Premier Explosives Ltd
NSE:PREMEXPLN
Premier Explosives Ltd
NSE:PREMEXPLN
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Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '24 Premier Explosives Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Mehta. Thank you, and over to you, sir.
Thank you, [ Lisan ]. Good afternoon, everyone. I, on behalf of Stellar Investor Relations. Welcome you all to Premier Explosives Limited Q2 and H1 FY '24 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the second quarter and half year ended September 30, 2023.
We have with us today the senior management team of Premier Explosives Limited, Mr. T.V. Chowdary, Managing Director; and Mr. Srihari Pakalapati, Chief Financial Officer.
Before we begin, I would like to state that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance have already been e-mailed to you.
Now I invite Mr. Chowdary to share his initial remarks on the company's performance for the quarter and half year.
Thank you, Vishal. Good afternoon, everyone, and thank you for joining the call. We'll begin the call with company's operational performance during the quarter and followed by the key industry update. The recent highlights for the company has been strong order inflow.
We started the current fiscal year 2024 with an order book of almost INR 521 crores and added to it new orders of almost INR 615 crores in the year till date. Our current outstanding order book stands at approximately INR 1,054 crores, a strong growth of 75% year-on-year and translates into 5.21x of our financial year '23 revenues. Execution of these orders will help us to bid for bigger and better orders from Indian defense industry as well as from the foreign defense entities.
Now let me take you through the current orders at hand. Ministry of Defense, IAF supply of shaft for INR 292 crores and supply of flares for INR 260 crores, each to be executed in 12 months. And Ministry of Defense, Air headquarters supply of 50 mm MTE flares of INR 76.78 crores to be executed in 12 months.
[indiscernible] Dynamics Limited supply of [indiscernible] INR 9.73 crores to be executed in 12 months. Bharat Dynamics supply of P1 and P2 motor for MRSAM for INR 43.26 crores to be executed in 24 months.
In addition to that, we have different orders totaling to INR [ 50 ] crores from Larsen & Toubro Limited and export commitments of defense products around INR 115 crores. We'd like to reiterate that we have completed the design and development of various products for foreign entities and developed excluding production lines for these developed products. The company has been constantly receiving production orders in this segment and started supplying to these foreign entities.
During the quarter, the company has further executed export orders and shipped out 160 mm rocket motors. The company has done first export shipment of HMX during this quarter.
With all this, the company has clocked the record export revenue of INR 29.4 crores during this quarter. During Q2 financial year '24, Premier Explosives reported excellen performance on an overall level. Our revenue for the quarter increased by 29% year-on-year and 27% quarter-on-quarter to INR 78.4 crores. Again, Premier has clocked highest revenue post the COVID-19 pandemic.
Premier Explosives has achieved highest ever EBITDA margins of 28% in the quarter -- second quarter of financial year '24, which is a significant improvement, mainly on the back of higher execution or contributions from defense order, along with the significant contribution from commercial explosives, our industry explosives segment. Consequently, the PAT margin of 15% was also the highest ever.
Now the future outlook. Premier Explosives is the only qualified Indian company for countermeasures and the only Indian company, which is in the export of fully assembled rocket motors. Additional to the rocket motors and warheads, and now Premier has entered into manufacturing of mines and also ammunition.
The mines -- the production of mines has started and the deliveries will be from November 2023 onwards. And Premier has successfully completed the development of 40 mm [indiscernible] ammunition for UVGL and HCGL with the -- under DCPP program of DRDO.
So now we hope that we'll be entering the production and supplies in the current financial year itself. And the HMX and RDX [indiscernible] which was earlier producing for self-consumption and also from the domestic market has now started exporting. We have executed on order of RDX and another order is going to be executed in the -- before the end of November. And further orders are being booked for RDX and HMX and [indiscernible].
Premier has also completed the bulk [indiscernible] production plant which has come into production, and we are expecting a good contribution from this plant from the current financial year itself. In terms of cash flows, we have generated healthy cash profit of INR 14.4 crores in Q2 FY '24 and INR 25.3 crores in half year of FY '24. With our execution run rate stable and given the nature of our cost structure, the operating leverage of our business will help us to generate better cash flows, which will be applied towards strengthening of our balance sheet. Coming on the defense industry.
Now coming, the Indian defense sector is experiencing a significant transformation coupled by the pursuit of [indiscernible]. The Indian defense export has reached a record high of nearly INR 16,000 crores in '22-'23, saw a 23-fold increase in export. Now India is independently designed and developed capabilities reaching over 84 countries.
The Indian indigenous defense industry has achieved the success in expanding exports. The sale of major different systems, including the BrahMos supersonic cruise missile, Akash air defense systems and artillery gun to friendly nation. As per the industry data, the Indian defense industry is now competing with global firms for exporting their military hardware and have been in competition in multiple countries, including Southeast Asia and Africa.
In order to reduce dependence on imports of defense equipment, the government has introduced a number of measures to promote private investments [indiscernible] As per the industry sources, various sector firms are likely to get driven contracts or INR 60,000 crores in the financial year '24-'25, which will be around 22% of the overall size of the industry.
Private sector defense production is expected to expand at a compound annual growth rate of approximately 20% over the next 3 years, reaching INR 34,000 crores by financial year 2026.
Coming on the aerospace industry. First of all, I would like to congratulate Indian Space Research Organization for the successful landing of Chandrayaan-3 on the south pole of the moon, first ever landing by any country.
With this landing, India has now joined the elite club of becoming the fourth nation to touch the lunar surface after the USA, Russia and China. ISRO has now launched another mission, Aditya-L1, for dedicated mission to study the sun's photosphere, chromosphere and corona.
