III towns via air routes will also help
the company to promote its modern smart steel
building technologies.
BUILT TO LAST
Over the past decade, Everest’s revenue has mul-
tiplied by fi ve times. The company’s foray into the
Middle East was met with a setback that resulted
in muted growth in the recent past. However, it has
taken corrective measures, which will refl ect in its fi -
nancials in coming quarters. Going forward, topline
is expected to grow by 15 %- 20 % and bottom-line at
a similar or a higher rate.
The introduction of GST had an initial impact but it
seems to be a game changer for Everest. All its major
products — roofi ng, boards, panels, PEB, smart steel
buildings, and metal roofi ng will be taxed at 18 % GST.
This should result in making the retail range of prod-
ucts more aff ordable and benefi t a larger section of the
society. The prices of PEB and smart steel buildings
will be on par with those of the unorganised players
and will, thus, expand the market for the company.
Despite the second quarter of FY 18 being a lean
one, the fi rm showcased a relatively better perfor-
mance. Revenue for Q 2 FY 18 came in at # 259 crore, a
growth of 7. 5 % YoY. Operating profi t stood at # 11. 35
crore against a loss of # 2. 97 crore in the same quar-
ter last year. The company was back in the black
with a profi t of # 4. 5 crore against a loss of # 7. 7 crore
in the same quarter last year. Besides, PAT margin,
too, expanded by 489 bps.
Going ahead, macro factors such as a surge in ru-
ral housing demand, GST and a good monsoon will
drive growth in building products. Next-gen prod-
ucts will also expand the overall opportunity size and
drive revenue. Government initiatives such as Swa-
chh Bharat Abhiyan, Housing for All by 2022 and
Smart City Mission should drive additional demand
for building products, whereas a pick-up in private
capex will accelerate growth in PEBs.
Everest enjoys a leadership position in the indus-
try and has a strong brand recall with a large dis-
tribution network. Its next-gen products off er higher
scalability and better profi tability amid low compe-
tition. I bought into the stock at # 360 levels, when it
was trading at 13 x estimated FY 18 earnings. Since
then the price has gained over 40 % to its current lev-
el of # 520. Though I believe the long-term story of
Everest is intact, patient investors can wait for an
opportune correction to enter the stock at an
attractive valuation. b
THE WRITER HAS A POSITION IN THE STOCK
Everest’s revenue grew 5x in the
past decade, but its foray into the
Middle East met with a setback
that resulted in muted growth in
the recent past
CY17 RETURN 171%
net profit# 1 cr
ttm p/e (x) 37
roce3.52%