Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales grew by 19% year-on-year, reaching INR2,106 crore.
- Profit before tax increased by 27%, amounting to INR323 crore.
- Margins improved to 15.4% from 14.5% due to higher realizations, favorable product mix, and cost efficiencies.
- Free cash flow generated during the quarter was INR63 crore.
- Unexecuted order book as of June 30, 2024, was 44% higher year-on-year at INR7,054 crore.
Negative Points
- Margins in the Industrial Systems segment were lower year-on-year due to a higher mix of Railway Division and competitive bidding.
- Price realization in the LT motor segment was lower, impacting overall profitability.
- The railway tenders awarded had lower prices due to competitive intensity, compressing margins.
- The Europe market for exports was sluggish, affecting the acceleration of export growth.
- The company faces challenges in maintaining the high margins achieved this quarter in the upcoming quarters.
Q & A Highlights
Q: Can you provide more details on the Industrial Systems business performance during the quarter, including subsegments like low-tension motors, high-tension motors, and the railways portion?
A: We don't provide separate breakups for railways and motors or sub-segments like LT Motors and LIM. The railway business volumes have been good, and we expect to grow at least 40% this year based on awarded tenders. However, competitive pricing in tenders has compressed margins. Demand has been impacted by elections, but we expect improvement in H2.
Q: Is it safe to assume there was double-digit volume growth in LT motors, and the issue was more with price realization?
A: Yes, there was double-digit volume growth, but price realization was the culprit. Concrete numbers will be available once IEEMA publishes the first quarter results.
Q: Can you talk about the opportunity that the KAVACH system will bring following the acquisition of Dgtronix?
A: Dgtronix is one of the four companies approved for KAVACH and holds a significant market share in diesel axle counters. The railway minister has indicated a large allocation for KAVACH, which focuses on safety. We aim for a 20% market share in KAVACH, and with our support, this can be a significant growth driver.
Q: What is the progress on the OSAT business?
A: The OSAT project is in the initial stages of construction. Activities are picking up, and we have appointed a senior team. The project is expected to be completed in 18 to 24 months.
Q: How is the export market for industrial motors progressing?
A: The European market has been sluggish, and while we continue to receive orders, the acceleration has not met our expectations for Q1. We are placing people in different locations to improve this.
Q: Can you comment on the progress and market share of HT Motors?
A: Our market share for HT Motors was 20% as of March last year. Enquiries for HT Motors are better than LT Motors, and our order intake for HT Motors in Q1 has been strong.
Q: What is the sustainability of the current high margins in the Power Systems segment?
A: Margins in Power Systems are influenced by various factors, including order specifics and export prices. While current margins are favorable, it is optimistic to expect them to continue at the same level. However, margins are expected to remain good overall.
Q: What is the current delivery period for a 400-kV transformer?
A: The current delivery period for a 400-kV transformer is around 18 months, compared to 15 months a year ago.
Q: What is the contribution of IE3 and IE4 motors to overall sales, and how do their margins compare to IE2 motors?
A: IE3 and IE4 motors contribute about 40% to overall sales, with IE4 at 15% and IE3 at 35%. We do not share specific margin data for these segments.
Q: What is the lead time for a 400-kV transformer, and how has it changed over the past year?
A: The current lead time for a 400-kV transformer is around 18 months, compared to 15 months a year ago.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
