Founded in 1985, AVL is a leading manufacturer of industrial and plumbing valves and fittings.
Market Cap: ₹ 230 Cr. (June 9, 2023)
Promoter Holding: 43%
Pledged Percentage:0%
The company went public on the BSE SME platform in October 2020 and migrated to the BSE and NSE main board in May 2023.
Product portfolio consists of 500 SKUs
Clientele
- Serves over 300+ clients
- Top 15 clients - 80% revenue
- Top 10 clients - 40-50% revenue
Manufacturing Infrastructure
- AVL has 3 specialized foundry shops for Nonferrous, Stainless Steel and Carbon & Alloy Steels, each with multiple molding techniques
- Capacity of 96,000 pieces per month across all product categories
Exports & Dealer Network
- Exports is currently 3% with presence in South Africa, USA, UK and Indonesia
- pan-India dealer network of 750 dealers
Financials
- 10Yr CAGR: Sales - 14%, OP - 21%, PAT - 43%
- 5Yr CAGR: Sales - 23%, OP - 34%, PAT - 73%
- FY23 saw significant improvement in revenue, profits and margins. However, sustainability is in doubt after a deep dive into the numbers.
- FY23 YoY growth: Sales - 141%, Inventory - 37% and receivables - 250%.
- CFO has become negative while sales, receivables & inventory have increased significantly.
- Cumulative 10Yr CFO is also less than cumulative 10Yr PAT.
- Deteriorating CFO/EBITDA in the past 3 years, indicate the company is not able to translate its profits into cash profits.
- There’s indications of providing extended credit period and aggressive inventory management to inflate sales.
Management Commentary
- The big jump in sales is due to introduction of new products, increasing sales network and large orders from existing customers
- Currently enjoys 5-6% market share in the organized market
- Current capacity is INR 65-70 cr. (FY23 Sales is INR 49 Cr.)
- 25% topline growth is expected from existing business
- Sustainable margins are 15-16%
- Q4 is the best quarter for the company
Valves Industry Outlook
Boilers Industry Outlook
End-user Industries
Capex
- To invest INR 30 Cr. and launch bathroom faucets and allied items project in either 1st or 2nd quarter of FY24
- Expecting INR 25 cr. sales in current year, 15-20% EBITDA levels and 80-90 debtor days. At full capacity can generate INR 100 cr.
Future Plans
- To achieve INR 1,000 cr revenues by 2030
- Increase the dealer network from 750 to 1,000
- Increase export sales from 3% to 25%
- Intends to increase its presence in the United Arab Emirates, Saudi Arabia, Tanzania, Kenya, Russia.
Source: Investor Presentation, FY23 Con-call transcript
Disclosure: Not Invested
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