Premier Explosives had a pivotal role in establishing SSL that is small satellite launch vehicle and Government of India's encouragement to private sector to take a satellite launching on a commercial vehicles.
Opportunities are opening in space field, and these are expected to certify the coming -- frutify in the coming 3 to 4 years. As per the recent announcement made by the Government of India that India aims to grow its space economy from the current $8 billion to $40 billion by 2040, stated Union Science and Technology Minister.
Now we'll share key highlights on the mining industry. The mining industry where the coal is the major mining sector as per the data available with the Ministry of Coal, domestic coal production rose by 9.2% year-on-year in July 2023.
Further, September 2023 witnessed a raise in India's total coal output of 15.81%, reaching 67.21 million tonnes, over the 58.034 metric tonnes produced in the same month of the previous year. Moreover, September 2023 a considerable increase in coal shipment, which reached 70.33 metric tonnes.
This represented an impressive improvement over September 2022, 61.1 metric tonne with a growth rate of 15.12%. As per the Coal Ministry, the industry experienced an unparalleled such as output, dispatch and stock level [indiscernible] and this phenomenal growth is largely attributed to the ongoing commitment of coal PSU.
This demonstrates how well the coal supply chain works and ensures a seamless flow of coal across the country. According to the Indian Bureau of Mines, the amount of minerals mined increased by 12.3% [indiscernible] compared to the same month previous year. While the mining industry as a whole grew by an overall 8.3% from April to August of financial year '24.
Thank you. Now I request our CFO to share the financial performance.
Thank you, sir. Good afternoon, everyone. The result presentation for the quarter has been uploaded on the stock exchanges and on the company's website. I believe you all may have gone through the same. Now I would present the financial results for the second quarter and half year ended 30 September 2023.
The revenue from operations for Q2 financial year 2023-'24 stands at INR 78.4 crores that compared to INR 60.6 crores in the corresponding previous last year, which saw a growth of 29% year-on-year and 27% quarter-on-quarter. Our operating profit for Q2 FY '24 stands at INR 21.9 crores as compared to INR 7.2 crores with a growth of 204% year-on-year.
The operating margin for the quarter stands at 28%, clocked highest ever EBITDA margin in industry of Premier Explosives -- in the history of the Premier Explosives, which is already shared by Mr. Chowdary in his initial remarks.
In Q2 FY '24, we reported a net profit of INR 11.6 crores compared to INR 2.5 crores in Q2 FY '23 with a growth of 362% as compared to the corresponding previous period year and even on the net profit margin, Premier Explosives have achieved the highest ever PAT margin in the history of the Premier Explosives.
Let me take you to the H1 FY '24 performance. The revenue from operations for H1 FY '24 stands at INR 140.4 crores as compared to INR 112.4 crores in the corresponding period last year, translating into 25% growth year-on-year.
Operating profit in H1 FY '24 stands at INR 38.5 crores as compared to INR 13 crores in the corresponding period last year, which shows a robust growth of 196% year-on-year. The operating margin stood at 27% in H1 FY '24. The net profit in H1 FY '24 stood at INR 19.8 crores compared to profit of INR 3.8 crores in FY '23 which showed a tremendous growth of 425% year-on-year.
Now coming to the order book. The company's current order book stands at INR 1,054.38 crores, out of which the higher-margin defense segment forms the majority of INR 884 crores which is almost equal to 84% of our total order book.
Explosive segment stands at INR 51 crores and Service segments that is operational maintenance is at INR 119 crores. During the quarter, domestic order book is at 89% and export order book is at 11% of the total order book. The order book represents a solid and strong growth over the previous year.
Yes, with this now open the floor for questions-and-answers. Thank you very much.
[Operator Instructions] The first question is from the line of Pankaj Gupta from Ratnabali Investments.
Congratulations for the excellent set of numbers you have shown. And sir, thanks for the detailed breakup of the order -- individual order which you have given. Sir, I just wanted to understand that in your Slide 21, you have mentioned a lot of India's prestigious missile programs. And some of them are also in the production phase. So I just wanted to understand that in some of them, we are the sole say, 100% requirements of solid are being met by us. So whether in this order book, any order from these programs have been mentioned? And how does the orders for these programs comes? It's a step-by-step or it's a quarterly requirement or how the orders close?
See, I have already mentioned about MRSAM. MRSAM is a cell which has come to productionization and being produced by BDL. And there is another missile Astra, which is again the order -- the BDL is the production agency for the entire missile, and we are already having those orders in hand and expecting bigger order in future. In addition to this, there are others which are in DRDO labs, which are progressing, and I think very soon, they will be productionized and we'll be continuing to provide the propellents as sole provider.
Sir, but one thing I think is LRSAM, MRSAM, ASTRA, this would be going orders, which would be for a number of years. But when we report the order book from this, it is only for an immediate requirement or it creates to the medium-term requirement also?
See, we report only the order which is received by us, firm order received by us and that too as per the statuary...
Yes, yes. No, no, normally, we declare the significant large orders. It's not that we declare each and every penny order. We keep on getting the orders on a regular basis. But it depends on the importance and the value of the order and nature of the order, we to the stock exchanges, and we follow as per the regulations of the listing agreement.
Okay. And sir, my second question is regarding, sir, we are already started supplying, say, rocket motors to our customers based in Israel. So if you could help us understand any impact of the ongoing conflict in inside, which is happening, whether it would help us in accelerating or decelerating the shipments. And I think this rocket motors, et cetera, should be in huge requirements post this conflict -- so if you could help us understand our position in this?
