Isgec Heavy Engineering Ltd
NSE:ISGEC
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
Abbvie Inc
NYSE:ABBV
|
Biotechnology
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Realty Income Corp
NYSE:O
|
Real Estate
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
This note will be permanently deleted.
Isgec Heavy Engineering Ltd
You don't have any saved screeners yet
Good evening, ladies and gentlemen. I'm [indiscernible], moderator for the conference call. Welcome to Isgec Heavy Engineering Limited Q1 FY '24 Earnings Conference Call. As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] e Telephone. Please note this conference is recorded. I would now like to hand over the floor to Mr. Bharat Jain from ICICI Securities Limited. Thank you, and over to you, sir.
Thank you. Good day, everyone. On behalf of ICICI Securities, I would like to welcome you all for the Q1 FY '24 Earnings Conference Call of Isgec Heavy Engineering Limited. Today, from the management, we have Aditya Puri, Managing Director; Mr. Kishore Chatnani, Whole-time Director and CFO; and Mr. Sanjay Gulati, Full-time Director and Head of Manufacturing units. I would now like to hand over the call to Mr. Puri for his opening remarks, which will be followed by a Q&A session. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope that you and your loved ones are all well and safe. We look forward to a fruitful interaction. You would have seen the quarterly and annual financial results at [indiscernible] on Friday. We've also uploaded our presentation on BSE, NSE and on our website, www.isgec.com. There is also much more information about our [ business ] on our website. The stand-alone revenue for Q1 FY '24 is INR 1,158 crores, I mean higher by 16% compared to INR 999 crores in Q1 of FY '23. The standalone profit before tax for Q1 FY '24 at INR 78 crores, a -- and is 94% higher compared to INR 40 crores for Q1 FY '23. The consolidated revenue for Q1 FY '24 is INR 1399 crores and is about 12% higher compared to INR 1250 crores for Q1 FY '23. The consolidated profit before tax for Q1 FY '24 is 141% higher at INR 72 crores compared to INR 30 crores for Q1 FY '23. In the stand-alone, as result, the profitability is better for the Manufacturing segment and also because of dividends received from subsidiary companies. The consolidated profit is better because of higher profits in Isgec Heavy Engineering related standalone and in [indiscernible]. I will now talk about the order book. The consolidated order booking for Q1 of FY '24 is INR 1,152 crores compared to INR 1221 crores of orders booked in Q1 of last year. The order book position is good. Consolidated orders in hand as on 30th June 2023 INR 8422 crores. Of the consolidated order book, 75% is for the project business and 25% is for the manufacturing business. The order book includes INR 1160 crores for international orders, which is about 14%. The order book for Isgec Hitachi Zosen is also good, it has INR 694 crores of orders as of 30 June 2023. The overall demand trend is good and the inquiry position continues to be good. Export inquiries have also picked up. In the Saraswati sugar mills, we completed the expansion of our capacity for our ethanol plant from 100 KLPD to 160 KLPD and the expanded capacity has come into operation from 18th June 2023. The enhanced capacity will enable the plant to produce more ethanol during the sugar season and therefore, save fuel costs incurred during the off-season. The total production of ethanol during the financial year is expected to give you a point is expected to be 3.80 crores liters compared to INR 3.5 crore liters earlier. We are also in the process of converting our sugar mill from a refining process from the present double [indiscernible] process. And this will come into operation on the season starting in November 2022. The Philippines project, there is a good progress of construction at the Cavite biofuel plant in the Philippines. The intensive rains for the last few months have hampered the speed of the work. The plant will be completed and will have a test run for production of ethanol from molasses in September 2023 and we'll start commercial production in November 2023. My colleagues and I will be happy to answer any questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, first question comes from Digant Haria from GreenEdge Wealth.
Sir, my question is, firstly, on the Philippines plant that assuming your trial runs are successful by December, what is the peak revenue potential? And what is the fee volume potential from that plant in Philippines?
Did I mistakenly say December, I meant September.
You said trial run will be in this September, right, on September, which is—
Yes. Yes. And so the peak revenue would be about INR terms, about INR 550 crores.
Between INR 500 and INR 550 per year.
All right. And now because we are closer to completion, are we seeing more inquiries there? Or maybe once we start running it, there will be more inquires?
Inquiries for ethanol, you mean?
No. So inquiries for the plant because eventually, we may also want to sell the plant if there are good buyer as well.
As of now, we are preparing to run the plant. If there is a buyer at a good price, we will consider it, but we are preparing firstly to run the plant. And so therefore, we are hiring the people. We are -- we have tied up the feedstock. We're preparing to run the plant.
The second question is in terms of working capital, actually, the last 2 quarters, we have seen good execution and a good improvement in the margins. But at what stage does the working capital for us revert back to our older number of, say, 10% of the total revenue. Any details on this? And I have those very, very long registration and slow-moving orders or majority of them now of the order book pipeline?
