Everest Industries Ltd Positioned for Growth

Everest Industries Ltd
BUY
Target Price Rs 712 CMP Rs 536 SOTP
Index Details Everest Industries Ltd (EVI) is known as a roofing company but by FY20 65% of
Sensex 33,324 its profits will come from newer building products and pre-engineered steel
buildings (PEB). In FY17, roofing/ boards & panels/ PEB accounted for 49%/ 15%/
Nifty 10,273
36% of its revenues. Roofing solutions such as Everest Fiber Cement Roofing,
Housing
Industry made of cement and cellulose fibres, can be used for residential, commercial and
Ancillary
industrial roofs. The boards and panels are used for ceiling/wall &
cladding/flooring. EVI provides end to end PEB solutions from design to
installation. Everest PEBs are widely used in making industrial, commercial and
Scrip Details residential applications.
Mkt Cap (Rscr) 834.4 Over FY17-20E we expect EVI’s CAGR of revenues/ EBITDA/ PAT to be 11%/ 53%/
BVPS (Rs) 307 173%. EVI benefits from a low base of FY17, which was impacted by demonetization
O/s Shares (Cr) 1.5 and high material costs. The EBITDA margin expansion and debt repayment will help
Av Vol 28,041
EVI to post ROE and ROCE of 16% and 22%, respectively, by FY20.
52 Week H/L 584/182
We initiate coverage on EVI as a BUY with a price objective of Rs 712, representing a
Div Yield (%) 0.4 potential upside of 33% in the next 12 months. We arrived at the price target by
STOCK POINTER
applying SoTP valuation based on the growth in different operating segments.
FVPS (Rs.) 10
Shareholding Pattern Our optimism on EVI is driven by faster growth in higher margin segments, reducing
debt levels and impressive increase in ROCE: -
Shareholders %
 EVI is focusing on newer avenues for growth. The Boards and Panels segment is
Promoters 48.7
seeing a growing demand with 13% margins (versus 6% in roofing). This will lead to a
Public 51.3 better profitability of the company.
Total 100.0  The steel building segment suffered a setback in FY17 as contracts did not allow EVI
to pass on the increased steel prices to clients. This has now been changed and new
RDCK vs. Sensex
contract terms allow the of price hikes to be passed on to the customer. This averts
the adverse impact on EVI performance. We expect the PEB segment to report an
EBIT margin of 6% in FY18E.
 The roofing industry has grown in lower single digits during FY11-16. We expect EVI
to outperform the industry growth by introducing new products with technological
advantage. This will increase its market share from the current 17%.
 EVI has adequate capacity for its future endeavors so there are no large capex plans.
We expect EVI to pay off its debt by FY20 and turn net cash positive. This will lead to
savings in finance costs and improve the return ratios.
Key Financials (Rs. in Cr)

Net EPS EPS ROCE P/E EV/EBITDA
Y/E Mar EBITDA PAT ROE (%)
Sales (Rs.) Growth (%) (%) (x) (x)
2017 1,177 40 4 2.7 -88.1 1.2 5.1 83.6 13.2
2018E 1,293 106 60 38.9 1,333.2 15.4 18.8 13.8 8.7
2019E 1,453 128 73 47.6 22.1 15.8 21.6 11.3 6.8
2020E 1,604 144 85 55.4 16.6 15.8 22.0 9.7 5.6
- 1 of 29 - Tuesday, 12th December, 2017
This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
 Company Background
Everest Industries was incorporated in 1934 as M/s Asbestos Cement Ltd. The company was
promoted by C.P. Cement Co Ltd (which in 1936 merged with other companies to form Associated
Cement Companies Ltd (ACC)) and Turner & Newall Ltd, UK. The company's object was to
manufacture asbestos cement sheeting products such as corrugated roofing sheets, corrugated
curved tanks, roofing extractors, etc., as well as accessories for roofing sheets. The products are
marketed under the brand name "EVEREST".
EVI was a pioneer in setting up facilities for the manufacture of asbestos cement roofing sheets in
India. It commissioned its first factory in May 1934 at Kymore in Madhya Pradesh. By 1956, the
company had set up four factories, in Mumbai, Kolkata and Podanur in Tamil Nadu.
In 1988, the ownership of the company by Turner & Newall International Ltd, UK, was transferred
to Eteroutremer S.A., Belgium, the holding company of the ETERNIT group. The name of the
company was changed to Eternit Everest Ltd. In 2002, Eteroutremer S.A. sold its share to ACC. In
2003, Eternit Everest Ltd.’s name was changed to Everest Industries Ltd. ACC sold 50% of the
shareholding in 2005 to M/s Everest Finvest (India) Pvt Ltd, a company led by the current
chairman Mr. Aditya Vikram Somani. ACC fully divested its remaining stake in EVI in 2007.
Somani group now owns 49% of the company.
EVI has a strong presence of over 80 years in the building solutions industry. It provides building
products and solutions for commercial, industrial and residential sectors to over 25 countries. The
product portfolio includes Roofing, Ceilings, Walls, Flooring, Cladding and Pre-engineered
buildings.
Business Profile
Source: EVI, Ventura Research
- 2 of 29- Tuesday, 12th December, 2017

