Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net revenue increased by 6% compared to the preceding quarter, driven by a 2% rise in sales volume and higher selling prices.
- Sales volume rose by 23% over the corresponding quarter in the previous year.
- EBITDA improved to INR29.71 crores with a margin of 12.3%, up from 5.8% in the preceding quarter.
- Post-tax loss declined to INR3.64 crores from INR13.37 crores in the preceding quarter.
- The company is actively engaged in cost optimization, including the finalization of a 16.5 MW solar-wind hybrid power plant.
Negative Points
- Average ex-factory selling prices were lower by 17.9% compared to the corresponding quarter last year.
- Export sales have been affected by a demand slowdown in Europe, with exports standing at INR22.42 crores compared to INR72.13 crores in the corresponding quarter last year.
- The German operations are facing challenges due to unrestrained import of Chinese solar modules at dumped prices, leading to production shutdowns.
- Overseas subsidiaries reported a negative EBITDA of INR3.8 crores for the first quarter.
- The company is still awaiting a decision on the imposition of antidumping and countervailing duties on imports from China and Vietnam.
Q & A Highlights
Q: After the announcement in the project, where do you see EBITDA margins for Borosil Renewables settling in coming quarters, especially given your commentary that the Chinese are also undercutting prices and that has a downward impact even as we speak?
A: (Ashok Jain, Whole-Time Director) It's a moving number as of now, because the prices have been changing and the freight rates also have been changing. But the impact of basic customs duty would mean that 11% will get added to the landed cost of imports, which will allow us to raise our prices of the corresponding order. So we can estimate based on the current earnings that the EBITDA margins may settle between 20% to 25% post the imposition of basic customs duty, provided there are no very significant changes in the prices or in the freight.
Q: Where would you peg India's solar glass manufacturing capacity now? And based on what is under construction right now by the end of the fiscal, where do you see that capacity going and Borosil Renewables share is what we are looking at?
A: (Ashok Jain, Whole-Time Director) In India, there are four new plants which have started in the last one year or so, totaling to almost 1,300 tonnes per day, and Borosil Renewables is at 1,000 tonnes per day. So total capacity has become 2,300 tonnes per day in terms of the domestic production. A very sizable, significant imports are also happening at this point in time because these capacities put together are not enough to meet the entire demand.
Q: Given the shortfall in domestic manufacturing capacity versus the size of the Indian market itself, what are your thoughts in terms of expanding capacity hereon? Or do you think that you will wait for government intervention and probation of extra duty protection to make it more attractive?
A: (Pradeep Kheruka, Executive Chairman of the Board) We have spent the last year actively following with the government and bringing to their notice that in order to have a complete ecosystem, all the ancillaries need to be studied and they have to be dealt with so that we are able to retain and grow some full manufacturing ecosystem. The government is definitely very keen to get out of the umbrella of China. So generally, I see that things should be getting better and better as time goes by.
Q: Of India's total solar glass inputs, what percentage comes from China? And what percentage comes from Vietnam and other locations?
A: (Ashok Jain, Whole-Time Director) Imports are basically at this point in time coming largely from China, almost 85% comes from China and only 15% come from Vietnam.
Q: What is the India's domestic solar glass consumption against the 2,300 tonnes per day capacity?
A: (Ashok Jain, Whole-Time Director) The entire domestic production is getting sold as of now. Some exports are there, which may be about 8% to 10% overall, but sizable imports keep coming to India because the requirement is growing very steadily now with the implementation of ALMM from April '24. Imports may be about 55% to 60% of the demand as of now and domestic maybe about 45% or so. The Indian demand in terms of glass consumption would be about 4,000 tonnes per day, of which about 1,600 may be coming from Indian production.
Q: What will be the landed cost of China glass prices? Like what would be the price -- without duty and after duty?
A: (Ashok Jain, Whole-Time Director) The prices are changing every day, almost every week, in terms of the landed cost. But we sell against the landed price and seek some premium over it, which is maybe about 3% to 5%. So you can see that what we realized is about INR105, INR106 on an ex-factory level. So you may say import prices are maybe about INR102 or INR100 per annum.
Q: What is your view on the trajectory of solar glass panels from China? How long will they be able to dump more?
A: (Pradeep Kheruka, Executive Chairman of the Board) The situation in China today is a little tight; their panels, which were being sold everywhere, especially in markets like the United States and India, have suffered a very sharp decline. Therefore, they are selling to other countries under certain compulsion. The prices at which we are selling, there is no possibility that they can make any money from that. In fact, they will be losing money unless they are being subsidized, which is our fear.
Q: What is the CapEx plan for the future, which presently is on hold?
A: (Ashok Jain, Whole-Time Director) The Board had, in the past, approved for expansion by 1,100 tonnes per day, setting up another furnace to increase the production, which is currently at 1,000 tonnes per day. But this was put on hold because of the change in the economics and the scenario after the removal of anti-dumping duty against China. With the positive developments happening on the basic custom duty front and once there is some clarity on the antidumping duty, we expect the Board to reconsider the matter.
Q: How can we reduce the employee benefit expenses in the German unit?
A: (Ashok Jain, Whole-Time Director) German labor cost is higher. The buyers in Germany were able to pay a higher price because they were getting higher price for their modules. Now that situation has changed, which is putting pressure on our selling prices. We are trying to rationalize the workforce, cut down on the number of people, and increase productivity. We have also put in new equipment to enhance productivity, which will help reduce per unit cost and the impact of labor cost.
Q: When can we expect the rights issue?
A: (Ashok Jain, Whole-Time Director) The rights issue is subject to approvals. We already have BSE, NSE approvals, and the major approval now is SEBI, which is almost on the cards. Once we have this, we will start the process of filing the final letter of offer. The rights issue should be there by the end of September or beginning of October.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
