Interarch Building Products Ltd.  (Subscribe)

Highlights

Interarch Building Products Limited (IBPL) incorporated on 1983, is one of the leading turnkey pre-engineered steel construction solution providers in India with integrated facilities for design and engineering, manufacturing, on-site project management capabilities for the installation and erection of pre-engineered steel buildings (PEB).

IBPL offer their PEBs by way of: (a) PEB Contracts, wherein they provide complete PEBs on a turn-key basis to their customers, and as a part of which, they also provide on-site project management expertise for the installation and erection of PEBs supplied by them at  customers’ sites; and (b) PEB Sales, which includes (i) sale of metal ceilings and corrugated roofing (under TRAC Brand), metal roofing and cladding systems (under TRACDEK brand) and permanent/metal decking over steel framing (under TRACDEK Bold-Rib brand); (ii) supply of PEB steel structures (under Interarch Life brand) for erection and installation by third party builders/erectors, and (iii) light gauge framing systems (LGFS).

They have delivered PEBs for projects ranging from multi-level warehouses for customers engaged in e-commerce to paint production lines for customers engaged in manufacturing of paints and FMCG sector for setting up manufacturing units for manufacturing their products. They also supplied large-span PEBs for indoor stadiums and customers engaged in the cement industry. During the from FY15 to FY24 they have completed execution of 677 PEB Contracts.

Out of the total proceeds of Rs. 6,002 mn, Rs. 585 mn would go towards funding CAPEX for setting up project, ~Rs. 192 mn would utilize towards funding CAPEX for upgradation of the Kichha manufacturing facility, Tamil Nadu manufacturing facility I, Tamil Nadu manufacturing facility II and Pantnagar manufacturing facility, Rs. 113 mn would go towards Funding IT assets for upgradation of existing IT infra of the company, Rs. 550 mn would go towards funding working capital. ~Rs. 560 would use for general corporate purpose and Rs. 4,002 mn would go towards existing selling shareholders of the company.

Key Highlights

• The global pre-engineered steel buildings market is estimated at USD 16-17 bn as of CY22 and is expected to clock at 11-12 pct of CAGR over the medium term till CY27. The Indian PEB industry is expected to grow at a pace of 11-12 pct CAGR over FY24-FY29. IBPL extensive track record and market position, make them a beneficiary of such growth.
• They were ranked 3rd in terms of operating revenue from PEB business in the FY24 among integrated PEB players in India. IBPL further had the 2nd largest aggregate installed capacity of 141,000 MTPA as at FY24 and a market share of 6.5 pct in terms of operating income in FY24 among integrated PEB players in India.
• As of FY24 the total order book of the company stood at Rs. 11.53 bn which is (0.89x of FY24 sales) indicating short term sales visibility. The growth of their order book is a cumulative indication of the revenues that IBPL expect to recognise in future periods with respect to their existing PEB Contracts.
• Most of the raw materials that they use are heavy industries related. Substantially all IBPL’s raw materials are available in India, enabling them to ensure timely availability of raw materials of the desired quality and quantity.
• CIL key strategies include (i) To capitalize on industry tailwinds, including through proposed expansion and upgradation of their Manufacturing Facilities Diversification by leveraging existing capabilities (ii) Expanding geographical footprint to cater to strategic markets in India and overseas. (iii) Expand customer base and increase sales to existing customers (iv) Continue to invest in their technology infrastructure to enhance in-house design and engineering, and manufacturing capabilities and thereby improve operational efficiencies.
• Sales of the company has grown by 24.46 pct CAGR during the period FY22-24 and EBITDA and Profit grew 85.33 pct CAGR and 124 pct CAGR over FY22-24. During FY24, company reported sales of Rs. 12,993 mn which grew by 15.07 pct YoY while EBITDA rose by 6.24 pct YoY to Rs. 1,130 mn as EBITDA margin slipped from 3.94 pct in FY23 to 8.74 pct in FY24. As of FY24 the company reported profit of Rs. 863 mn which was grew by 5.89 pct YoY.

Key Risk

• IBPL customers do not commit to long-term or continuing contracts and may cancel or modify their orders or postpone or default in their payments. Any cancellation, modification, payment postponement or payment default in regard to their order book could materially harm cash flow position, sales of the company.
• Some of the orders placed with IBPL by their customers, have been cancelled in the past and any future cancellations may impact their sales.
• IBPL business and future growth are dependent on the growth of the commercial, infrastructure, and industrial landscape. If the growth in these industries is slow or stagnant, it could have an adverse impact on their business.

Financial Performance

Peer comparison based on FY24 Financials

Valuation

Interarch Building Products Limited commenced its operations in 1983 and has been involved in the high-end metal interior products market in India. Interarch provides solutions, right from metal ceilings, to blinds, metal roofing to pre-engineered buildings. IBPL’s execution record and strong orderbook indicates short term revenue visibility. At the upper end of the price band of Rs. 900 the issue is priced at a PE of ~17.4x its FY24 earnings. The issue looks fully priced. However, one can subscribe for longer-term perspective.

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