Milestones
FY94 Introduced Non-Asbestos Roofing
FY99 Established R&D Centre
FY03 Initiated exports of Boards
FY05 Introduced Hi-Tech Roofing with HIPP technology
FY06 Launched Solid Wall panels (Rapicon)
FY07 Initiated Fibre Cement Roofing and Boards plant at Bhagwanpur, Uttarakhand
FY08 Launched Roof light polycarbonate Roofing Sheets
FY09 Launched Cement planks; Smart Steel Buildings; upgraded the Roofing plant at Kolkata
FY10 Launched EPDM washers; upgraded the Oldest Roofing plant at Kymore
th
FY11 Launched Metal Roofing Sheets; Delivered 500 pre-Engineered Building
FY12 Awarded LIMCA Book of Records for fastest construction in India (60,000 sqft in 90 days)
FY13 Delivered 1000th pre-Engineered Building
Initiated PEB plant in Gujarat; Established Odisha Roofing plant and Ranchi Metal Roofing
FY14
plant.
Achieved 100% utilization at Somnathpur plant in Orissa; Commenced full operations in
FY15
Narmada plant in Gujarat
Emerged as the 2nd largest PEB company in India, Boards & Panels domestic revenue
FY16
crosses Rs 100 crore mark
In 1994, EVI introduced non-asbestos roofing. In the roofing segment it offers a wide range of
products for residential, commercial and industrial roofing. It has launched new age products,
include the non-asbestos Fibre Cement Roofing Sheet – Everest Hi-Tech and Polycarbonate
roofing sheets. EVI has covered more than 1 billion sq. m. of roofs till date.
EVI operates in the boards and panels segment since 2003. It offers a range of Fibre Cement
based new-age building products and solutions which enable strong, light and rapid construction of
residential, commercial and industrial infrastructure. The range of products is manufactured using
high pressure steam curing (HPSC) technology which makes them resistant against moisture, fire
and termites.
In 2008, EVI introduced Smart Steel Buildings. With this technology, construction of a building can
be completed three times faster than by using conventional methods of construction, even in
th
seismic, hilly, coastal and high-wind areas. By 2011, EVI delivered its 500 pre-engineered
nd
building. In 2016, EVI became the 2 largest Pre-Engineered Building Company in India.

 Product Portfolio:
Portfolio
 Roofing Segment (49% of FY17 sales)
EVI offers roofing solutions for all kinds of requirements. Everest roofing solutions such as Everest
Fiber Cement Roofing, made of cement and cellulose fibres can be used for residential,
commercial and industrial roofs. These roofs are manufactured using the latest European
technology. They are low in maintenance costs, easy to fix, fire resistant and economical.
Fibre Cement Roofing Hi Tech Roofing
Source: EVI, Ventura Research Source: EVI, Ventura Research
Everest Hi-Tech is a corrugated cement hi-tech roofing sheet reinforced with a blend of strong
factory fibres including High Impact Polypropylene. The imported fibres replace asbestos to give
them high-impact resistance. These pre-painted sheets are resistant to impacts of all weathers,
UV rays, algae and chemical corrosion.

Rooflight Roofing Accessories
Rooflight is a range of lightweight corrugated polycarbonate roofing sheets. They allow light to
transmit through them and reduce heat loads. This leads to energy conservation while enhancing
the quality of the work environment. The roofs are instilled with a UV protective layer which retains
transparency without yellowing over its lifetime.
EVI is involved in the manufacture of roofing accessories. It ensures quality and ensures
performance at full potential of its products. The roofing accessories include ridge caps, crimped
curve profile ridge caps, corner trims, rake trims, eave gutters, crimped curve eaves, stitching
fasteners, wall cladding fasteners, roofing fasteners, etc.
Normal Roof After Rooflight installation
 Boards and Panels Segment: (15% of FY17 sales)
EVI offers a wide range of products under the boards and panels section. The boards and panels
can be divided as per their usage, i.e., ceiling, wall & cladding and flooring boards & panels. These
products are made from a mixture of OPC cement, treated cellulose fibres, silica quartz and fly
ash. The range of products is manufactured using high pressure steam curing (HPSC) technology
which makes them resistant to moisture, fire and termites. EVI offers a range of Fibre Cement
based new-age building products and solutions which enable strong, light and rapid construction of
residential, commercial and industrial infrastructure.

Boards & Panels – Ceiling
Standard Ceiling Designer Ceilings Grid System
Source: EVI, Ventura Research Source: EVI, Ventura Research Source: EVI, Ventura Research
EVI ceiling products provide thermal resistance and dimensional stability. The product profile
includes standard ceilings, designer ceilings, Tex ceilings and ceiling grid systems. Tex ceilings
are ceilings catering to the textile factories which enable high light reflectance as well as
temperature and humidity control. Everest Boards are used in false ceilings and in interior wall
linings in places like hotels, restaurants, residences and in all commercial spaces.
Boards & Panels – Wall & Cladding

Wall Boards Cement Wood Planks
Heavy Duty Wall Boards Rapicon Wall

Everest wall boards are made from HPSC technology, which makes them moisture, termite and
fire resistant. EVI also manufactures Everest Cement Wood Planks and Everest Heavy Duty
Boards which are used for cladding and facade solutions. Everest Rapicon walls are Sandwich
Wall Panels made from Aerated Cement Concrete sandwiched between Everest Boards. It is the
fastest wall building solution in India.
Boards & Panels – Floor

Floor Boards Heavy Duty Floor Boards Access Flooring
Source: EVI, Ventura Research Source: EVI, Ventura Research Source: EVI, Ventura Research
Everest Heavy Duty Boards are strong and durable boards. They find usage in Mezzanine flooring
solutions due to their high load bearing properties. The Access flooring consists of liftable floor
tiles and a grid of adjustable height pedestals, which ensure safety of working environment by
housing HVAC, power, voice, data cabling under the floor.
 Steel Buildings and Products: (36% of FY17 sales)
EVI provides end to end PEB solutions from design to installation. Steel buildings score over
traditional constructions in reduced construction time, savings in cost and manufacturing under
controlled factory environment. EVI has executed more than 2,000 projects till date. The
construction time is reduced and the structures are executed three times faster than by using
conventional methods of construction, even in seismic, hilly, coastal and high-wind areas. Everest
Smart Steel Buildings are widely used in making industrial accommodations, site offices, sample
flats, schools & colleges, rooftop extensions and many such commercial and residential
applications.
PEB Primasteel Roofs

Everest uses high tensile steel plates and coils. Using the core strength of high tensile steel, its
Light Gauge Steel Frame (LGSF) system allows multiple applications across residential and
commercial sectors. Steel constitutes ~65-75% of the raw material costs. The structural design is
created by engineers who are equipped with best in class software like TEKLA, STAAD Pro, MBS
and AutoCAD. EVI also manufactures steel roofs; Everest Primasteel Roofs. They have anti-
corrosive and weather resistance properties.
Steel Building