As on date, we have no impact of any conflict. These are all the orders we are executing, and we are continuing to do that. And about future impact, I don't know. This is premature to say anything on that. But today, we are -- whatever orders in hand from them, we are executing them, and they are going smoothly.
Sir, I'm talking from the positive impact on our this one because I think the requirement of this rocket motor should increase, are we getting some initial feedback from our customers that the requirement of this would be increased or enhanced?
So Pankaj, I do want to make a speculative statement on this. We are in the business, yes, if it helps yes, we may grow. But let us be happy with what we have in our hand. We have good orders in our hand and then we can execute them and all of them. Okay, if this helps and we get our better orders and all those, we'll be definitely sharing with you.
The next question is from the line of from InCred Equities.
Congratulations on a good quarter. Sir, my question is on the order book, sir. Sir, can you help us with the execution time line for your order book and mainly on the order book breakup for services, explosive and defense. Is everything executable in, say, around 12 to 15 months?
Can you please repeat [indiscernible] you are not audible much?
Sir, my question is on the order book. So in our order book, can you help us with the execution timeline of our order book, so services, explosives and defense?
I have mentioned in my starting comments the execution time of each order.
Yes. So with regard to the operational maintenance, the order book of balance INR 119 crores, which is spreads our 7 years, next 7 years. Okay. So with regard to the commercial explosives, I think all -- total outlook has to be in the next 12 to 15 months. With regard to defense, it varies and it has to be executed between 9 to 18 months.
Some of them 24 months also, average.
Sir, my next question is in the line of some of our DPSUs as well as clients from Israel DPSUs were facing from supply chain issues. So did that create any stress on your receivables or any slowdown in orders from DPSUs?
Which defense PSUs. You were saying about the raw material availability?
Yes.
So on date, we are not facing any problem.
And the orders from defense PSUs are on track as it used to be for any slowdown on that?
Yes, yes, they are on track.
The next question is from the line of Abhishek Poddar from HDFC Mutual Fund.
Congratulations on strong order book and good results for the quarter. Sir, could you give us some understanding this large order that you received for shafts and flares. What is the timeline for the requirement by MOD? Should we expect such orders in what period for the recognition. So I'm understanding there? And is it like a large order for building up the inventory? Or how have the orders such a large number, sir?
Yes. This is a large number coming under the emergency procurement to build up the inventory and all those. But this has to be executed in 12 months period from the date we receiving order. But -- this is not the only thing, but in the future for replenishing the quantities and all those, it will continue. I may not be of this large volume in 12 months, but yes, it will continue.
Okay. So sir, this -- what quantity we are supplying, any, sir, understanding that how much time it gets consumed by the defense forces?
That we cannot say.
Okay. And sir, is it that this was earlier getting imported and now it's getting substituted by us? Where was the buying...
You're right. Earlier, they are being imported. Now it has come in the positive list where imports are [indiscernible] only to procure from India. So under that, we are the source [indiscernible].
Understood. And sir, the product pipeline that we are supplying now has increased with the mines and ammunitions. Any understanding that next 1 to 2 years, what kind of order inflows are we expecting or at least some understanding how you're seeing the markets?
Orders are expected. This is beginning only. These products earlier, which are being imported, now even mines or ammunition also, they are all being imported. Now they are all going to be sourced internally [indiscernible], so definitely, there will be increase in the orders and the quantities. Now quantifying it in terms of so many crores is difficult. But yes, we are targeting a INR 500 crore turnover in the coming 2 months -- 2 years period.
INR 500 crores a year, you're targeting, sir?
Yes. Yes.
Understood. And sir, if you look at the margins for this quarter, 27.9, if you could give us some understanding that how are the defense margins and how are the explosive margins? And should we assume that the current order book has the similar margins for next 2 years?
Giving margins separately, I don't think that we can do that. But yes, the overall margins will remain like that only.
Okay. So this 27, 28 is where your entire order book is currently based at?
Yes.
The next question is from the line of [ Disha Pandiya ] from Capital.
The questions are already answered. Thank you so much.
The next question is from the line of Aman Vij from Astute Investment Management.
My first question is on the mine production, which you talked about, you started recently. If you can talk about how big is this opportunity and what kind of revenue we can achieve in this division over the next 2, 3 years? As well as does this also include some kind of underwater mines or this is only the our surface mines only?
We are working on multiple types of mines, where some are under development and some have already got into productionalization. So present order what we have received, I think we have...
About INR 40 crores order.
Yes. That is indicated. So again, it is not possible to predict because we think okay, now these order, next year may not be requiring so much having placed order. But it will -- yes, either this or that or something will take over when you have a bouquet of multiple products. So that's why I said that we can say that we have targeted INR 500 crores. But if you ask which product and how those you cannot express in that way. Yes.
Sure, sir. I understand that point, but I was trying to understand in terms of import or the opportunity, how big is the opportunity in mind, whether we get it or not is we can't predict that, but currently...
[indiscernible] in future, we cannot predict that how and all because this -- see, these are all war machinery and used in that. So whatever is used in the practice and roadway stage only will be replenished. So those quantities will have to understand.
Okay, sir. My second question is on this grenade ammunition part which you talked about a little bit in that starting piece. So last call, you had talked about we had submitted 2 phases of our clearance and we were expecting clear end. So any update on that?
Yes, that's what I told. We are cleared and now we are ready for production. We have built the production facility also. Product is qualified. User agencies have visited us. So we are hoping that in the current year, some RFP will come and then we'll be participating in it.
