Everest Industries (EVERESTIND) Annual Report FY23: A Deep Dive for the Everyday Investor
Part 1: The Financial Snapshot (The Numbers in Simple Terms)
Before we dive into the story, let's look at the scoreboard. The financial statements are like a company's report card. Here’s a simplified look at Everest's performance for the financial year ending March 31, 2023.
The Income Statement: Did They Make a Profit?
The income statement tells us how much money the company made (revenue) and how much it kept after paying all its bills (profit).
Total Income:
The company earned ₹1,666 Crores, a healthy increase of 22% from ₹1,363 Crores the previous year. This means more people and businesses were buying their products.
Operating Profit (EBITDA):
This is the profit from core business operations before accounting for interest, taxes, and other non-operational items. It stood at ₹121 Crores, down from ₹151 Crores. While sales went up, profits from those sales went down. We'll explore why in the management section.
Net Profit (Profit After Tax):
The final bottom line. After all expenses, interest, and taxes were paid, the company's net profit was ₹60 Crores, a decrease from ₹90 Crores in the previous year.
In a nutshell:
Everest sold a lot more stuff, but it became less profitable. This often points to rising costs, which we'll see was a major theme this year.
The Balance Sheet: What They Own vs. What They Owe
The balance sheet is a snapshot of the company's financial health on a single day (March 31, 2023).
Assets (What they own):
The company has total assets worth ₹1,326 Crores. This includes their factories, machinery, inventory (unsold products), and cash.
Liabilities (What they owe):
Their total liabilities are ₹523 Crores. This is the money they owe to suppliers, banks (loans), etc.
Equity (The owner's stake):
The difference between assets and liabilities is the equity, which stands at ₹803 Crores. This represents the shareholders' portion of the company.
Key takeaway:
The company has a strong balance sheet. It owns significantly more than it owes, which is a good sign of financial stability.
The Cash Flow Statement: Where Did the Cash Go?
This statement tracks the actual movement of cash in and out of the company.
Cash from Operations:
The business generated ₹100 Crores in cash from its day-to-day activities. This is a positive sign, showing the core business is bringing in real money.
Cash for Investing:
The company spent ₹95 Crores on investments, primarily on upgrading its plants and machinery (Capital Expenditure or 'Capex'). This shows they are investing in future growth.
Cash from Financing:
The company paid out ₹42 Crores, mostly in the form of dividends to shareholders and repaying loans.
In simple terms:
The business generated enough cash to fund its expansion and still had enough left over to reward its shareholders and pay back some debt.
Part 2: The Heart of the Report: Management Discussion and Analysis (MD&A)
This is the most insightful section of the annual report. Here, the management team sits down and tells you their story—what happened during the year, why it happened, and what they plan to do next. Let's break down their commentary.
The Big Picture: Economic and Industry Headwinds
Management started by talking about the world outside their factory gates.
Global Scene:
The year was marked by geopolitical tensions (like the war in Ukraine), high inflation across the globe, and rising interest rates. This made everything more expensive and uncertain.
Indian Scene:
Despite global issues, India was a bright spot with strong GDP growth. The government's focus on infrastructure (roads, railways, housing) and a good monsoon helped boost the economy, especially in rural areas.
The Challenge:
The biggest hurdle for the entire building materials industry was input cost inflation. The prices of raw materials like cement, steel, and fuel skyrocketed. While companies tried to pass these costs to customers by increasing prices, it was a delicate balancing act to avoid scaring away buyers.
A Tale of Two Businesses: How Everest's Segments Performed
Everest operates through two main business divisions, and they had very different years.
1. Building Products Segment
This is the larger part of Everest's business, catering to a wide range of customers from individual home builders to large developers.
What's in this segment?
Roofing:
Corrugated roofing sheets, a staple in rural and semi-urban India.
Boards & Panels:
A modern solution for ceilings, walls, and partitions. These are fire-resistant, water-resistant, and quick to install.
Rapicon Walls:
Pre-made wall panels that speed up construction significantly.
Solar Solutions:
Integrated solar panels for rooftops.
How did it perform?
This segment was the star performer, growing its revenue by a strong 27%.
Why? Management attributes this success to strong demand from rural and Tier-2/3 cities. A good harvest and increased rural income put more money in people's pockets for home building and renovation.
They also successfully implemented price hikes to counter the rising raw material costs, which helped protect their profitability in this segment.
The Boards & Panels business, in particular, saw excellent growth as more people adopted modern, faster construction methods.
2. Steel Buildings Segment
This division builds large, custom-designed steel structures. Think warehouses, factories, airport hangars, and metro stations.
What's in this segment?
Pre-Engineered Buildings (PEBs):
Designing, manufacturing, and erecting massive steel buildings for industrial and commercial clients.
How did it perform?
This segment faced a tougher year. While revenue grew by 10%, its profitability was severely hit.
Why? The management points to one major culprit: volatile steel prices. Steel is the primary raw material here. Prices shot up unpredictably, but since these are long-term projects, Everest couldn't always pass the increased cost to clients who had signed contracts at older, lower prices.
This "unabsorbed inflation" squeezed their profit margins tightly. Many projects in the infrastructure space also saw delays, which impacted execution.
The Game Plan: Strategy, Opportunities, and Future Outlook
So, what is Everest's plan to navigate this environment and grow in the future? Management laid out a clear strategy.
Opportunities They See:
Government Push:
Programs like 'Housing for All' (PMAY) and the massive budget for infrastructure are huge tailwinds.
Shifting Preferences:
People are increasingly looking for faster, safer, and more sustainable construction materials. This is a big opportunity for their Boards, Panels, and Rapicon Walls.
Warehousing Boom:
The rise of e-commerce and modern retail requires a massive expansion of warehousing space, which is the sweet spot for their Steel Buildings division.
Export Potential:
They see growing opportunities to export their products to the Middle East, Africa, and other parts of Asia.
Their Strategic Pillars:
Brand Strengthening:
Continuously investing in the "Everest" brand to be seen as a provider of complete, modern building solutions, not just roofing.
Innovation:
Developing new and improved products. For example, they are working on more aesthetically pleasing and durable roofing and wall solutions.
Go-to-Market Expansion:
Deepening their reach in rural India while also building stronger relationships with architects, builders, and large corporate clients in cities.
Cost Leadership:
A relentless focus on efficiency to control manufacturing costs and better absorb shocks from raw material price volatility.
Digital Transformation:
Using technology to improve everything from supply chain management to customer service.
What Keeps Them Up at Night: Risks and Concerns
Management is also upfront about the challenges that could derail their plans.
Economic Slowdown:
A major downturn in the Indian or global economy would reduce demand for building materials.
Competition:
The industry is highly competitive, both from large organized players and smaller, local ones. This puts pressure on prices.
Raw Material Volatility:
As seen this year, sudden spikes in steel, cement, or fuel prices can severely impact profitability.
Skilled Labor:
Finding and retaining skilled workers for both manufacturing and on-site installation is a continuous challenge.
Regulatory Changes:
Changes in environmental laws, building codes, or tax policies could impact their operations.