 Production Facilities:
Manufacturing Facilities
Building Products - Total Capacity 9,15,000 MTPA*
Location Products Capacity

Bhagwanpur, Fibre Cement Roofing Sheets, 50,000 MTPA of fibre cement boards;
Uttarakhand Boards & Panels 1,00,000 MTPA of roofing products
Lakhmapur, Fibre Cement Roofing Sheets,
not known
Maharashtra Boards & Panels
Kolkata, West Bengal Fibre Cement Roofing Sheets not known
Kymore, Madhya
Fibre Cement Roofing Sheets not known
Pradesh
Podanur, Tamil Nadu Fibre Cement Roofing Sheets 1,74,000 MTPA
Somnathpur, Odisha Fibre Cement Roofing Sheets 1,20,000 MTPA

* Including Dubai plant of Boards with 50,000 MTA capacity transferred
Steel Building Plants - Total Capacity 72,000 MTPA
Location Products Capacity

Bhagwanpur, Pre-Engineered Buildings,
40,000 MTPA of steel fabrication products
Uttarakhand Smart Steel Buildings
30,000 MTPA of Pre-engineered building
Pre-Engineered Buildings,
Dahej, Gujarat with automatic paint line & shot blasting
Smart Steel Buildings
Facility
Ranchi, Jharkhand Metal Roofing 15,000 MTPA

 Key Management Personnel:
Management Personnel
Name Experience
Mr Aditya Vikram Somani Mr Somani has more than 25 years of experience in real estate,
Chairman construction, building products, textiles and information technology
management.
Mr M L Gupta Mr Gupta has a long and varied experience of handling building

Vice Chairman products businesses.
Mr Manish Sanghi Mr Sanghi has been with EVI since 2001. He took charge as
Managing Director Managing Director in 2010.
Mr Y Srinivasa Rao Mr Rao joined EVI in 1997 and is experienced in handling

Executive Director manufacturing, project management, and technology transfer.
Mr B L Taparia Mr Taparia has more than 40 Years of experience in Legal,

Independent Director Secretarial, Finance and Accounts, Taxation and Corporate
Governance.
Mr Nikhil Dujari Mr Dujari has more than 20 years of experience in business

Chief Financial Officer accounting, internal control, taxation, banking and treasury, audit,
contract structuring.
Mr Neeraj Kohli Mr Kohli has more than 27 years of experience in Corporate and
Company Secretary Secretarial matters.
Mr Rahul Chopra Mr Chopra has been with EVI for 30 years. He is an expert in rural
Senior Vice President - marketing, market activation, brand building, and handling large sales
Roofing forces.
Mr Manish Garg Mr Garg has been with EVI for 10 years and is an expert in Design
President & COO –Steel and Sales of Steel Buildings.
Buildings
Mr Sanjay Joshi Mr Joshi has over 15 years of experience in the fields of Product
Senior Vice President - Development, Sales & Marketing and Sales Force Effectiveness.
Boards & Panels

 Key Investment Highlights:
 Boards and Panels - Key Growth Driver:
EVI has more than 15 years of experience in the boards and panels sector. These products are
gaining popularity with increased acceptance by the customers. The limitation and lacunae of
plywood can be easily overcome with use of the boards and panels such as cement wood planks
and wall boards. EVI has a wide variety of products as per the specifications and end use. The
boards and panels are used to make ceilings, wall and floors. This is also known as dry
construction. Such methods ensure that the construction is lighter, faster and also becomes high
performance, particularly in terms of heat and sound insulation.
EVI has significant exports to the Middle Eastern markets. The exports declined 40% in volume in
FY17. The reduction in demand was due to low oil prices and local conflicts in these markets. The
oil prices have bottomed out and are moving higher and with domestic demand seeing an uptrend.
We expect EVI to grow at 22% CAGR (FY17-20E) in this segment. It is a high growth and high
profit generating segment. EVI expects to maintain the double digits growth momentum in this
segment.
The capacity stood at 1.5 lakh MT in FY17 and will increase to 2 lakh MT in FY18 after the Dubai
plant of Boards (with 50,000 MTA capacity) is transferred to India. The boards and panels sales
volume stood at ~1 lakh MT in FY17; and it is expected to grow at 18% CAGR (FY17-20E) to ~1.8
lakh MT in FY20E. This will result in a higher composition of boards and panels in the total
company revenues from 15% in FY17 to 22% in FY20E. We expect this segment to generate
~14% EBITM by FY20E.
Capacity Utilisation Segment Performance
(MT) (%) (Rs in cr) (%)

15
220,000 90
300
180,000 80 225 10
CAGR 18%
150
140,000 70 5
75
100,000 60 - -
FY16 FY17 FY18E FY19E FY20E FY16 FY17 FY18E FY19E FY20E
Capacity (LHS) sales (LHS) Utilisation (RHS) Revenue (LHS) EBITM (RHS)
 Steel Buildings Segment - On the Road to Recovery:
The Steel buildings segment constitutes ~37% of EVI revenues. This segment grew by 8% CAGR
(FY15-17). In FY17, the segment was impacted by the rise in steel prices. The minimum import
prices (MIP) was imposed on steel, which led to a sudden rise of ~18% in steel prices. EVI was
unable to pass on the price hike to the customers; thereby resulting in losses.

