Synergy Green Industries Ltd Management Discussions.

1.0 Market Analysis:

1.1 Wind Industry:

2019 saw global new wind power installations surpassing 60 GW, a 19 per cent growth compared to 2018, and bringing total installed capacity to 650 GW, a growth of 10 per cent compared to last year.

New installations in the onshore wind market reached 54.2 GW, while the offshore wind market passed the milestone of 6 GW, making up of 10% of the global new installation in 2019 the highest level to now.

Asia Pacific continues to take the lead in global wind power development accounting for 50.7 per cent of the global new installations last year, followed by Europe (25.5 per cent), North America (16.1 per cent), Latin America (6.1 per cent) and Africa & Middle East (1.6 per cent).

The worlds top five markets in 2019 for new installations were China, the US, United Kingdom, India and Spain. Those five markets together made up 70 per cent of the global installation last year.

Growth momentum is expected to increase further with new markets. These markets include: Vietnam, Thailand, Chile, Colombia, Kenya for Onshore market and USA, China & Japan for Offshore market.

The market outlook for the global wind industry remains positive. The CAGR for the next five years is 4 per cent. GWEC Market Intelligence expects that over 355 GW of new capacity will be added. That is nearly 71 GW of new installations each year until 2024.

At the beginning of the five-years forecast period, the market growth will continue to be driven by government support mechanisms, such as FiT, PTC, auction programs and national or state level renewable targets.

2020 was projected to see a new installation record, considering the installation rush in the worlds two largest markets China & US. However, COVID-19 is likely to hinder the growth ambition because of supply chain interruptions, in spite of renewables are globally classified as essential industries.

From 2021 onward, although the PTC will remain as the main driver for installations in the US where the one year PTC extension which passed the senate last December is most likely to generate a new rush, the rest of world is expected to operate based on tenders or on other market mechanisms.

In Europe, Latin America, Africa & Middle and South East Asia, market-based mechanisms including the wind-only, hybrid, technology-neutral auctions will continue to dominate, but issues related to the market design in countries like Germany and India have to be resolved in order to allow accelerated growth.

With wind increasingly improving its cost-competitiveness, the bilateral agreement (e.g. in the form of corporate PPAs) will not only maintain momentum in matured markets like the US, Brazil, Mexico, Chile, Argentina and the Nordic markets, but also make breakthrough in growing emerging markets over the coming years as barriers to access are removed (as in the case of South-East Asia).

Following the sharp drop of the LCOE and the speeding-up of the global energy transition, the investment climate for offshore wind has become very positive. With a CAGR of 19.5%, more than 50 GW offshore is likely to be built in the next five years.

1.2 Non-Wind Industry:

Apart from Wind Turbine Industry, company is also producing castings to Mining, Pumps & Plastic Injection parts. During FY 2019-20, there was drop in non-wind business from 22% to 13% compared to last year due to general slowdown in Indian economy. This segment revenue contribution is estimated to go down further in FY 2020-21 due to COVID-19 pandemic. Non-wind business share is expected to bounce back during FY 2021-22

2.0 Performance Analysis:

2.1 Sales Revenue:

Following are the Sales revenues figures in Rs Crore for last five years of operations.

During the year FY 2019-20, sales revenue grown by 26.3% from Rs 165.6 Crores to Rs 209.15 Crores. Export business has grown by 146% from Rs 11.94 Crores to Rs 29.34 Crores. This growth could be achieved in spite of 4 weeks production disturbance due to Kolhapur floods and COVID-19 lockdowns.

Last five years company has maintained a CAGR revenue growth of 26%. Factoring 8 weeks of COVID-19 disturbance in production, FY 2020-21 growth is projected to grow around 10%. During the year, export sales are estimated grow over 100%.

2.2 Profitability:

Following are the PBDIT figures in Rs Crore for last five years of operations.

figure 8: PBDIT figures in Rs Crores

During FY 2019-20, there is reduction in EBIDTA margins from 12.4% to 11.0%. This reduction is mainly because of following.

a. 1% Impact on EBIDTA margins due to one-time reassessment of inventory with introduction of stagewise costing of WIP in SAP and moderation in raw material prices.

b. Another 1% impact is due to 4 weeks of operational disturbance during Kolhapur floods and COVID-19 lockdowns resulting to higher over heads.

During FY 2020-21, EBIDTA margins are estimated to improve over 300 bps with increase of export business share and cost improvement initiatives.