Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KEC International Ltd (BOM:532714, Financial) reported a robust order intake of over INR 7600 crore, marking a 70% growth compared to the previous year.
- The company has a strong and diversified order book of approximately INR 32,700 crore, with an L1 position of over INR 42,000 crore.
- KEC International Ltd (BOM:532714) achieved revenues of INR 4,512 crore for the quarter, a 6% increase year-over-year.
- EBITDA margins improved by 70 basis points to 6.5%, and the company saw a 20% year-over-year growth in EBITDA.
- The company successfully reduced its interest expenses by 30 basis points, now standing at 3.4% of revenue for Q1 FY25.
Negative Points
- Revenue growth was hindered by an acute shortage of manpower due to elections in India and continued supply chain pressures.
- Despite the overall positive performance, the standalone margins remain a concern, with some legacy projects still affecting profitability.
- The company faces challenges in the railway business, particularly with margins in the India segment.
- There are ongoing supply chain issues, especially with transformers and equipment supply disruptions in Middle East projects.
- The civil business growth was impacted by severe labor shortages during the quarter, and the order intake in this segment has stagnated.
Q & A Highlights
Highlights from KEC International Ltd (BOM:532714) Q1 FY25 Earnings Call
Q: Can you provide more details on the arbitration award of INR24 crore?
A: It's a smaller award received from a Delhi-based arbitration that has been ongoing for over a decade. The award has been accounted for this quarter. - Vimal Kejriwal, CEO
Q: What is the growth target for the cable business after creating a separate subsidiary?
A: The ROC is more than 100 due to net negative working capital. We expect to invest around INR100 crore this year, aiming for a turnover of INR2800-2900 crore by FY26. - Vimal Kejriwal, CEO
Q: How are you addressing supply chain constraints, especially for transformers and equipment supply disruptions?
A: Supply chain issues are easing. Many players are expanding capacity, and we expect additional supplies from Q3 onwards. - Vimal Kejriwal, CEO
Q: What is the outlook for the cable business margins?
A: Cable margins are currently 200-300 basis points lower than the market. We expect to reach 9% margins in the next two to three years. - Vimal Kejriwal, CEO
Q: Is there a risk to the annual guidance of 15% revenue growth due to the muted Q1 growth?
A: We are confident of achieving the 15% growth target, especially with the strong order intake. H2 will see significant numbers. - Vimal Kejriwal, CEO
Q: What are the plans for debt reduction and working capital management?
A: We aim to reduce debt levels and have already started receiving funds for delayed receivables. The enabling resolution for QIP is to strengthen the balance sheet and capitalize on growth opportunities. - Vimal Kejriwal, CEO
Q: What is the growth outlook for the civil business?
A: The civil business is expected to grow by around 30% in revenue, driven by residential and water projects. - Vimal Kejriwal, CEO
Q: Can you provide a timeline for the subsidization of the cable business?
A: The process should take between three to six months, involving valuations, legal, and other approvals. - Vimal Kejriwal, CEO
Q: What is the outlook for the Middle East CapEx, especially in transmission and oil & gas?
A: The Middle East, particularly Saudi Arabia and Abu Dhabi, is seeing significant CapEx in transmission. We are positive about the growth prospects in this region. - Vimal Kejriwal, CEO
Q: What is the strategy for the international T&D business?
A: We are focusing on regions like the Middle East, Africa, East Asia, and the former Soviet Union. We expect reasonable growth in international T&D, but India will grow faster in absolute numbers. - Vimal Kejriwal, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