Okay. And you expect this in Q3 or Q4?
Q4. I think Q3 probably it may materialize, but we cannot predict all this, these timings and all those, they don't work in months rather they are work in years.
Sure, sir. And you talked about that some paramilitary forces orders might come, but the bigger opportunity is the Army orders -- so any further update on that? Is Army also looking at? Are they coming for the inspection?
So Army RFPs are -- the old RFPs were there, but they are not yet finalized. These are the RFPs from paramilitary forces, what I'm talking that we can probably productionizing this year. So those are only visible right now.
Okay, sir. Just last part on this. What is the maximum revenue we can do in this -- in terms of our production capacity? Do we have the production capacity to make like INR 100 crores also or is it a smaller size we can produce in the new production facility you talked about?
Yes. We have the production capacity and capacity to INR 100 crores of business in this line.
The next question is from the line of Vivek Gautam from GS Investments.
Yes. Am I audible? .
Yes, sir.
Sir, seeing this nowadays, the warfare going on in Ukraine and then Israel, since everything is through missiles and aeroplane bombs so we are placed, I believe, in a sort of a situation for us is better in terms of opportunity size. And as such, any new orders we have got from Israel and in any new orders from the missile program. And that is the one thing question. And secondly, similar sort of opportunity size exists for space SSLV also, I think so, and how is the future looking like?
Yes. As far as the defense order you named about the present countries which are involved in the conflict. No, whatever orders we have in hand from Israel, we are executing, there are no new orders. And about the space sector, yes, new -- SSLV is the new thing, which government wants to privatize the satellite launching. And having participated in the production of SSLV at Sriharikota facility, we are very much have to be the partner for this. So not -- with this expression of interest and other things are going on, in which we are -- yes, we are participating along with other players. .
And sir, what is -- so this is really Atmanirbhar scheme has really sort of been helping the indigenous defense companies like us. And -- but the earlier sort of regime was totally favoring imports and now for a change, we are doing it. But now the elections are coming and any preparation at our end for a sort of adverse development and in terms of regime change and how prepared are we for that sort of theoretical situation, sir?
And in future looking like that current policy will continue or sort of basically any preparation at our level for policy and regime change, sir?
I think the encouragement to Make in India and then -- have started almost 15 or more years back. It is only getting better and improve more and more with the consecutive government. So I don't think any adverse effect will come based on the political situation. It will only -- because today, we have already transformed from an importing country to manufacturing country and then exporting countries. So I don't think that is going to affect us.
Yes, that's a really good development and good for us, good for country.
Yes.
The next question is from the line of [ Nikhil Jain ] from Galaxy International.
Yes. I just wanted to check whether we have started supplying the new order that we received for countermeasures and flares. So have you already started supplying that?
No, the supplies will start from, I think, February month onwards.
But you said that since the time of receiving, we have to supply that order in 1 year, like so 12 months emergency procurement. So...
Yes, 12 months. Each order has to be executed in 12 months. .
So we received the order sometime in August. So from there, we have to supply till next July, August 2024. Is that the correct understanding?
Right. Yes.
So if you will start supplying from February, so would we be able to manage the entire order by, let's say, the August of 2024?
Yes. We are working with those schedules only because any order -- big order execution, it needs built up time. You have to procure the raw materials, you have to build the component, you have to build your vendor [indiscernible] that large quantity and all those. So that's why 6 months' time is needed for those things.
Now we have already completed those. Now the process is going on outside process. Once that process has to shift inside our plant, then we'll be doing. In the meantime, we are also building up the multiple production lines. So we are quite confident that we can meet that.
Okay. And just a follow-up on that, sir. So you said that we are targeting INR 500 crores, let's say, by FY '25, FY '26, 2 years' time. But if you will supply, let's say, a INR 500 crore order in 6 months from February '24 till August of '24, so the turnover should actually exceed more than INR 500 crores, given that there are other products also which are there, right?
Yes, you're right. But the part of it will come in this financial year, part of it will go in next financial year.
Right. Yes. That is there, yes. And sir, the second question was related to the grenade and other things. So you said that we have submitted it, and we expect the order finalization is to happen by quarter 4. Is that understanding correct, sir?
Yes. Submitted in the sense, it's not a kind of submission or anything. It is -- yes, we have developed the product. Product has been submitted for testing by the user and then the quality agencies and it has met the requirements.
The next question is from the line of [ Ankur Kumar ] from [ Alfa ] Capital.
Sir, my first question is on the balance sheet side, there is a big jump in other current labilities, which I believe is advanced from customers. So can you comment on...
Yes. We have received some advance in the last week of September 2023 from the MOD against a new order.
So generally, what percentage of our revenue is generally comes in advances for...
No, normally, MOD is not giving any advance, but this is emergency, they have given some advance to the extent of 15% against the bank guarantee. So this is an exceptional case. Not that we get advance in every case.
Got it, sir. And sir, on margins, you said this current 27% time is sustainable. But Isn't there an operating leverage in the business because I generally believe gross would be working on a similar gross margins and when revenue improved, our margins should inch up from here?
So normally, if you remember our previous calls, we were talking about 20% on overall average EBITDA for the whole year. But first 2 quarters, we almost reached about 27%. So we are trying hard to get -- I mean to maintain the similar margin. There may be some plus or minus, but we are trying to [indiscernible].
[indiscernible] changes with the deliveries made and the inspections and all those, sometimes it may happen that the last day of the quarter, we could not deliver and it may go into the next first or second day of the next quarter. So that consistency is a little bit thing, but yes, we expect a good [indiscernible].