So we are continuing to complete orders, which have, as you said, long gestation. So during this year, we will be completing 2 of the very large projects, which are on the FGD be completing them this year. There are multiple payments, which are milestone in payments. So working capital is certainly going to come down by the end of this year, but the number -- that you remember, 10% of turnover, I mean I don't remember when that was because it would depend on the ratio of what is the mix between manufacturing and projects. It will also depend on the mix between what long duration orders we are executing.
Right. But then like sort of -- have we seen the peak in '23, at least, we will be better than FY '23 in the coming years, right? Because FY '22 and '23 saw a very big expansion in working capital.
We will certainly be better than by the end of this year or early next year.
And the last question is on the product side also, we did close to INR 2300 crores of revenue. So we did so much better than what we guided of around INR 1800- INR 1,900 crores last year. Now do you think this INR 2,300 crores base, can you still grow in this base in the years to come?
So INR 2,300 crores, I guess you are talking about the consolidated revenue.
Yes. Consolidated revenue for products, yes.
Right. So that includes subsidiary level.
Yes, yes.
So on a stand-alone basis, yes, we are expecting to do better than what we did. So also hopefully, is the Isgec Hitachi Zosen will maintain its run rate. And so should [indiscernible]. So we should be doing better, better than last year.
[Operator Instructions] Next question comes from Asit Zaveri from PaySquare Investments.
Congratulations for a very good set of numbers. So I have 2 questions. Firstly, what is the current capacity utilization for the manufacturing segment?
So current utilization, see, it varies across various sectors, various products in various sectors, but if you aggregate it, it's probably anywhere between 90% and 100%.
Okay. And the order book, which you mentioned of around INR 8,400 crores on an average, what would be the execution period for this?
Execution period is different for different products. So if you're looking for -- the execution period for a typical simple casting maybe 3 or 4 months for a complex casting maybe 6 months for presses maybe 8 or 9 months for process equipment maybe 8 to 10 months -- and of course, our projects sugar project would be 12 months for boiler project could be 16, 17 months. And for a SGD projects would be 24 months. So execution cycle varies according to products? [indiscernible] Is that the answer you're looking for? Or is there something else?
Yes. But on an average, if you could quote some time like 2 quarters or 3 quarters.
So as the manufacturing business, you could take an average of about in about approximately 9 -- maybe more, maybe about 10 to 11 months, 11 months. And for the project business, I think the average would be about 18 months.
And last question, in the EPC segment, are you expecting any further margin improvement? Because I can see that around -- from last four quarter, we are around 4% EBIT margin. Do we see any margin expansion in this year or we are expecting top line growth?
Margin expansion is not -- I mean, it's certainly going to be there, but not too much of it will be shown this year. It is certainly going to show next year. Top line should be better than last year.
Next question comes from Bajrang Bafna from Sunidhi Securities.
Congratulations for a good set of numbers. Sir, on the Philippines plant, you're expecting that to trial run to be over by September. So what sort of utilization we are looking for December quarter or any guidance that when we are going to reach 100% utilization for this plant? And if I remember correctly, in the last call, you indicated the margins are to between of 30% in this plant. So considering that now we are already doing trial runs, will that adjunction is still valid and the offtake arrangement for the same? That's the first question. And the second is considering the product business where we are operating at almost full utilization now. So how do you expect that ramp-up of the capacity on the product side? And how can we look at from next maybe 1 or 2 years' perspective in that space.
So let me answer the Philippines plant first. So we are expecting trial traction based on molasses, as Mr. Puri mentioned, to be in September. Thereafter, there is some licensing requirements. And of course, sugarcane as a feedstock because of the seasonality starts becoming available in November. So we expect the plant to start on full commercial production around the middle of November. Next point is about what will be the revenue and things for December quarter and the offtake. So offtake is normally from the oil companies. Actually, we have -- there are oil companies which are already taken keen interest in when we'll be completed. But like in India, the allocation for the ethanol is done by the government to the oil companies. So while we will be producing in the December quarter, we don't expect to sell much in the December quarter of much of ethanol in the December quarter. Full sales from revenue generation will start from the January onwards. The next point was about what is the margin. So as we have mentioned earlier, there is a pass-through on the feedstock. So there's a pricing formula, the price of the ethanol is decided by the government agency, and it is fixed every 15 days. And it takes into account the prevailing price sugarcane and of molasses, both the feedstocks. And therefore, there is a pass-through of the feedstock. So the margin expectation of about 30% continues to be the same. We continue to expect 30% EBITDA margin.
And as far as your question on manufacturing is concerned, your -- I wasn't very clear you were asking about the capacity utilization with the previous person who had asked. And what was your next question, what did you ask about that?
