S
Salasar Techno Engineering Ltd
NSE:SALASAR
Salasar Techno Engineering Ltd
NSE:SALASAR
Price:
20.45 INR
0.74%
Updated:
May 3, 2024
Section:
Earnings Call Analysis
Summary
Q1-2024
Q1-2024
Salasar Techno Q1 FY'24 Financial Growth
In Q1 FY'24, Salasar Techno Engineering Limited reported a revenue increase of 24.3%, reaching INR 261.86 crores, driven by demand for steel structures and EPC solutions. EBITDA rose by 39.54% to INR 23.58 crores, with EBITDA margins improving to 9.01%, attributed to operational scaling and resource efficiency. The company has a robust order book valued at INR 1,435 crores.
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Ladies and gentlemen, good day, and welcome to Salasar Techno Engineering Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Deepika Murarka from Choice Equity Broking Private Limited. Thank you, and over to you, ma'am.
Thank you, Seema. Good afternoon, everyone. On behalf of Choice Equity Broking, welcome to the Q1 FY '24 Post Results Conference Call of Salasar Techno Engineering Limited. I also take this opportunity to welcome the senior management team. On today's call, we have with us Mr. Shashank Agarwal, Joint Managing Director; and Mr. Pramod Kala, Chief Financial Officer.
This conference call may contain certain forward-looking statements about the company, which are based on the beliefs, opinion and expectations of the company as of the date of this call. These statements are not a guarantee for future performance and involve risks and uncertainties that are difficult to predict.
I will now invite Mr. Shashank Agarwal for the opening remarks to be followed by a question-and-answer session. Over to you, sir.
Thanks, Deepika. Thank you for hosting us for our quarterly earnings call.
Good afternoon, everyone. We welcome you all on our Q1 FY '24 earnings call.
We, Salasar Techno Engineering Limited, began our operations in the year 2006-'07 and have been in the business for more than 15 years. With our unwavering dedication and focus to serve the need of the clients, we have successfully established ourselves as a one-stop infrastructure solution company, providing 360-degree solutions across continents.
Our area of operations consists of designing and manufacturing of telecom towers, structures for railway electrification, transmission line towers, distribution poles, monopoles for telecom and power transmission sector, heavy steel structures, such as prefabricated buildings and bridges, and EPC projects for railways and power transmission and distribution lines, including substations. We have emerged as a leading player in most of these sectors.
We have consistently been delivering innovative solutions, meeting diversified needs of our clients and surpassing their expectations. Our staunch focus on quality, safety and sustainability has enabled us to build a strong relationship with our stakeholders allowing us to expand our presence across India and serve to over 25 nations.
We carry our operations through 3 state-of-the-art manufacturing facilities located in Uttar Pradesh, having a total capacity of 115,000 metric tonnes per annum and our -- with cutting-edge technologies, in-house certified design, tried and tested rumble designs and tools and other machineries. We also proudly boast of having zero defect production, shortest delivery windows in the industry and the ability to ramp up operations in a minimum time span at anywhere.
Our quality products, services and customer-centric approach has helped us in getting recognition from large government companies, making us an approved vendor for Power Grid Corporation of India Limited; CORE, that is Central Organization for Railway Electrification; and many more. Till date, we have catered to over 600 clients. More than -- we have supplied more than 50,000 telecom towers, laid more than 700 kilometers of power transmission lines and almost 600 kilometers of railway tracks.
We have a long standing technical tie-up with Ramboll of Denmark to manufacture lighter and lower costing tower structures and high-mast poles. These designs help us reduce the cost by as much as 20% compared to conventional angle bar towers. Apart from the association with Ramboll, on our -- we have our own internal design team, which has a vast experience of designing towers. These designs are time-tested and proven for performance.
With our partnership and continuous efforts towards innovation, quality, multidisciplinary engineering capabilities and widely accepted design, we are sure that we will constantly grow and offer our customers with superior products and services.
