SPA Research report on Skipper
Skipper is among the top 3 players in the transmission tower business (after KEC Intl and Kalpataru) with a capacity of 175000 MTPA (25000 added in H1CY15). The company operates in 400 KV - 1200 KV segment, which has entry barriers like prequalification, quality & infrastructure related criteria, and derives 85% of revenue from Powergrid projects. 54% of India's transmission line network is expected to be in 400 KV and above by the end of 12th Plan.
Skipper plans to increase the PVC pipe (7% of revenue) capacity by 10x to 100000 MTPA by FY18 of which 30000 MTPA is likely to start in FY16 (10000 each in Ahmedabad, Secunderabad and Guwahati; Ahmedabad facility started). Multi-locational manufacturing facilities will help in saving freight costs and aid margin expansion. With multifold increase in capacity and decent profit margin, we expect PVC division to contribute significantly to the overall revenue & profits. To increase the share of revenue from plumbing sector, the company has partnered with global leaders like Sekisui Chemicals (Japan) and Wavin group (Netherlands) for CPVC and fittings respectively. Currently agri sector account for 75% of revenue, which the company is planning to reduce to 60% in the coming quarters. The company has a market share of ~10% in Eastern India.
Outlook and Valuation"The Power ministry plans to attract investments worth INR 4000 bn in the T&D space over the next 4 years. Creation of smart cities, focus on improving irrigation facilities, rapid urbanisation and improvement in urban infrastructure are likely to create demand for water transportation pipes. Skipper ltd. is gearing up to cash in on the emerging opportunities with aggressive capex and increasing distribution reach (coupled with brand led marketing). Topline & bottomline grew at a CAGR of 20.8% and 118.3% respectively between FY13-15. At CMP, the stock is trading at 17.5x FY15 earnings", says SPA Research report.
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