The steel purchases are made on a contract to contract basis due to the specification
requirements as per the contract. The company has modified the terms of contract, which now
include risk mitigation clauses. The prices of steel are currently on an uptrend and have increased
by ~30% in H1FY18. Nevertheless, we have not factored in any major risk due to the modified
terms of the contract; which will allow EVI to pass on the hikes.
However, this will have an impact on the overall sales in terms of lower growth in demand due to
higher costs. We expect the steel buildings segment revenues to increase by 12% CAGR (FY17-
20E).
(MT) (%) (Rs in cr) (%)

73,000 84 600 10.0
78 7.0
62,000 500
72 4.0
51,000 400
66 1.0
40,000 60 300 -2.0

 Roofing - New Product Launches to Maintain Growth Momentum:
EVI has a market share of ~17% in the roofing industry. It has an advantage of being a veteran in
the roofing industry with an experience of ~80 years. The roofing segment accounts for ~50% of
revenues. EVI offers a wide range of products. However, this industry is facing a slowdown in
growth momentum. There is an increase in the ‘pakka’ roofs. Nevertheless, with modern
constructions where there are multistoried buildings for residential purposes, the demand for roofs
is likely to show a limited growth. The other users of roofs include warehouses and industries. EVI
has introduced new technology in the new products to cater to the changing demand of the
customers. EVI has an R&D facility, which gives it a cushion to make a transition towards the
others segments.
 Everest Hi-Tech: A Non-asbestos Fibre Cement Roofing Sheet used for industrial purpose.
 Everest Super: A special water repellent and anti-fungal properties.
 Everest Rooflight and Everest Decoroof: Polycarbonate roofing sheets that save on
electricity consumption cost by allowing sunlight to enter the building.

(MT) (%) (Rs in cr) (%)

660 8
725,000 90
85 6
650,000 600
80 4
575,000 540
75 2
500,000 70 480 -
We expect the roofing segment revenues of the company to grow at a CAGR of 5% (FY17-20E)
on a low base. The management expects the roofing industry to grow at ~3-4%. FY17 was an
aberration impacted by demonetisation. We expect EVI to keep its momentum in this segment
while actively trying to move its dependence from the roofing segment to the steel building
segment which involves the new age technology.
 Strong Brand Recall:
The EVEREST brand has a strong recall value with its customers. The existence of the brand
dates back to 1934, when the company was incorporated by the erstwhile promoters C.P. Cement
Co Ltd (which subsequently, in 1936, merged with other companies to form Associated Cement
Companies Ltd (ACC)) and Turner & Newall Ltd, U.K. Turner & Newall Ltd was a UK based
company which brought its ~6 decades of rich experience in using asbestos to India. It is the
oldest roofing brand in India.
The transition of EVI into non-harmful asbestos based products under the brand, and other fibre
based non-asbestos products, has ensured a strong brand recall of EVI. ‘Everest’ today is a brand
synonymous with roofing in India. Its products are installed over 1 billion sqm of industrial and
residential roofs in India.
Key Customers

 Widespread Distribution Network:
Over the years, EVI has built a widespread distribution network. It has 42 sales depots, 6,000
dealers, with ~1,000 dealers in urban areas and ~5,000 dealers in the rural area. The company
also exports to more than 35 countries. EVI’s building products and solutions are available in more
than 1,00,000 villages and 600 cities in India and also in many countries globally. It has designed
and erected more than 2,000 Pre-Engineered steel buildings across 275 cities in India.
EVI has plants at 8 locations. The pan - India presence helps reduce logistics cost and reduces
the lead time. It also reduces the shipping and forex expenses as a lot of the fibres used are
imported. This gives it a cost advantage.
Distribution Network

 Large Product Offering:
EVI has a strong portfolio of products and solutions to offer. Its product range caters to different
demands of the consumer. It has invested in R&D, to ensure adoption of newer technologies. The
products are technologically superior with resistance to moisture, fire and termites. They also have
anti-corrosive and weather resistance properties. It exports to countries in Asia, Africa, Europe
and Australia. This suggests that the products are suitable and accepted in diverse weather
conditions.
 Change in Product Mix to Boost Profitability:
EVI has been a roofing company since inception. The roofing segment constitutes ~49% of its
total revenues. The other two segments – boards and panels and steel buildings are relatively
new and constitute ~15% and 36%, respectively. The company has decided to reduce its
dependence from the roofing segment to the steel buildings segment. EVI is actively focusing on
high growth and high margin products. With the roofing industry growing at a slower pace, the
boards & panels and steel building industry is expected to be the revenue and profit growth driver.
Revenue Mix Revenue Proportion
(Rs in Cr)
1,800 100%
37% 36% 36% 36% 37%

589 75%
1,200 520
483 471
423 15% 15% 17% 21% 22%
348 50%
198 217 298
600 180
25% 48% 49% 47% 44% 42%
632 575 604 635 667
- 0%
Roofing Boards & Panels Steel Building Roofing Boards & Panels Steel Building
We expect the revenues of the roofing / boards & panels/ steel building segments to grow by 5%/
25%/ 12% CAGR FY17-20E, respectively. The growth in the boards and panels segment will
increase its share in the total revenues of the company. We expect EVI to recover from the losses
in the steel buildings segment. The EBIT of the steel building and the boards & panels segments
are expected to drive total EBIT.

EBIT Mix EBIT Proportion
(Rs in cr)
100%
133
22% 28% 28%
49% 31%
37 78%
98 32
29%
20 28 56% 36%
32% 37%
49
63 26 41
29 34%
23 50% 58%
28 46 45 37% 36% 35%
33 41 12%
27
-7 -3 -7%
FY16 FY17 FY18E FY19E FY20E -10% FY16 FY17 FY18E FY19E FY20E
Roofing Boards & Panels Steel Building Roofing Boards & Panels Steel Building
 Government Policies to Promote Housing Sector:
In the domestic roofs scenario, as per the population census of 2011, 54% of the Indian
population still lives in houses made of kuccha roofs. The major growth driver for roofing-
“Housing for All” - the Pradhan Mantri Awas Yojana, aims at providing affordable housing for the
poor. Under this scheme, the Government of India has planned to build ~20mn homes by 2022,
with central assistance of ~Rs 2tn.
The Government has identified 500 more cities and towns in 9 states under this plan to be
covered in the first 3 phases. With an increase in allocation to Rs 230bn in budget FY18 for the
Pradhan Mantri Awas Yojana - Gramin and proposal to complete 10 mn houses by 2019 for the
homeless people living in ‘kuchha’ houses, the demand for the rural economy is expected to
increase. This will give momentum to the otherwise slow growth in the industry.
Government Housing Schemes