Got it, sir. And sir, on the last question on the flare side, you said you will start from February. So can you comment on how should be we assuming the delivery in the second half of the year, how much revenue or delivery schedule should we be expecting in Q3 and Q4 for this year?
No, sir, we cannot comment on the revenue. This is very premature because it depends state it depends on a lot of the PDI inspection and all, which are not in our hands. But the new order execution as our -- Mr. Chowdary was telling earlier, some portion, maybe a little question may start going from the February. So little portion may come in this year and major portion will come into the next year.
Sure, sir. And sir, in terms of new order wins, how much are we applying and how -- what is our chances to get more such orders?
See, you are quite aware of the fact that we are limited persons are there involved in this -- limited companies are involved in this business. So with our present niche position, yes, we expect that others will keep on coming.
[Operator Instructions] The next question is from the line of [ Jayesh Shah ] from OHM Portfolio Search.
Hello? Am I audible?
Yes, sir. Please go ahead.
Little louder, please speak a little louder.
Yes, yes, yes. Sir, congratulations for a great set of results. I just wanted to clear the understanding what is the order inflow in the second quarter? Because I thought the first quarter order inflow was already around INR 1,000 crores.
Second quarter inflow was -- I mean, it was nominal because I think we said about INR 50 crores, normal order. We have not seen any significant order in [indiscernible].
Okay. Okay. And what -- how is the pipeline looking at it for the next 2 quarters?
Yes, we are participating in many RFPs and tenders how many of them will be completed this year, come to order placement stage and all those prediction is a little difficult because MOD doesn't work on that basis. So yes, we are working and we are participating. All of them may not materialize, some of them may materialize so that's why we are targeting this financial year and next financial year, probably we will and go closer to INR 500 crores.
I think on the last call, my understanding was that we should -- we were targeting INR 500 crores for this financial year depending on the execution cycle that we expected for the emergency order. So that has got delayed a bit, right?
I think if I remember correctly, that was -- somebody asked about that, can you achieve? And yes, the way the orders are in hand, we can achieve. But our target was INR 300 crores.
I see. I see. Okay, okay. And based on the current pipeline, what should be the average order inflow for the year that 1 could see now is the run rate?
Between last year and this year, I think last year, we rescued about INR 400 crores and this year, we have already received about INR 700 crores. So...
And with the new products of DRDO coming into productionization and we feel that this will continue.
The next question is from the line of [ Deepak Poddar ] from Capital.
[Technical Difficulty]
Mr. [ Poddar ], we are unable to hear you.
Am I audible now?
Sir, your voice is breaking up.
Now it's better? Hello?
Sir, slightly better, please proceed.
Yes. Just a clarification, sir. I mean, you mentioned INR 300 crores and INR 500 crores is our execution target for this year and next year, right?
Yes, INR 500 crores, like I said, year '25-'26 is the target. That is -- this year is INR 300 crores is our target, it depends. If we can execute some of them pulling this year, we may exceed that also.
Okay. And INR 500 crores, you are saying about FY '26 not FY '25?
Yes. In '25 itself I think we can reach.
The next question is from the line of [ Kaushik Mohan ] from [ Ashika ] Institutional Equities.
Congratulations for the great set of numbers. Sir my -- I'm a bit not convinced on this number. Because we have seen from the last 15, 16 quarters, if I look at our employee cost, day by day, we had a peak of around 35% of our entire total revenue, but now it comes out to be around 18.5%. Can I get some clear clarity or understanding on this? Like why are we reducing -- what is playing out our employee cost is going down? Are we reducing on what basis?
See, our -- earlier, if you go back in the history, we were an industrial explosives manufacturing company, where most of the operations, the detonators, detonating fuse and all those were manpower intensive. So we had larger manpower, which is permanent employees with larger pay package because of the long experience and service.
It's a 40 years old company. Now the employees, workmen and also they have reached at retirement stage. As we are retiring, the numbers are reducing. But we are now shifting more and more towards different products and all those where the manpower requirements are less. We are not recruiting. We are rather using the people effectively and train their experience and all those rather than recruiting fresh people. Now the recruitment is more towards the educated and the skilled employees rather than the workmen and all those, so that has brought this change.
Okay. Sir, another question is on -- like are we able to maintain these margins going further? Like our operating margin has been around currently around 28 percentage in this quarter. Can we see the growth? And can we maintain this overall next till we reach a INR 500 crore mark in a couple of years on the top end?
I think the margins should be good, but it is not that we can commit on 28%. This is good -- because it depends on the product mix, it depends on the...
Quarter-to-quarter, it varies, depends upon the delivery of the goods. It's not just...
Then what is a normalized margin, sir?
Like earlier, we have indicated normally, we will be maintaining around 18% to 20% EBITDA. That is, yes, definitely commitment. But beyond that, yes, depending on the deliveries and fresh orders coming and how we execute, it will go up also.
Got it. Got it. Sir, I have another last 1 final question. Sir, if we see the full -- our annual report of March 2023, we have paid taxes of INR 1.91 crores, but we reported around INR 4 crores as our tax expense in our P&L. What is this majorly difference is coming? Because I can't find any deferred number for in the balance sheet. So some light over here on this number, clarity.
Sorry, you are talking about deferred taxes, right?
Yes, sir. Yes.
No, it is related to the calculation, which is there is -- there was some MAT liability was there. There was some calculation.
Sorry, VAT liabilities were there?
MAT, yes. MAT. It came in the MAT liability.