Our diversified business lines allow us to cater to various industries, such as power industry by providing products and EPC solutions, such as transmission and distribution line towers, substation structures, railway overhead electrification and structures; renewables by providing solar module mounting structures, solar trees, solar water pumps and wind mill towers; telecommunications by providing every possible solution for the industry, whether it is an angle bar tower or a tubular tower or a bar Cell on Wheels tower or a rooftop pole or a monopole. Poles by manufacturing and delivering lighting poles, distribution poles and other infrastructure poles as required. Heavy steel structures such as bridges, prefabricated buildings and heavy and complex industrial structures used in power industry and in steel sector.
We also contribute towards modernizing the nation by manufacturing smart city poles and camouflage poles. We are highly committed towards innovating our products. The company's focus on research and development has led to creation of cutting-edge solutions that address the evolving needs of its clients by embracing technological advancements and staying at the forefront of the industry needs. We continue to provide innovative products and services that set new benchmarks in the sector.
Simultaneously, our unwavering focus of maintaining stringent quality standards throughout our manufacturing process from design to fabrication and to installation has allowed us to earn a reputation and recognition from major industry giants such as Airtel, Indus Towers, BSNL, KEC, BHEL, L&T, Tata and many, many more.
Coming on to our financials. In the first quarter of FY '24, revenue from operations experienced a healthy growth of 24.3%, reaching to INR 261.86 crores compared to INR 210.67 crores in the Q1 FY '23. The growth was primarily driven by rising demand of customized steel structures and diversified EPC solutions as well as efficient execution of the order book.
EBITDA increased from -- 39.54% from INR 16.9 crores in Q1 FY '23 to INR 23.58 crores in Q1 FY '24, and EBITDA margins increased by 99 bps from 8.02% in Q1 FY '23 to 9.01% in Q1 FY '24, led by increasing the scale of operations and efficient utilization of resources.
Talking about our order book, we stand on a healthy order book of about INR 1,435 crores. We are very confident of good growth going forward. We have strong orders from domestic and international markets in the EPC segment, which we expect to complete within the time frame. Our EPC order pipeline stands at INR 1,243 crores. In the towers and poles segment, we have orders more than INR 88 crores from domestic and international markets. And in our heavy steel structure division, we are witnessing a healthy demand and have orders of more than INR 100 crores.
Looking ahead, we expect more orders coming our way. In the power segment, increased demand for electricity in the country of the year growing at a rate of 7% per annum will provide ample growth possibility for us. In order to meet the growing demand, a huge investment in transmission distribution networks is required. Moreover, government's ambitious plan to achieve a diversity of 500-gigawatt in non-fossil energy by 2030 set to significantly booster the need for healthy power transmission infrastructure, opening new avenues and opportunities for growth and expansion in the energy industry.
In the telecom sector, the rollout of 5G is going at a very good pace, and for effective execution of the same, the demand for telecom towers is set to more than double. Apart from 5G, there is a lot of expansion happening for the strengthening of 4G sector, for the 4G part of the telecom. Also, we expect our modern product offerings in this segment but as camouflage towers, smart city solution and portable towers will act as a game changer for the industry.
In the railway sector with the hefty budget towards the sector, government is planning to electrify the balanced network by the year 2024 and us being a recognized and an approved vendor of CORE, we are confident to flourish in the segment. Moreover, not only just EPC in the segment, we also provide heavy steel structures and bridges, which is a better margin product.
With almost INR 1.07 lakh crores dedicated towards CapEx for railways, we expect to have this market as well as resulting in favorable results. Further, our new state-of-the-art galvanization plant is nearing completion, and the expansion will allow us to manufacture monopoles for power transmission lines sector. These monopoles will be high in size, which will be almost 3 meters in diameters for high-voltage transmission lines.
The segment faces less competition owing to our strong presence and elect as a value-added product offering better margins and boosting our revenue visibility. The new plant also deploys a step ahead processes and cutting-edge technologies, which will enhance overall efficiency and manufacturing process and enhance margins.