 Strengths & Opportunities
1. EVI has adequate capacity to maintain its growth trajectory. It has the necessary state-of-the-
art manufacturing facilities, which offer significant logistic advantages over competitors, in both
in the Building products and Steel Buildings segments.
2. The macro economic factors such as the government’s push towards affordable housing and
industrial expansion, etc. will drive demand for the housing ancillary sector.
3. Inclusion of Fibre Cement products in the lower GST slab will make these products more
competitive in the market.
4. EVI has a sizable market share and is amongst the leading companies in its sectors. In the
roofing industry EVI has a market share of ~17% while in the boards and panels industry, it has
a market share of ~25%. EVI is one of the largest players in the Pre-Engineered Buildings
industry in India
5. The increasing commodity prices have benefitted the roofing segment. The AC/ fibre cement
roofs are priced higher in comparison to the steel roofs. The raw material prices of steel give it
a pricing advantage in the roofing segment. The price advantage of the steel roofs over AC
roofs reduced due to the recent uptrend in the steel prices. The tapering price differential in the
steel roofs and AC / fibre cement roofs tilt the balance in favour of EVI.
6. Everest has successfully executed large complex projects with challenging time constraints,
which has gained the company a lot of respect and fame. Implementation of GST is also going
to give the organised sector and branded Steel Buildings makers a competitive edge.
7. The size of the company gives it a commanding position in the procurement of raw materials
such as cement. Being a large purchaser of Cement, the company is able to get the best
negotiated prices from the suppliers.
8. EVI has invested in a strong design team, training and software development to ensure strong
designed buildings at optimised cost. The company invests in training of erection teams in
safety and speed.

 Risks
1. EVI has a portfolio of foreign currency debt as a result of which it is subject to currency and
interest rate risks. The company’s export portfolio (which accounts for about ~5% of net
revenue) acts as a natural hedge on this front.
2. 50% of the company’s revenue comes from a single segment - Roofing. The company has
decided to reduce its dependence from the roofing segment. EVI is exploring opportunities and
building an expertise in other segments such as boards and panels and steel buildings.
3. The demand for the roofing products are primarily in the rural area for residential roofs apart
from the industrial roofs. India being an agrarian country, there is a greater dependence on the
monsoon and good agricultural produce.
4. There are concerns that exposure to Chrysotile fibre leads to health risks and as such, its
usage is banned in certain countries. Chrysotile or White Asbestos Fibre is a naturally
occurring mineral and it constitutes less than 10% of Asbestos Cement Roofing sheets. EVI’s
production process is fully automated and there is no exposure of the workers to the fibre. This
has been established through different studies by organizations like National Institute of
Occupational Health (NIOH).
5. The company’s products face competition in the form of roofing tiles and metal roofing, gypsum
boards, plywood, wood substitutes, and brick & mortar construction.

 Industry:
 Roofing Industry:
The growth in the domestic construction industry, especially in the rural areas and the expansion
of capacities in the industrial sector is the driving force for the roofing industry. The roofing industry
is bifurcated in two parts- domestic roofs of houses, buildings, etc. and industrial roofs of factories,
storage facilities, etc.
The roofing industry has undergone a big change over the course of 7 decades. The earlier pucca
roofs were made from asbestos material. Asbestos being hazardous to life, non-asbestos material
roofs were developed. This has further progressed into fibre cement roofs and steel roofs. There is
a wide spectrum of roofing materials, which are used for different structural, aesthetic, economic
and performance reasons.
The growing domestic construction industry and the booming industrial sector are together seen
as the major driving forces behind the increased demand for roofing products in India. The country
has seen steady growth in roofing demand for both residential and non-residential applications
over recent years.
Nearly 70% of the Indian population stays in the rural area and thus rural development has been a
major focus of the government. The government initiatives in the affordable housing through
Pradhan Mantri Awas Yojana will drive demand from the rural industry. It is envisaged that ~2
crore dwelling units will be built and these are expected to be completed by 2022. The growth in
GDP and agricultural economy in will boost the sector.
Roof Scenario in India as per Census 2011
Pucca Kuccha

 Boards & Panels Industry:
Traditionally, the Indian Boards & Panels industry consisted of wood based products like plywood,
MDF, particle boards. The recent developments in the form of fibre cement boards and gypsum
boards are capturing the consumer attention. The industry size is estimated to be ~350bn MT.
There are 4 significant players in the industry producing identical or similar products with an
annual capacity of 396,000 MT
Fibre cement boards (FCB) and gypsum boards have gained acceptance by the consumers on the
grounds of cost effectiveness and fire, water and termite resistance. These boards are available in
various finishes and textures. The Fibre cement boards market in India has almost doubled in the
last 2 years owing to increasing demand for the modern quick-to-install building materials.
However, the consumption of Fibre Cement Boards in India is still at an abysmally low level of 0.28
kg per person versus the likes of 12.5 kg per person in Australia and 3.4 kg per person in USA.
These boards are used for ceilings, walls and floors. These boards offer ease in installation and
help improve the aesthetics. The requirement for fast construction has led to increase the share of
Fibre Cement Boards and Dry Wall systems in all infrastructure projects, hospitality and sanitation
projects, prefab construction as well as modern realty projects. The difference in the cost of
construction between on-site and readily installable materials has been narrowing. Boards and
Panels are less labour intensive and are readily available at affordable prices. Government has
taken the Smart Cities initiative to enhance the life of citizens of India by providing basic
infrastructure and amenities for the individuals. The Boards & Panels segment can add immensely
to accomplishing the dream of Smart Cities. The unveiling of the smart cities will improve the
infrastructure activity fueling growth for new age ready to install and green building products.
Growth Drivers
Fast paced
execution
Boards
Smart City Affordable
Initiatives &
Cost
Panels
Labour
Efficient
Modular
Construction

