Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NCC Ltd (BOM:500294, Financial) reported a 37% growth in standalone revenue for FY24, driven primarily by the buildings and electrical divisions.
- The company achieved a 15% increase in its order book, closing at INR 57,536 crores, surpassing its target of INR 26,000 crores in new orders.
- Significant improvement in working capital days from 102 to 76 days, the lowest in a decade.
- NCC Ltd (BOM:500294) received an enhanced credit rating of AA- from Care Ratings, which is expected to reduce costs for term loans, working capital loans, BGs, and LCs.
- The company successfully settled several long-standing disputes, including the Sembcorp and TAQA settlements, clearing historical claims and improving financial clarity.
Negative Points
- Gross profit margin declined from 15.8% to 14.2% in Q4 FY24, indicating pressure on profitability.
- EBITDA margin decreased from 10% to 9.4%, reflecting increased competition and cost pressures.
- The company anticipates potential impacts on order booking and business progress due to upcoming general and state elections.
- Despite improved collections, the debt level increased slightly by INR 25 crores, standing at INR 1,005 crores at the end of FY24.
- The company has provided a conservative guidance for FY25, with expected order bookings of INR 20,000 to 22,000 crores and a topline growth of 15%, lower than the previous year's growth.
Q & A Highlights
Q: Our margins used to be 12%, but they have been declining to 10%. Given the outlook, do you think there is any chance of margin surprise in FY25, and are we targeting a slightly higher number in the future?
A: The company's focus is on securing more orders, even if it means compromising on margins by 1% or 2%. The strategy is to maintain bottom-level margins at PBT-PAT level and improve net profit margins by 50 basis points each year. The guidance for EBITDA margins is 9.5% to 10% for FY24-25.
Q: What are the CapEx and equity investments for FY24, and what is the guidance for FY25?
A: In FY24, we spent about INR285 crores on CapEx. For FY25, we are targeting to spend about INR250 crores. Equity investment in subsidiaries will vary between INR100 to INR175 crores, depending on the progress of smart meter projects.
Q: Can you provide data points on retention money, mobilization advance, and loans to associates and subsidiaries as of March?
A: Retention money is INR1,505 crores, mobilization advance is INR2,311 crores, and loans to subsidiaries and associates stand at INR509 crores.
Q: What is the rationale behind the stake purchase of 37% for INR240 crores, and how did you arrive at this consideration?
A: This is an old transaction based on a pre-understanding from six to seven years ago. It involved swapping shares and debentures between NCC and GEVPL. The transaction is essentially a paper transaction to close the books, making NCCIHL a 100% subsidiary of NCC.
Q: Given the election period, are you looking at new sectors to compensate for the shortfall in order booking?
A: We continue to see a healthy pipeline in buildings, transport, water, and electrical T&D divisions. While we are open to opportunities in solar EPC and BOT projects, our focus remains on our core verticals. We expect order awards to pick up post-elections.
Q: Are there any further write-offs or exceptional items expected in FY25?
A: At the moment, we do not foresee anything material. FY23-24 was a year of clean-up, and we have settled major historical claims. We are starting with a relatively clean slate now.
Q: What is the rate of interest for financing smart meter projects?
A: The interest rate for financing smart meter projects is between 9.5% to 10%. Term sheets are under discussion with lenders.
Q: Have you found a partner for the smart metering orders to reduce capital intensity?
A: Discussions with investment bankers are ongoing. We are looking to partly finance from our own funds and partly from external investors. The modalities will be decided in a couple of weeks.
Q: What is the impact of elections on execution and payments?
A: There is some impact due to elections, primarily because NCC has many government projects. Activities and payments have slowed down, but it is difficult to quantify the exact impact at this point.
Q: What is the profitability in the Pachhwara MDO project for FY24?
A: The profitability is 4% of the project value at the SPV level. The PAT percentage is around 3.2%, resulting in roughly INR60 crores at the PAT level, distributable in a 51%-49% ratio to the two partners.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