Now I would like to open the floor for questions and answers. Deepika, kindly please open up the floor for the questions and answers.
[Operator Instructions] We'll take the first question from the line of Ajay Verma, an individual investor.
Hello, am I audible?
Yes, sir, please go ahead.
Congratulations, sir. I have three questions. Actually, I would like to know what is the sustainable margins of the company? Is there any scope of expansion because your margins have decreased in quarter-over-quarter? This is my first question.
No, your question is what is the sustainable margins for our industry, right?
Yes. Yes, sir.
Okay. And next line was...
Is there any scope of extension because the margins have decreased from quarter-over-quarter?
See, our margins -- sustainable margins are in the range of about 9% to 10% on EBITDA level, okay? We are as we do in infrastructure sector and primarily supply as towers and other structures to various companies. And the margins typically remain in the range of about 10% plus/minus, sometimes 9% -- and between 9% and 10%. Here, there might be some fluctuations on a quarter-to-quarter basis. But over the years, what we have seen is that we are bound with a 9% to 10% EBITDA level.
And when I say this, I'm also confident that going forward, we might be able to improve our margins when our new galvanizing plant is operational, wherein will be offering a product, which is not being offered by everyone in the industry. And we will have an edge over others compared to other manufacturers. So going forward, the margins might improve slightly. But yes, 9% to 10% is something we'll sustain -- we'll be able to sustain.
Okay. Okay. Helpful. Okay. My second question is, as you all know, huge amount of CapEx is planned for the railway electrification. I just wanted to understand how much of our company is going to get benefit from it?
So in railways, see, when you say that there's almost more than INR 1 lakh crores of expansion, which is happening in the railways, that includes various things that like building new lines, new railway stations, modernization of the infrastructure, modernization of the signal system and so many other things.
What our company focuses on is the electrification sector for railways, wherein we have orders of almost INR 400 crores as on date for railways, which are under execution. And maybe between INR 350 crores to, say, INR 400 crores, which are under execution. And I'm not sure about the unexecuted product part. Maybe I'll -- I can get those figures for you... And going forward, also, we would be bidding for projects which suit us in terms of our operations, in terms of our geography, in terms of our margins. It's difficult to comment as to how much amount of orders we'll be able to pack on. It depends, tender to tender and job to job.
Okay. Okay. Helpful. Helpful. Okay. My last question is from electrification -- of rural electrification from [indiscernible], what is that electrification of rural area, what types of opportunity we can expect? And can you please give us some idea or any kind of numbers or something?
So we have recently 1 order in rural electrification for almost INR 750 crores. And this is for 4 districts, which are nearby to our location. And we have already started executing that order. And going forward, also, we might be bidding for some projects. And there are some projects in the pipeline which we are expecting to get for rural electrification as more than INR 25,000 crores is going to be spent on rural electrification alone.
RDS has been basically the ramping of our distribution sector. So yes, we are happy to be part of that. And we -- as I said, we have already an order book of almost INR 750 crores in the sector.
[Operator Instructions] We take the next question from the line of Kashish, an individual investor.
I just have one question. Could you please tell us what is [Technical Difficulty] major growth drivers you're witnessing for EPC projects?
So EPC projects, as I said, we do EPC projects in basically 3 sectors I would say. I mean 2 in power transmission and distribution, right, and another one is railway electrification. So we are not adamant on doing any one particular sector. It depends which particular project can offer us better margins and which, in terms of operations and execution of the project, is more suitable to us. We bid for those projects and try to get those projects. It could be in power transmission sector, it could be a distribution sector of power or it could be railway electrification.
But our major growth, as I think, would come from power transmission monopoles, wherein we are trying to bid for projects which have lines running on transmission and monopoles wherein we have an edge in terms of designing those monopoles and manufacturing those monopoles. So there could be -- those would be a major area of growth in terms of business as well as margins.
[Operator Instructions] The next question is from the line of Dinesh Narayan, an individual Investor.