 Steel Building Industry:
The steel buildings industry is a very revolutionary concept as compared to the conventional
construction methodology. Steel buildings require a whole new approach to construction. This
technique is gaining popularity especially for constructing cost effective and time bound projects.
While globally, the PEB market is expected to grow at 12% CAGR FY16-20E, the domestic
demand is also growing. ~60% of the non-residential low-rise buildings in USA are pre-
engineered.
India is one of the fastest growing large economies. India is the world’s 4th largest producer of
crude steel. The projected steel capacity build-up in India is likely to increase to ~USD 208.3 billion
by 2030. MOU’s for ~488.6MT of capacity increase have been signed in various states. This
makes the Indian PEB market very attractive. Government policies for development of
infrastructure will drive the demand for Steel Buildings Industry. This concept has been gaining
momentum in India and the scope of growth is certain, looking at India’s huge infrastructural
requirements. The domestic industry has been growing in double digits for the last few years. The
estimated size of the steel building industry is ~Rs 5,000 crore. Domestic market is estimated to
grow at a CAGR of ~15% over the next 5 years.
Steel buildings are popular in the warehouse constructions. Agri-warehousing forms 10% of total
warehousing in India. Industrial warehousing needs are also on a rise.
Steel Building Projects
Pre-Engineered Buildings
- Construction of Factory Buildings
- Warehouse construction
- Navigation Hangers
- Military Buildings
- Offices, Schools, Hospital
- Residential complexes
Smart Steel Buildings

- Commercial Buildings
- Office Buildings
- Industrial Utility Buildings
- Automobile Showrooms

 Financial Performance - Q2FY18
In Q2FY18, EVI’s net revenues grew by 15% YoY to Rs 259 crore; the increase in revenues was
driven by 8% YoY growth in the building products segment to Rs 153 crore and 24% YoY growth
in the steel buildings segment to Rs 107 crore.
The sales volume of building segments in Q2FY18 were 1,28,970 MT (+6% YoY). The sales
volume of steel buildings was 14,000 MT (+37% YoY) while the orderbook stood at 26,518 MT
valued at ~Rs 250 crore.
EVI reported positive EBITDA of Rs 11 crore against a YoY loss of Rs 3 crore. Material costs
increased by 600bps while the favourable performance was led by 1,000bps savings in other
expenses. EBITDAM grew by 571bps to 4% (over YoY loss).
At the EBIT level, the building products segment reported an EBITM at 10% and the steel
buildings segment at 2% compared to EBIT losses in both segments in Q2FY17. The PAT turned
positive at Rs 4 cr as against a loss of Rs 8 cr in Q2FY17.
Quarterly Financial Performance (Rs in cr)
In Rs Cr 2QFY18 2QFY17 FY17 FY16

Net Sales 259 226 1,177 1,313
YoY Growth (%) 15 -21 -10 7
Total expenditure 248 229 1,137 1,230
EBITDA 11 -3 40 84
Margin (%) 4.4 -1.3 3.4 6.4
Depreciation 6 7 25 26
EBIT (Ex. Other Income) 5 -10 15 58
Other Income 2 2 9 13
EBIT 8 -8 24 71
Margin (%) 3.1 -3.3 2.1 5.4
Finance Cost 2 5 19 20
Exceptional Items - - - -
PBT 6 -12 5 51
Margin (%) 2.3 -5.5 0.4 3.9
Prov. For Tax 1 -5 1 16
Adjusted PAT 4 -8 4 35
Margin (%) 1.7 -3.4 0.4 2.7
EPS 2.9 -5.0 2.7 22.9

 Financial Outlook
We expect EVI to grow revenues at a CAGR of 11% for FY 17-20E on a low base of FY17. The
company was adversely impacted in FY17. The management is positive about the growth
prospects. We expect the performance to improve, led by a) Strong volume growth in the boards
and panels segment; b) Recovery in the steel building segment with the company reporting a
positive EBIT in FY18 itself; c) The new product launches to lead the growth in the roofing
segment.
The favourable change in the product mix will enhance the profitability of the company, thereby
resulting in EBITDM expansion (FY17-20E) by 600bps and PATM expansion (FY17-20E) by
500bps.
Revenue to Gain Momentum Return Ratios to Recover
(%)
(Rs in cr) (%)
1,600 10.0 25
20
1,200 7.5
15
800 5.0
10
400 2.5
5
- - -
FY15 FY16 FY17 FY18E FY19E FY20E FY15 FY16 FY17 FY18E FY19E FY20E
Revenue (LHS) EBITDAM (RHS) PATM (RHS) ROE ROCE
EVI has no immediate capex plans as it has adequate capacity to maintain the company’s growth
trajectory. It has a debt of ~Rs 130 crore as on September 2017 and the net debt position was
~Rs 120 crore. With no major capex plan in the radar, EVI is likely to pay off its debt by FY20E
with internal accruals. This will result in savings in interest expenditure.
EVI to Pay Off Debt by FY20
(Rs in cr) FY15 FY16 FY17 FY18E FY19E FY20E (%)

30 2.0
-40 1.5
-110 1.0
-180 0.5
-250 -
Net Debt (LHS) Interest Cost to sales (RHS) Debt/ Equity Ratio (RHS)

 Valuation
We initiate coverage on Everest Industries as a BUY with a price objective of Rs 712. This
represents a potential upside of 33% from the CMP of Rs 536. Currently, the stock trades at 18x/
15x/ 13x its earnings estimates for FY18/ FY19/ FY20. We have assigned a PE multiple to each
segment in a Sum of The Parts (SoTP) Valuation to arrive at the target price. The multiples given
to each segment are based on the growth in the profitability of the segments in the next two years.
SoTP Valuation based on FY20 Estimates
Rs in cr PAT Multiple Total

Roofing 29 5 145
Boards & Panels 33 20 656
Steel Buildings 24 15 353
Total Value 1,153
Value per share (Rs) 748
Target Price (Rs) PV (for 4 months @ 15%p.a.) 712
We are optimistic about the company due to:
 Favourable product mix to boost revenues.
 Improvement in the operating margins with increased focus on high margin products.
 Balance sheet to get stronger with repayment of loans from internal cash accruals.
 Undervaluation of the company compared to growth expected over FY18-20.