Okay, okay. So that's the reason MAT liability is the major reason. Okay. Got it. Sir, and how about our order book, sir? We can see that our order book is break up with defenses of around 84 percentage. So are we also going further in a couple of years down the line or the 4 years, 5 years down the line, is the defense order being in such a dominant position in the order book?
Yes, it should be.
It should be. Okay. Something around 75%, then can I assume it something around like that?
Yes, more or less. If you see even last year also, you can see 70%-75% [indiscernible].
[Operator Instructions] We'll move to the next question that is from the line of Santanu Chatterjee from Mount Infra Finance Private Limited.
Congratulations for great set of numbers, sir. My question is actually based on your current book and upcoming opportunity size, what would be the CapEx required to fulfill this obligations for FY '24 as well in FY '25?
It will not be a large CapEx because we have already invested in and we have built enough capacity. So what will be needed will be maybe some balancing equipment are the tooling or other things which are needed, which may not be very large. But yes, somewhere within, I think, INR 10 crore per annum or something it will be like that.
INR 10 crores each for FY '24 and FY '25, sir?
Yes, that is the -- in case when we enter into...
Product maintenance is there.
Yes.
Okay. Okay. And sir, in BrahMos, what is our contribution segment? And how big it is for upcoming period?
BrahMos, right now, we are in the technology transfer process. We are going to make the propellant rocket motors for them. But this is a project developed by DRDO. So we are under DOT process. And commercial production will start probably in the next financial year. And you -- this is available in all newspapers what is the size and all those [indiscernible].
The next question is from the line of [ Manan Shah ] from [ Moneybee ] Investment Advisors.
Congratulations for a good set of numbers. I wanted to understand in terms of the products you manufacture, is there a useful life for these products? I mean an expiry for these products. So see if they are not used within that expiry, they need to be replaced?
Yes, you're right. There is a shelf life for these products. So some go for life extension and some may go for refurbishment, which has not yet started in the country. But they have a shelf life. These all explosives, propellent products or rockets and missiles, they have generally 10 years is the life given. Afterwards, it's a question of extension by conducting some trials.
Okay. Understood. And in terms of propellent, so apart from us, we maintain 2 facilities, 1 for ISRO and 1 for Advanced System laboratory in terms of propellent. So are there any other manufacturers who are solid propellent or we are only 3 of us? And when an order is released, how does the order gets bifurcated between these 3 players, I mean, including us for the solid propellent?
I think you were asking about -- question is not clear. Can you repeat it?
I'm saying for solid propellent, I believe there are 3 manufacturers, including us. And the 2 facilities that we maintain one of ISRO and one for ASL, so when an order for solid propellent is released is it bifurcated between these 3 players or how is that decided?
See, the ISRO facility at Sriharikota and Trivandrum and also Jagdalpur facility, they are built for producing the large rocket motor, which normally a private sector company cannot invest such infrastructure. But today, the requirements have gone up, so whichever private sector company or other company can take over, they are offloading.
So in that process, now we are already producing PSOM-XL and then some of the variants of ASL rocket we are doing in our facility. That is decided by them based on our size and plant and then capability and capacity. They will place the order [indiscernible] and...
Understood. And are there other players as well who are looking at this opportunity or is there a long-drawn approval process, which acts as an entry barrier for other private companies to enter this space?
Yes, correct. This is highly capital intensive. And you know that what is the kind of buildup it requires and the time needed and gestation period. So anybody to reach this level in which we are, it takes a few years for them to come to that level.
Understood. And also in terms of propellent, I believe there are 3 types of propellent as for my understanding. One is cryogenic, one is liquid and one is solid. So are we looking to enter the other 2 propellent space as well? Or do we possess the expertise or know-how to enter that space? Any light on that?
No. Those first 2 what you mentioned, they are limited to only the space application as on date, and they have done by them. And then there are other players which are -- they don't need our expertise in that line. And we are specialized in composite solid propellent which are the main propellent for all the defense and applications. And in aerospace, also, if you see the launch, the main launch is done with solid propellent, composite solid propellent, booster rocket motors. When the space launch vehicle takes off, you see the large fire loom coming out, that's all from the solid propellents and we are in that field.
The next question is from the line of [indiscernible] from Swan Investments.
Sir, I missed your guidance for FY '25 and '26 on the top line. Can you please repeat?
Yes. I think we've already answered enough number of times on this point. Yes, please go ahead. .
Could you -- what are you expecting? What is the top line for FY '25?
So the total turnover, like we mentioned, '25-'26, we'll be crossing INR 500 crores.
We'll be crossing INR 500 crores.
On top line that is our target.
Sir, order book currently standing on INR 1,100 crores. So don't you think that you are being a little conservative in your guidance for the top line?
We are conservative.
Yes. Your order book is currently standing at INR 1,100 crores, right?
Yes.
And you have an emergency order that has to be executed by August '24, if I'm not wrong. So just taking that order, that order is approximately worth around INR 700 crores, INR 800 crores.
That is about INR 540 crores without GST. But at the same time, we are expecting some portion of that to come into this this year, financial year '24. .
Okay. Okay, sir. Also, sir, one more question in regards to your balance sheet. Sir, trade receivables have almost doubled.
Right.
So...
Yes, so significant amount has to come from Minister of Defense, which we are expecting to come in the next couple of days.
Okay. Okay. And sir, 1 more thing, so if you look at the other current liabilities in your balance sheet. So...
Can you stay till closer to the mic and louder, sir?
Yes, sir. So your other current liabilities have almost tripled in 6 months. And -- yes.
