PL Stock Report: Goodluck India (GLIN IN) - Management Meet Update - Focus on value addition - Not Rated

Goodluck India (GLIN IN) - Tushar Chaudhari - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: Not Rated | CMP: Rs497 | TP: NA

Management Meet Update - Focus on value addition

We met the management of Goodluck India (GLIN) and visited its facilities located at Sikandrabad. GLIN is a high value engineered steel products manufacturer catering to automobile, aerospace, oil & gas, T&D, defence, solar and overall infrastructure space. Over next two years, mgmt. is focusing on a) Value addition in the high volume low margin GI pipe business which is dragging consolidated margins and b) Capacity addition in high value added product (VAP) segments. GLIN has spent Rs 3 bn over last five years to increase capacities in VAP segments and expects EBITDA margin expansion from 6.7% in FY23 to 8.5-9% by FY25E. We believe with newly added capacities and measures undertaken to turnaround GI business, GLIN is well placed to benefit from Govt.’s planned infrastructure spending over next few years. GLIN has delivered 19%/16%/43% Revenue/EBITDA/PAT CAGR over FY18-23. At CMP, stock is trading at 14.9x FY23 PE and 9.5x FY23 EV/EBITDA. Not rated.

§ VAP segments witnessing strong volume growth: GLIN is setting up 60ktpa capacity in Precision tubes (PT) segment as it is witnessing strong traction from both domestic as well as global Auto OEMs. Capex of Rs1.7bn is expected to get completed by 1QFY25 taking total PT capacity to 145ktpa. Over 60% of the volumes gets exported from this unit as GLIN is Cat-2 supplier to various global automotive OEMs. PT contributed maximum to GLIN’s exports which were ~33% of FY23 revenues. In forging business, GLIN added one fully automatic metal press unit in FY22, which enabled it to improve its single piece press capacity to 25t. With addition of this unit at capex of Rs400mn total forging capacity is ~32ktpa from 12ktpa earlier enabling volume growth.

§ Higher capacities & expertise attract high value export orders: With addition of higher capacity press, GLIN is getting good traction on high value export orders. With technical background of promoters and legacy of delivering critical components, mgmt. expects to enter into newer areas of sub-sea forged components going forward. In the past GLIN has also supplied material to various prestigious programs of DRDO.

§ Strong domestic infrastructure capex driving structures business: Being Cat-1 supplier to domestic infrastructure majors, GLIN is receiving orders for supply and fabrication of critical components. GLIN has recently received letter of intent of Rs2bn by L&T for the upcoming first bullet train in India for supply and fabrication of special bridges required for high speed tracks. GLIN has set up new unit at Kutch for the same and project supplies have started. The company has also received orders from other user industries and Metros for supply and fabrication of heavy duty structures. As GLIN has proven expertise and track record, mgmt. expects to continue receiving such orders in future for other upcoming bullet trains and metro projects in India.

§ Unaffected by volatile steel prices: Being a secondary steel processor GLIN has pass through arrangement with its customers for any rise in raw material prices which protects it from the steel price volatility.

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