 Stock Performance and PE Chart
Share Price and P/E
600 40
450 30
300 20
150 10
- -
1-Oct-15
1-Oct-16
1-Oct-17
1-Dec-15
1-Dec-16
1-Dec-17
1-Aug-15
1-Aug-16
1-Aug-17
1-Jun-15
1-Apr-16
1-Jun-16
1-Jun-17
1-Apr-15
1-Apr-17
1-Feb-16
1-Feb-17
EVI PE
Source: Ventura Research
FY17 was highly impacted by the adverse macroeconomic conditions, such as demonetisation.
EVI reported a decline in financial performance with the PAT declining 88% YoY. The market
price, however, did not bear the brunt as EVI traded in the range of Rs 201-318 per share. Hence,
the PE chart, which is based on the next 4 quarters EPS, is skewed.
EVI has been trading at a PE ranging between 7x and 20x from Q2FY17 till date. Considering the
different segments, we have valued the company on a Sum of The Parts (SoTP) basis. The
company is trading at 13x FY20E EPS of Rs 55.

 Peer Comparison
Peers
Company Name Everest Industries Visaka Industries HIL

Business The company offers a The company offers HIL Limited (formerly Hyderabad
complete range of roofing, building products - cement Industries Limited) is a pioneer of
ceiling, wall, flooring & asbestos products and fibre green building materials,
cladding products and pre- cement flat products (V- producing roofing solutions,
engineered steel buildings for Boards and V-Panels) and panels, walling blocks, plywood
industrial, commercial and Synthetic yarns for the substitutes, high-quality pipes and
residential applications. textile segment. fittings, and industrial insulation.
Segments Roofing: Cement Asbestos Roofing: Cement Asbestos Roofing: Fibre cement Sheets and
Sheets, Fibre Cement Sheets coloured steel sheets
Sheets
Boards & panels: Fibre Fibre cement boards: Building solutions: AAC, FOB &
Cement Sheets V Boards & V Panels C-Boards, Dry Mix and Pipes and
Fittings
Steel Buildings & Metal Synthetic yarn Thermal insulation solution
Roofing
Installed Roofing Roofing Roofing solutions
capacity Roofing Sheets: 7,15,000 Cement asbestos: 8,02,000 Fibre cement sheets: 11,50,000
MTA MTA MTA
Coloured steel sheets: 26,700
MTA
Boards & panels: 1,50,000 Fibre cement sheets: Building solutions
MTA 1,29,750 MTA Solid wall panels: 78,000 MTA
AAC blocks: 8,25,000 CuM
FOB & C-boards: 54,000 MT
Dry Mix: 72,000MT
Pipes & Fitting: 7,555MT
Steel Buildings: 72,000 MTA Synthetic Yarn: Others
41 MURATA Twinjet Insulation for energy intensive
Spinning Machines: 11,000 industries: 4,800MT
tonnes of yarn p.a. Wind Power: 9.35MW
Promoter Name Mr Adityavikram R Somani Dr G Vivekanand & family Mr C.K. Birla

Promoter
48.66% 41.23% 40.99%
Holding
Dealers 6,000 6,000+ 6,500
No of plants 6 Building Product plants; 3 11 manufacturing facilities 20 manufacturing capacities
Steel Building plants
Market cap Rs 790 cr Rs 998 cr Rs 935 cr
Key Financial Data (FY16) {FY17 was impacted by demonetisation and hence is not representative}
Revenue Rs 1,313 cr Rs 1,005 r Rs 1,098 cr
EBITDA Rs 84 cr Rs 95 cr Rs 101 cr
PAT Rs 35 cr Rs 24 cr Rs 40 cr
ROCE 14% 15% 12%
ROE 10% 7% 9%

Comparison of Financial Performance of Peers with Estimates
EV/
EBITDA PAT ROE P/E P/BV
Rs in Cr Sales EBITDA PAT EPS EBITDA
Margin Margin (%) (x) (x)
(x)
Indian Peers
HIL
FY17 1,054 102 55 9.7 5.2 73.2 11.4 11 0.9 5.9
FY18E 1,188 126 58 10.6 4.8 76.8 11.1 17 1.6 8.5
FY19E 1,363 157 82 11.5 6.0 109.3 14.9 12 1.4 6.0
Everest Industries
FY17 1,177 40 4 3.4 0.4 2.7 1.2 84 1.7 13.2
FY18E 1,293 106 60 8.2 4.6 38.9 15.4 14 1.7 8.7
FY19E 1,453 128 73 8.8 5.0 47.6 15.8 11 1.6 6.8
Pennar Engineered Building Systems Limited

FY17 503 51 24 10.1 4.9 7.1 10.9 18 17.3 6.9
FY18E 562 52 22 9.3 4.0 6.4 9.1 15 11.0 6.6
FY19E 666 69 31 10.4 4.7 9.1 11.8 11 9.3 5.0
Visaka Industries
FY17 971 119 41 12.2 4.2 25.7 10.0 24 0.9 5.1
FY18E Not available
FY19E Not available
Source: Ventura Research, 4 Traders
In the building products segment, HIL Ltd is a listed peer company while Pennar Engineered
Systems Ltd is a listed peer in the steel building segment.
Attractive Valuation along with High Growth

 Financials and Projections
Y/E March (Rs in cr) FY17 FY18E FY19E FY20E Y/E March (Rs in cr) FY17 FY18E FY19E FY20E
Profit and Loss statement Per Share Data (Rs)