Yes. So I was just wondering, sir, when we are reaching almost the full capacity utilization in our product business. So any capacity expansion plan there? And when you expect that to materialize in terms of augmenting the existing capacity?
So we would be spending some amount of money, not huge sums of money, but we would be spending some amount of money, maybe about INR 20 crores. for expansion in certain lines of our business.
Okay. So would that take care of some growth in that segment since we are at almost full capacity now? between the growth 15%, 20% there.
No 10%-15% in manufacturing is difficult because the investments are just going to take place, but we do certainly hope there would certainly be some growth.
Just to add to that, there is some growth expected from some investments we made earlier in the boiler [indiscernible] panels manufacturing. And of course, to grow even though US capacity is fully utilized. The capacities can be used for different kind of products. The product mix can defer something that we made from carbon steel sales for the something which is made from an oil [indiscernible] set for more. So it's also a function of which particular orders we are executing. So as Mr. Puri just mentioned, 10% side of growth we expect it to be there
Got it. sir. And on the -- you didn't answer one question on the last part, Philippines. So Jan set March quarter, can we expect that full utilization? Or when are we expecting a full --?
We're expecting full utilization in that quarter.
Next question comes from Khadija Mantri from Sharekhan0.
My question is regarding the order intake environment. So we have seen that the order inflow in Q1 has declined by about 8% to 9%. So how are you looking at the order environment for FY '24 and the year FY '25?
So the inquiries remain buoyed, -- it is in capital goods investments are lumpy. So if a refineries, for instance, ordering, it will do a lot of ordering in one quarter and then nothing in the next quarter. So there is this lumpiness in order booking, which is to be expected, but we think the trend is -- continues to be healthy.
Sir, which sectors you are seeing the traction increasing?
People are investing in sugar. People are investing in -- there was a little bit of a slowdown in the refinery investments, but I believe that in this quarter it's going to pick up again. cement and steel continue to invest, automobile components is investing.
Okay, sir. And one more question, if I can put. So what would be our consolidated debt at the end of June quarter? And how much would be the Philippines part in it?
[indiscernible]
Yes, the debt related to Philippines plant. The total consolidated debt.
We'll have to give me a minute to catch that information -- so our total consolidated debt total borrowings as of 30th of June are INR 1,122 crores. Out of this INR 393 crores, this belongs for the Philippines plant.
Okay, sir. Sir, just add to what the previous participant asked -- so we are expecting that from January, Jan to March quarter, we will have revenues flowing in from the Philippines plant. So if we are expecting INR 500 crores to INR 550 crores of annual revenue, is it safe to assume that it would be somewhere around INR 125 crores to INR 150 crores in Q4?
INR 125 crores should be expected.
[Operator Instructions] Next question comes from Deepesh Agarwal from UTI AMC.
Continuing with the previous participant's question, can you help us understand on the ordering trend, how has been the inquiry you mentioned the [indiscernible] compared to the last year, what is the delta inquiries. Do you think last year the inflows could be repeated again this year?
Inquiry, there is a delta there is an increase in the number of inquiries. That is certainly [indiscernible].
Okay. And this would be more on select side?
Sorry, can you just be a little louder, sorry. I can't hear you very clearly.
I just in some of the past points you have mentioned that you're looking more of a manufacturing of product related after an EPC. So would it be fair to say the incremental influence would be more on the product side?
Well I can't say quarter-to-quarter, but yes, we are trying to move to more to skew the ratio towards manufacturing.
Also, if you can help us understand the breakup of your order book between manufacturing and EPC that could be helpful.
Okay. So that was part of the presentation also that we have put up. But on a consolidated basis, the manufacturing order book is INR 2,100 crores, and the project's order book is INR 6,300 crores. So about 25% of the order book is for manufacturing and 75% is for the project progress.
Sure. And last question. You mentioned the [LGD ] orders will get largely over legacy LGD order this year. If you can help us understand what is the margin ex orders in the LGD orders in EPC sector?
I don't think we can give you number- granular numbers. Sorry for that, we can't give you granular.
If you can at least share whether we are making losses on the LGD orders or not?
No.
Next question comes from Jiten Parmar from [indiscernible] Capital.
Yes. Congratulations on a good set of results. My first question is on international revenue. That has been declining for last few years. What is the reason for that? And is it going to go up in the future?
So we -- so for the past few years because of COVID, there was no travel and people were reluctant to source from distances. So the order booking was low. And now also, although the COVID situation is -- I should say no longer there, but the Indian economy is doing much better than the world economies. Having said that, we have a lot of inquiries right now for foreign orders, and we expect to book a few orders in the next -- some good orders in the next few months.
Okay. And my second question is on Q4. Sugar and Ethanol revenue has increased year-on-year. Any particular reason for that?
Ethanol, we have—
The revenue has decreased for sugar and ethanol.