I have two questions. One is, actually, if you can provide us with a visibility in terms of export orders? Have you got any export orders? Or do you expect any export orders over the next few months? The second question is really around visibility on the debt. How much debt are you expecting to take in this financial year?
So we have, I would say, a healthy order book for exports. One is a project in Nepal, which is -- it's a European bank aided project, which we had won a few months back. And it's a project of almost INR 143 crores. Out of which, almost INR 100 crores is a supply part, which would be exported from India. So that will be part of our operations, but that would happen over a period of 18 to 24 months, partly coming in this year and balance going over to the next year.
And we have also bidded for some project in Africa, which we expect to receive orders very soon. Apart from this, we have some orders for telecom towers as well, South Africa, from our existing customers. And these orders at the moment are in the range of about INR 10 crores to INR 15 crores for telecom towers at the moment. And apart from this, we -- as I said, we have project exports.
And what was your next question?
So the other question was on the debt levels.
So we have a working capital limit of INR 250 crores and almost the same amount of limits for bank guarantees, which is a nonfund-based limit. And going forward, we are planning to increase by INR 50 crores over this year. And we are expecting a good growth in the financial year, so that would help us in achieving that growth.
Okay. One follow-up question, sir. Are there any plans for any further equity dilution considering the overall expansion?
Not at the moment. But depending upon the situation or some opportunity coming our way, we might think of doing that.
[Operator Instructions] We take the next follow-up question from the line of Ajay Verma, an individual investor.
Sir, as you mentioned that the new plant will be commissioned in Q2 FY '24, right? Then what is the incremental revenues rendered from that new plant?
So we'll have -- see, right now, we have 3 galvanizing plants, which are running in 3 units. And in one of the units, that's Unit #3, we are putting up a new galvanizing plant. And probably when this plant starts, we will put the existing plants in a standby mode and utilizing the capacity of the new plant. But as for the revenue is concerned, we would at least get an additional revenue of INR 50 crores from that plant alone in addition to whatever our routine...
Okay. Helpful. Helpful. INR 50 crores, so this will add INR 50 crores, right?
Yes. So this will add at least INR 50 crores of revenues within this year.
Okay. Okay.
Additional revenues, yes.
Yes, yes. Okay. Helpful. Okay. I have a one final question from my side. Sir, you mentioned largest steel galvanization plant in Asia, right? Can we expect our exports will be increasing percentage of a revenue and who are the peers in this segment? Can you throw some light on this?
So you are asking who are the peers in this particular sector for which we are going to use our galvanizing plant?
Yes.
Okay. So we have Valmont of U.S.A. in Pune. And we have Skipper in Calcutta, and then it's -- so we have now the biggest capacity, surpassing Valmont and Skipper and we'll be able to produce our largest possible monopoles in the industry, catering up to very high voltages, 400 KV and above. And this is a very state-of-the-art plant being imported from Germany and Italy. And we expect this to be operational by end of this quarter.
Okay. Okay. Sir, actually I want one additional -- who the export opportunity from this plant?
So yes, you're right. We already have export opportunity. I mean yes, this would also help us in getting some extra orders in terms of products, which -- wherein we'll be able to offer these products to developed countries like U.S.A. and Canada for their power distribution line sector, yes, yes. It might take us some time to get approvals. But yes, ultimately, we'll be able to offer a quality product to these countries.
[Operator Instructions]
As there are no further questions, I would now like to hand the conference over to Mr. Shashank Agarwal for closing comments.
Thank you. Since there are no more questions, I would like to conclude.
I would like to thank all the participants for attending this virtual session. We believe that we have satisfactorily run through our company and business model addressed every question and thereon, put up on the floor by the participants. Please follow with the Investor Relations team, Vinayak Shirodkar, Naman Maheshwari, Captive IR, if you have any questions and -- if these are not covered in the session, and I wish you all a great day ahead. Thank you once again. Thank you, everyone.
Thank you, everyone.
Thank you. On behalf of Choice Equity Broking Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.