No, this is basically majorly -- as we explained earlier, this is basically regarding we have received some advance [indiscernible].
The next question is from the line of from from Tiger Assets.
Yes. [Technical Difficulty]
Sorry to interrupt Mr. [ Naik ], sir, your audio is breaking up.
Hello? Am I audible?
Yes, sir.
Yes. Congratulations on good set of numbers. Sir, I joined the con-call a bit late. Sir, [indiscernible] target for INR 560 crores of revenue in FY '24 itself in the previous con-call?
That is too optimistic.
Okay. Okay. Okay. So will be -- we are targeting it by FY '25, right?
Yes.
And for FY '24 is it fair to assume that we'll be doing INR 300 crores of revenue?
'24, you're talking about?
Yes, yes.
It would be -- I mean, nearby, maybe some plus or minus will be there.
The next question is from the line of [ Manoj Shah ] from Investments.
Just wanted to understand when do you start new product development. Like is it that different sources reach out to you to develop a product? Or you feel there is a demand when you develop it and then you go then ask them to rectify the product. So how does it goes?
Yes, it works in both ways. Most of the time defense because they are already what they are importing, they may approach us that, okay, this develop indigenous, are they -- it may come through DRDO. So it happens, right. And in some cases, yes, we use our own R&D and then our own innovation, and then we make -- develop a product and then we offer. So if the arm forces find that useful, then they can buy like that. So it works on both ways.
And how is the time span for product life cycle normally start of commercial production, which is some idea?
See, I've already mentioned, normally 10 years since the shelf-life declared, warranty or shelf life. But if a product is taken and then launched on the platform, like an aircraft or on a ship or somewhere, then it is counted on a number of hours it is on launch and the shelf life changes with that.
That's you're talking about the shafts and flares, is that correct?
Pardon?
You are talking about this shelf life is shafts and flares?
Not only shafts and flares, missiles also, rockets and missiles.
Okay. So you are saying shelf life is 10 years, but when you onboard it, then it's [indiscernible].
Yes. Even mines also, most of the products made for defense, we have like 10 years of life.
And like you've recently got these orders on shafts and flares, so since this would be based on like how many [indiscernible] are having in India and this and that you've got the shafts and flares order. So can you give some signs what will be the replenishment cycle for this or initial order, what you got how many or some idea how much percentage of that total for the fighter planes you have in that will give you some sense of that.
See, it is a bit difficult to tell that. We have different fighter planes with different dispensers mounted on them. So what dispenser is mounted on a flight, it depends on that. So we are outside of defense agency, it's difficult for predicting that. Because there are different NATO has different dispensers and then the Soviet Union [indiscernible] in Soviet Union our Russian platforms have got different dispensers. So based on that this is done. So giving you a figure is difficult.
Okay. And like suppose you start developing a new product from scratch, what the product development life cycle? Is it like 5, 7 years or if it be close to 8 to 10 years?
You mean the development time, life cycle means?
Yes. Yes. Suppose we have got the shafts and flares where it was imported. So what was the product development you excited before you started commercial production?
Generally, 4 to 5 years for it to come to production level. Now it can be a little earlier also can take a little longer time. Depending on the inspecting. For example, if you are developing for airports, that is the products which are going to be mounted or installed on the aircraft there, the qualification is much, much more stringent and it will take much longer time launching if you are developing a new product.
The next question is from the line of Sanjay [indiscernible] from Capital.
I just wanted to understand the drivers of margin expansion and how sustainable are they?
So if you go through the previous 2 quarters, I think we have reached almost about 27% EBITDA level. So going forward, we have to see, but I think we had a guidance of between 18% to 20% on an average basis. So going forward -- it again depends on the product mix because we do produce so many products, multiple products, not just 1 product. So the margins are also varies product to product. So it also depends on the product mix there.
Sir, so when you were giving this guidance of some INR 300-odd crore revenue or INR 500-odd crores revenue, so all those numbers on top line, but still 18% to 20% is the sustainable margin on those revenues. Is that what you're saying, sir?
Yes, it's a sustained good margin, but we may get much better margins also. [indiscernible]
And in terms of your exposure to the coal sector, is that something which is a bigger -- going to be a big growth driver for you or it will be defense, which will continue to be your major focus area?
See, the coal factor, of course, in volumes, it is going big and all those. But the competition is also very fierce there. There are many players who are supplying and all those. And the prices margins are very, very low comparatively. So our area which we are supplied is in defense products, defense and aerospace.
At the same time, we won't be leaving the ground will be very much there in the industrial explosives also, but we will not go for a very, very low margins and all those. In fact, our exports, if you look at it, half the income from exports has come from industrial explosives.
The next question is from the line of [indiscernible] Yadav from Mount Infra Finance Private Limited.
Hearted congratulation for the good numbers. I had a couple of questions. Firstly, regarding the mine. Is it by Premier or is it through some JV or subsidiary? And second question is, are you planning to participate in the projects, 6 of them from Indian Air Force regarding development of the missiles?
Yes. mine, there is no JV or anything. It is our product and the Premier Explosives produces it.
Okay, sir. And anything regarding the 3 projects missiles, I mean, any new missile development, there are 6 projects which have been announced.
No. Right now, we are not in any projects.
Okay. Okay, sir. Can you give an idea of what the size of the market size of the mines we expecting to come from that side?
I think these are the questions are repeating. Sorry, the market market size of...
[indiscernible] mines.
So no, at this moment, we have orders for about INR 40 crores. And going forward, that may be continued on the requirements of the
[Operator Instructions] We'll move on to the next question that is from the line of [ Prabir ] from Investments.
