Analysing Skipper Ltd: A detailed exploration of business and growth

A global leader in infrastructure since 1981, this company manufactures Transmission & Distribution structures (towers & poles) and Pipes & Fittings. They stand out for their vertically integrated operations, encompassing structure rolling, manufacturing facilities, a dedicated tower load testing station, and even transmission line EPC services, ensuring total control and quality across the entire process. As a national leader in the Polymer Pipe industry, the company, operating under the brand ‘Skipper’, offers an extensive range of top-quality pipes and fittings for various sectors.

The company has a market capitalization of Rs 3,286 Cr and is currently trading at a price-to-earnings ratio of 45.8. Its return on capital employed is 11.9%, and its enterprise value to EBITDA is 13.2. The company has a debt-to-equity ratio of 0.91 and has seen a sales growth of 12.5% over the past three years.

Geographical Presence

With a national footprint and international tentacles reaching across Africa, Australia, the Middle East, South & South East Asia, South America, and Europe, the company operates on a global scale, exporting its products to diverse corners of the world.

Product Portfolio

This company operates in three key areas: Infrastructure, Engineering, and Polymer.

• In Infrastructure, they specialize in large-scale projects like transmission line construction, railway electrification, and underground utility installation.
• Their Engineering arm manufactures a wide range of structures for power transmission, distribution, telecommunications, railways, and even solar applications. They also produce fasteners and other tower accessories.
• Their Polymer division is a fast-growing player in India, offering various pipes, tanks, and fittings for plumbing and agriculture. They plan to significantly expand their retail reach within the next two years.

Manufacturing Capacities

The company operates four manufacturing facilities and a Transmission Line Testing Station, with a total manufacturing capacity of 362,000 MTPA. It has segment-wise capacities of 300,000 MTPA for Engineering Products and 62,000 MTPA for Polymer Products.

Revenue Mix for 9M FY24

Geographical Split FY23

Client Base

Reliance Jio, Power Grid Corporation India Ltd, Tata Projects, etc., maintain a vast distribution network of 20,000 retailers in eastern India for their polymer segment.

Q3FY24 Financials

The company’s revenue for Q3FY24 grew by an impressive 80% year-over-year (YoY) to Rs 802 crore, representing a 4% increase compared to the previous quarter (QoQ). While profit after tax (PAT) saw a slight dip of 5% QoQ, it skyrocketed by 157% YoY, reaching Rs 18 crore. The operating profit margin (OPM) remained consistent at 10% YoY. This indicates strong overall financial performance with consistent profitability and significant YoY growth in revenue and PAT. The trailing twelve months earnings per share (TTM EPS) stands at Rs 6.34.

Segment-wise Order Book

Key Highlights

• The company secured new orders worth over Rs 402 crore during the year, bringing its current order book to Rs 3,145 crore.
• It is actively pursuing international projects worth Rs 98.30 crore and domestic projects worth Rs 52 crore, with a strong bidding pipeline.
• The company has invested approximately Rs 55 crore in capex in the first half of the year and expects to incur Rs 80 crore to Rs 90 crore by the end of the year.
• In Q3 FY24, engineering revenue surged by 54%, polymer revenue rose by 11%, and infrastructure revenue skyrocketed by 1,672%.
• Polymer sales volume increased to 24,654 MT from 15,454 MT in 9M FY24.
• Recent establishment of an R&D Centre and Tower Testing Station significantly enhanced brand reputation in export markets, establishing the company as a major player.

Key Growth Drivers

Industry Outlook

On September 1, 2023, the demand for electricity in India reached a peak of 239.97 GW. In January 2024, the sector utilisation of thermal power reached 72.2%.

The need for additional transmission networks will rise as a result of local and international investment in T&D infrastructure for renewable energy sources.

By 2030, India wants to generate 500 GW of electricity from renewable sources and invest Rs 2.4 trillion to construct around 50,890 CKM of transmission lines.

Future Anticipation

• Company anticipates aiming for greater margin orders in the next months.
• Company expects the polymer segment to continue growing at a similar rate in the second half of the year.
• Over the next three years, we anticipate revenue growth at a 25% CAGR.
• Company hopes to take advantage of opportunities in conjunction with government efforts and anticipates development in the worldwide transmission line sector.
• Company anticipates keeping the engineering segment’s margin at about 12% and the infrastructure segment’s margin at between 9% and 10%.
• The increase of capital return ratios and bottom-line profitability remain the main priorities.

Shareholding Pattern

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.