Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skipper Ltd (BOM:538562, Financial) reported its best first-quarter revenue ever, nearly doubling its revenue compared to the previous year.
- The Engineering segment saw a 99% increase in revenue, while the Infra segment experienced a 1,600% increase.
- The company's consolidated EBITDA increased by 74%, with operating margins standing at 9.6%.
- Skipper Ltd (BOM:538562) secured significant domestic and international contracts, contributing to a total inflow of over INR765 crores.
- The current order book stands at INR5,844 crores, providing revenue visibility for the next 2 to 3 years.
Negative Points
- The Polymer segment saw a 26% decline in revenue, impacted by elections in the first quarter.
- Despite the overall positive performance, the EBITDA margin for the Engineering segment slightly decreased to 11% from 11.6% last year.
- The company faces challenges in maintaining consistent margins due to the variability in contract quality and execution.
- There is a potential for increased debt due to ongoing CapEx and working capital requirements.
- The Polymer business experienced a volume degrowth of 10%, attributed to election-related impacts on project sales.
Q & A Highlights
Highlights of Skipper Ltd (BOM:538562) Q1 FY '25 Earnings Call
Q: How does Skipper Ltd secure international orders? Is it directly or through EPC players abroad? What are the marketing or sales costs incurred for sourcing deals?
A: Skipper secures international orders through a mix of EPC contractors and direct utilities. The process involves long-term registration and approvals in various geographies. The company has been active in international markets for over 15 years and has approvals in numerous countries. Skipper has a strong international marketing team and representatives in about 70 to 80 active markets.
Q: What is the capacity utilization and capacity size of Skipper's competitors in India and abroad?
A: Skipper's current capacity is 300,000 tonnes per year, with last year's utilization at 70% and this year's expected to be 90%. Skipper has the largest capacity in India. Competitors like KEC International and large Chinese and Turkish companies have significant capacities globally.
Q: What is the expected order inflow for FY '25? Was Q1 impacted by elections?
A: Skipper aims to secure INR4,500 crores to INR5,000 crores in orders this year. The Q1 performance aligns with this target. There is no specific trend for order inflow by quarter, and the company expects consistent performance throughout the year.
Q: How does Skipper plan to manage its debt and interest expenses?
A: Skipper's debt is primarily working capital debt, which is manageable. The company recently conducted a rights issue to boost working capital. The first tranche of INR50 crores has been secured, with plans to call for the balance within this financial year. The company aims to reduce overall debt and improve interest expenses as a percentage of revenue.
Q: What are the growth prospects and margin expectations for Skipper's Polymer business?
A: The Polymer business faced a volume degrowth of 10% this quarter due to election impacts on project sales, though retail sales grew by 20%. The industry operates at an EBITDA margin of 11% to 12%, while Skipper currently operates at 4% to 5%. The company aims to achieve double-digit margins once it reaches a revenue level of INR1,000 crores.
Q: How does Skipper handle raw material price increases?
A: In the Polymer segment, raw material price increases are generally passed through to the market. In the Engineering segment, contracts can be fixed-price or variable-price, with an IMA-driven formula that adjusts for raw material and labor price changes.
Q: What is Skipper's market share in the T&D and telecom sectors within India and globally?
A: Skipper holds a 10% to 15% market share in the high-voltage sector within India. Globally, the market share is difficult to estimate, but Skipper is considered a prominent player.
Q: What are the future growth plans for Skipper's Polymer business?
A: Skipper plans to reach INR1,000 crores in revenue for the Polymer business within the next two to three years. The company is investing in advertising and brand ambassadors to support this growth.
Q: How does Skipper manage product rejections and customer acceptance issues?
A: Skipper's rejection rate is less than 0.002%, making it negligible. The company typically secures advanced payments to ensure customer commitment. Instances of customers not picking up supplies are extremely rare.
Q: What impact has the India-Australia free trade agreement had on Skipper's exports?
A: The India-Australia free trade agreement removed a 4% duty on Skipper's products, making them cheaper for Australian customers. This has positively impacted Skipper's competitiveness in the Australian market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
