Responsive Industries Ltd’s EBITDA Surged 172% YoY to 48.5 Cr
Company Overview:
Responsive Industries Ltd, incorporated in 1993, is a prominent player in the PVC/polymer industry, specializing in the manufacturing and sale of various PVC-based products. The company has firmly established itself as a leader in the domestic market, boasting a market share of over 50% in vinyl flooring. Its diverse product portfolio includes vinyl flooring, synthetic leather, luxury vinyl tiles (LVT), and shipping ropes, catering to sectors such as healthcare, transportation, real estate (offices and residences), and more. Notably, the company recently introduced an innovative flooring product called IMPACT, featuring a hard layer interlocking design that can mimic the appearance of wood, marble, granite, and tiles.
Industry Overview:
The Indian Vinyl Flooring Industry is on a growth trajectory, expected to achieve a CAGR of 10% per annum, reaching a value of US$1,898 million by FY 2027. This growth can be attributed to the increasing demand for vinyl flooring due to its durability, ease of installation and maintenance, competitive pricing, and overall comfort compared to traditional flooring materials. Globally, the vinyl flooring market is valued at US$45.1 billion in 2022, with a projected CAGR of 12%, expected to reach US$65.6 billion by 2027. This global growth is driven by factors such as rising consumer demand for residential flooring, increased purchasing power, technological advancements, and the cost-effectiveness and longevity of vinyl flooring products.
Manufacturing and Distribution:
Responsive Industries operates 15 manufacturing sites located in Boisar, Mumbai, covering 62 acres of land. These sites include advanced logistics facilities, multi-modal cargo handling, and large raw material and engineering stores. In the flooring segment, the company boasts a total manufacturing capacity of 6,000 tons per month, along with 2,000 tons per month for synthetic leather and ropes. The company has a robust distribution network spanning 35 cities in India, with over 75 distributors domestically, and more than 300 distributors internationally. It also maintains relationships with over 500 architects. Additionally, Responsive Industries is a significant supplier to Indian Railways, holding orders worth 100 crore for raw materials for various projects.
Customer Base:
The company’s key clientele includes renowned names such as Tata Motors, Ashok Leyland, Olectra Greentech Limited, and JBM Auto Ltd. As of June 2023, Responsive Industries has secured total orders worth 60 crore from these esteemed clients, along with a substantial order book of 4.63 lakhs for waterproofing membranes.
Valuation and Key Ratios:
Currently, Responsive Industries’ stock is trading at a multiple of 152x EPS of 2.33 at a market price of 354, while the industry PE stands at 37.4. The company is trading at 9.42 times its book value, which is 37.6 Rs per share. In terms of return ratios, the company reports an ROE of 2.46% and an ROCE of 4.51%. The interest coverage ratio stands at 3.72%, indicating that the earnings are three times higher than its interest costs, reflecting strong solvency.
Q1FY24 Results Updates: Consolidated
In the first quarter of FY24, Responsive Industries demonstrated robust financial performance. The company witnessed a 15.70% YoY revenue growth, reaching 263 crore, while the cost of goods sold (COGS) increased by 21.64% YoY to 183 crore. This resulted in a gross profit of 79.5 crore, reflecting a 3.97% YoY growth. However, gross profit margins experienced a 300 basis point drop YoY to 30.215% due to rising raw material costs. Notably, EBITDA surged by 172.04% YoY to 48.5 crore, driven by improved operating leverage, leading to an EBITDA margin of 18.43% in Q1FY24 compared to 7.84% in Q1FY23. The EBIT grew an impressive 658.71% YoY to 34 crore, with EBIT margins standing at 12.95% in the latest quarter, a significant improvement from -2.68% in Q1FY23 due to operating leverage benefits. Profit after tax (PAT) increased by 420.18% YoY to 30 crore, with PAT margins at 11.40% in the latest quarter. Earnings per share (EPS) for the quarter stood at 1.12 Rs, reflecting a 31.98% QoQ growth.
Conclusion:
Responsive Industries Ltd has carved a niche for itself in the PVC/polymer industry, particularly in vinyl flooring, by offering innovative products and maintaining strong relationships with clients and distributors. The company’s financial performance in Q1FY24 reflects impressive revenue growth, margin improvement, and profitability, driven by efficient operations and improved leverage. Considering the company’s position in the growing vinyl flooring market and its recent financial performance, it appears to be well-positioned for future growth and value creation for its shareholders.