Sir, I have 2 questions. One, what is our status of the Coal India, which was around INR 150 crores? And then can you please throw some light I think you already spoke about, but I missed it. The large programs, which could come to the production phase in extent?
Actually, your voice is going up and down. Can you please repeat keeping closer to the mic.
Yes. Am I audible, sir?
Yes.
Yes. I wanted to know what's the status of the Coal India order was around INR 150 crores, very strong in this financial year? And then I have another question which is if you can throw some light on the programs, large programs, which will come to the production phase in [indiscernible].
Sir, you were talking about Coal India order for INR 150 crore?
What is the order, sir? [indiscernible]
Which order?
Coal India order.
Coal India order for INR 150 crores. Where did you get that number? We don't have that much order from Coal India at any point of time.
Okay. So what can be the quantum of that?
At this moment, we have a small order, which we are doing -- executing it. We don't have that much order at this point in time.
Okay. And the large programs that...
Sorry to interrupt, Mr. [ Prabir ], sir, were unable to hear you clearly. Can you use the handset mode while speaking and on the speaker phone?
Am I audible now?
Sir, slightly. Please proceed.
Large programs, which can come in to the production phase in the next 2 years.
Yes. We have Astra is 1 program where we are the for a part of the year, we partnered with DRDO in developing the propellent. So as on date, we are the single vendor. So we are expecting that to become the next big one, along with MRSAM, LRSAM and QRSAM. These are all the new projects, new products which are going to be productionalized.
The next question is from the line of [ Ananth Jain ], an individual investor.
Congratulations on the good set of number. My first question is that are there any others where we are L1 -- if so, what are the size of those orders?
Which order?
Are there currently any order that we have bid and which -- where we are L1?
There are several bids we have participated. So this is a continuous ongoing process.
No, where we are L1, sir? Where we are L1? Where we are the lowest cost or where there...
No, nothing is finalized and it is a no such [indiscernible] What we are executing already we have informed the and already you know about those things.
Okay. Great. Sir, the next thing that I have is, sir, there is shafts and flares are, they get used regularly by the Air Force. Do you have -- it's not like you use it in war time they get used in trials also quite regularly. So my question here is that do we have any idea on the amount of shafts and flares used annually by the Air Force?
No, we don't have idea -- but yes, you are right, they are not used only when war not only shafts, and flares, but other ammunitions and others also. They are -- they keep on practicing and then they're doing it. So every year, that quantity will remain other than the emergence requirement.
It will be -- it would be very helpful if you can find this piece of info because then that they give us what will be your constant demand and not just onetime, if that can be found out in some ways.
See, none of these products will have any constant demand like a consumer industry or mining sector where mines are being regularly produced and all those. These are all -- year-to-year, they keep on changing. That's why we always go with multiple product bag. It is like a boutique of multiple So it cannot be the same quantity next year, it will continue. Instead of that, we'll be producing another product to take that place. It goes like that rather than going by this.
Okay. Sir, last question from my end is that we used to do defense since quite some time, we were in propellent, we were in motors, some of these things have come to production lately. So my question to you is that, sir, what is -- what are the other products that can be as big as shafts and flares in terms of opportunity for us like if you can say that can grenades be that bigger product, can mines be that bigger product which is -- or can propellent in terms of -- purely in terms of market size, if you can...
See, if you say like that in 1 year's time, I don't think any of these products can give us a INR 500 crores of revenue.
Not in a year's time, sir, not in a year's time, but over the next...
All this will contribute, INR 30 crores, INR 40 crores, INR 50 crores like that, the orders will keep on coming from this ammunition, mines and warhead all those. It will be like that. But this INR 510 crores and plus is a onetime opportunity of emergency procurement. We do not know. Maybe in future, we may again get such opportunities for other products also. .
The next question is from the line of [ Avinash Gupta ] from -- an individual investor. As there is no response from the current participant, we'll move on to the next that is from the line of the [indiscernible] from Swan Investments.
So in your last call, you had guided that the order book was approximately of INR 1,000 crores, out of which INR 123 crores was of O&M and you had guided to execute that order book in the next 12 to 18 months?
No, no, no. With regards to O&M, it -- the balance or -- I mean execution time is about 7 years. Every month, the billing would be about INR 1.4 crores to INR 1.5 crores.
But others orders also, they are not of 12 months. There are many others which are 24 months.
Yes, sir. Just request for clarity on this point. As in the last call, you had mentioned that these orders would be executed in the next 12 to 18 months.
Those are the defense order books which is an average. Between months is an average [indiscernible] said, but there's a 12 to 24 months. Some may even go up to 36 months also because where we are doing the propellent only, the pocket motors are issued as FIM by PDL or other agencies, you can't do anything unless the issue the FIM, so the order [indiscernible] but it may go to 36 months extended it like that.
Okay, sir. Sir, 1 question. The shafts order worth of INR 550 crores. So the execution will start in February, if I'm not wrong?
Deliveries, yes, may start from.
Yes. So the delivery will start from February and how much do you think you will be able to do in this year, in FY '24 out of the INR 550 crores?
No. It is very premature, sir. We are working hard to get the maximum, but it is very premature because the requires, I mean it depends on so many external factors.
So a ballpark number maybe?
It will be difficult to say.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. T.V. Chowdary for his closing comments.
Thank you. Thank you very much. Thank you, everybody, for having the trust and faith in your company and the management. And we hope to maintain the same figures and same level of performance in the coming years. Thank you very much.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Premier Explosives Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.