So the sugar scale is determined by the government, and the government gives us a quota, which densifies how much is we can sell. So the quota was less this year and also last year, in the same quarter, there were a lot of expensive figures, which have not been that this quarter. So these 2 factors have contributed to a lower turnover.
Thank you. Next question comes from Manish Goyal from ThinkWise Wealth Managers.
A couple of questions. First, sir, I missed on the order book position of our Hitachi JV, if you can please share that. And I have a related question on Hitachi JV as well in terms of how do we see the revenue and margin outlook? Because last couple of years, the margins have been low single digit for that? And also, if you can just give us perspective on to how is the revenue breakup between domestic and international JV? And what is the outlook to improve the market, sir?
Sanjay, can you answer?
Yes, sir. So the order book is close to INR 800 crores, Kishor would be having the exact figure. And the amount of export orders in hand are much larger than what we had in the previous year, the previous year. We also expect last -- the margins last year were affected because of the sudden material price increase, but we expect better results in this year
The order book as of 30 June 2023 was INR 694 crores. Mr. Puri also mentioned that in the opening remarks. Out of the INR 694, INR 485 crores were export orders. So you can expect that export revenue is the [indiscernible] also will be higher this year? Of course, Mr. Gulati talked about the orders you talked about orders, including a something's been booked in this quarter.
Okay. And on the margins, like what kind of normalized margins can we expect at this JV, sir? Because now the revenue base is quite substantial, and that is why –
So the exact percentage, I would not be able to give it to you, but it is certainly going to be better than what we had in the previous year. And similar to the one margin that we had about a few years ago before COVID. Okay.
And a related question, like how is the order pipeline for the JV at port Mexican International? And are we only servicing the oil and gas refinery market here or any other opportunity for that?
No. We are servicing oil and gas, refinery, fertilizer, petrochemicals and silicon projects. And so various sectors, really.
And how is the pipeline, sir?
The pipeline is good in the pipeline both in domestic and in export are quite good.
Okay. And the last question on -- sir, to -- on financial like EPC segmental for the consolidated, the capital employed in unallocated has fallen from almost INR 700 crores to INR 10 crores, and it has increased in manufacturing and EPC significantly. So is there any reallocation or just wondering …
It's just a minister answer that to you. So earlier, we were keeping whatever is being invested from the head office or whatever is being borrowed from the bank, we were classifying it as unallocated -- we are classifying it better into the respective segments, which are borrowing. I think it mean we improved utilization.
So this unallocation earlier for the Philippines plant probably was reflected under unallocated. So now how does it get reflected, sir?
Philippines plant, there is no change.
And really last question on the margin, sir, we were -- earlier we were expecting a fairly good improvement in margin in the current year of at least 100 to 150 bps. But sometime back, you just mentioned that we expect only small improvement. So I just wanted to know, like, is there any further impact on the margins in the current year?
No, I was -- we are expecting the margin improvement to happen and to show in the figures. I was just mentioning that since there are these projects which are getting completion, which will be completed in this year, the margin improvement may not show during the current year. Now the older orders earnout, nearing competition which are to be competed.
Okay, sir. And due to FGD orders completion, what kind of working capital might get released in the current year, which are milestone base sir?
So we have a total of between about INR 400 crores or so.
A large part of... Probably by end of year.
We should be able to realize or we should be able to utilize a large part of it by the last quarter.
[Operator Instructions] We've a follow-up question from [indiscernible] from PaySquare Investments.
Yes, sir. Can you tell me what is the cash value at the current level in the balance sheet?
As level?
Yes. how much cash are we holding?
You're talking about standalone or consolidated?
Consolidated please.
So net cash as of 30 June is INR 157 crores.
Okay. And... Are we planning the prepayment on a major scale this year?
So we have a sort of a term loan Isgec Heavy engineering we paid INR 25 crores in mid-quarter – Saraswati Sugar Mills has a low term loan of ethanol, which is also being paid at INR 6.5 crores per quarter. Isgec Hitachi Zosen has outstanding debt of about INR 8 crores the INR 5 crores of that is to be paid in last year. [indiscernible] the debt of about INR 25 crores download. And later that, of course, is it investment [indiscernible]. So whatever is the schedule that can in be about INR 75 crores. And total of about INR 135 crores will be paid off this year. 75%.
Okay, sir. And can we expect the FY '23 margins, which as high as 9.3%, the EBITDA margins to peak back by FY '25.
Not during F '23.
I'm asking for FY '25.
FY '25 we can certainly.
We are confident to [indiscernible] right?
As confident as we can be, yes.
As a we can certainly hope for it.
ladies and gentlemen, thank you. There are no further questions. Now I hand over the floor to management for closing comments.
Thank you, everybody, for being there and asking these questions. Thank you once again, and all the best. We talk to you again next quarter. Thank you.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [indiscernible] conference call service. You may disconnect your lines now. Thank you, and have a good day.