Net Sales 1,177 1,293 1,453 1,604 Adj. EPS 2.7 38.9 47.6 55.4
% Chg. 9.8 12.3 10.4 Cash EPS 19.0 55.0 62.1 70.3
Total Expenditure 1,137 1,187 1,325 1,459 DPS 0.1 0.5 0.5 0.5
% Chg. 4.4 11.6 10.1 Book Value 307 312 344 384
EBITDA 40 106 128 144 Capital, Liquidity, Returns Ratio
EBITDA Margin % 3.4 8.2 8.8 9.0 Debt/ Equity (x) 0.6 0.3 0.2 0.2
Other Income 9 9 9 9 Current Ratio (x) 1.2 1.2 1.3 1.5
PBDIT 49 115 137 153 ROE (%) 1.2 15.4 15.8 15.8
Depreciation 25 25 22 23 ROCE (%) 5.1 18.8 21.6 22.0
Interest 19 11 10 8 Dividend Yield (%) 0.4 0.9 0.9 0.9
Exceptional Items - 1.7 - - Valuation Ratio (x)
PBT 5 77 105 122 P/E 83.6 13.8 11.3 9.7
Tax Provisions 1 17 31 37 P/BV 1.7 1.7 1.6 1.4
Reported PAT 4 60 73 85 EV/Sales 0.5 0.7 0.6 0.5
Minority Interest - - - - EV/EBITDA 13.2 8.7 6.8 5.6
PAT 4 60 73 85 Efficiency Ratio (x)
PAT margin (%) 0.4 4.6 5.0 5.3 Inventory (days) 73 73 73 73
Other opr Exp/ Sales (%) 96.6 91.8 91.2 91.0 Debtors (days) 33 33 33 33
Tax Rate (%) 18.2 22.5 30.0 30.0 Creditors (Days) 53 53 53 53
Balance Sheet Cash Flow Statement

Share Capital 15 15 15 15 Profit Before Tax 2 77 105 122
Reserves and Surplus 335 386 450 526 Depreciation 25 25 22 23
Minority Interest - - - - Working Capital Changes 23 25 -23 -22
Long Term Borrowings 92 49 34 19 Others 10 -15 -31 -37
Deferred Tax Liability 31 32 32 32 Operating Cash Flow 61 112 73 86
Other Non-Current Liabilities - - - - Capital Expenditure -15 -29 -14 -14
Total Liabilities 473 481 530 592 Other Investment Activities 1 21 9 9
Gross Block 610 643 656 670 Cash Flow from Investing -14 -8 -4 -4
Less: Acc. Depreciation 273 298 320 343 Changes in Share Capital 0 - - -
Net Block 337 345 336 327 Changes in Borrowings -57 -82 -15 -15
Capital Work in Progress 5 - - - Dividend and interest -29 -20 -19 -18
Non-Current Investments 28 16 16 16 Cash flow from Financing -85 -102 -34 -33
Net Current Assets 57 75 133 204 Net Change in Cash -38 2 35 49
Long term Loans &
47 45 45 45 Opening Cash Balance 49 11 13 47
Advances
Total Assets 473 481 530 592 Closing Cash Balance 11 13 47 96

Disclosures and Disclaimer
Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is a member of
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involved in the preparation of this research report and VSL, disclose that neither RA nor VSL nor its associates (i) have any financial interest in the company which
is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company (iii) have any material conflict of
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Key Financials (Rs. in Cr)

- 1 of 29 - Tuesday, 12th December, 2017

Source: EVI, Ventura Research

- 2 of 29- Tuesday, 12th December, 2017

- 3 of 29- Tuesday, 12th December, 2017

Source: EVI, Ventura Research

 Roofing Segment (49% of FY17 sales)

Fibre Cement Roofing Hi Tech Roofing

Source: EVI, Ventura Research Source: EVI, Ventura Research

- 4 of 29- Tuesday, 12th December, 2017

Source: EVI, Ventura Research Source: EVI, Ventura Research

Normal Roof After Rooflight installation

Source: EVI, Ventura Research Source: EVI, Ventura Research

 Boards and Panels Segment: (15% of FY17 sales)

- 5 of 29- Tuesday, 12th December, 2017

Boards & Panels – Wall & Cladding

Source: EVI, Ventura Research Source: EVI, Ventura Research

Heavy Duty Wall Boards Rapicon Wall

Source: EVI, Ventura Research Source: EVI, Ventura Research

- 6 of 29- Tuesday, 12th December, 2017

Boards & Panels – Floor

 Steel Buildings and Products: (36% of FY17 sales)

PEB Primasteel Roofs

Source: EVI, Ventura Research Source: EVI, Ventura Research

- 7 of 29- Tuesday, 12th December, 2017

Source: EVI, Ventura Research

- 8 of 29- Tuesday, 12th December, 2017

Building Products - Total Capacity 9,15,000 MTPA*

Location Products Capacity

Podanur, Tamil Nadu Fibre Cement Roofing Sheets 1,74,000 MTPA

Somnathpur, Odisha Fibre Cement Roofing Sheets 1,20,000 MTPA

Steel Building Plants - Total Capacity 72,000 MTPA

Location Products Capacity

- 9 of 29- Tuesday, 12th December, 2017

Mr M L Gupta Mr Gupta has a long and varied experience of handling building

Mr Y Srinivasa Rao Mr Rao joined EVI in 1997 and is experienced in handling

Mr B L Taparia Mr Taparia has more than 40 Years of experience in Legal,

Mr Nikhil Dujari Mr Dujari has more than 20 years of experience in business

Source: EVI, Ventura Research

- 10 of 29- Tuesday, 12th December, 2017

 Boards and Panels - Key Growth Driver:

Capacity Utilisation Segment Performance

(MT) (%) (Rs in cr) (%)

Source: EVI, Ventura Research Source: EVI, Ventura Research

 Steel Buildings Segment - On the Road to Recovery:

- 11 of 29- Tuesday, 12th December, 2017

Capacity Utilisation Segment Performance

(MT) (%) (Rs in cr) (%)

40,000 60 300 -2.0

Source: EVI, Ventura Research Source: EVI, Ventura Research

 Roofing - New Product Launches to Maintain Growth Momentum:

 Everest Super: A special water repellent and anti-fungal properties.

- 12 of 29- Tuesday, 12th December, 2017

(MT) (%) (Rs in cr) (%)

Source: EVI, Ventura Research Source: EVI, Ventura Research

 Strong Brand Recall:

Source: EVI, Ventura Research

- 13 of 29- Tuesday, 12th December, 2017

Source: EVI, Ventura Research

- 14 of 29- Tuesday, 12th December, 2017

 Change in Product Mix to Boost Profitability:

Revenue Mix Revenue Proportion