Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pennar Industries Ltd (BOM:513228, Financial) reported a total income of INR740.89 crores and a PBT of INR35.43 crores for Q1 FY25.
- PBT increased by 20.31% compared to the same quarter last year, indicating improved profitability.
- The company generated a cash back of INR42.94 crores, showcasing strong cash flow management.
- Order backlogs in PEB India and PEB US have reached their highest levels, indicating strong future revenue potential.
- Gross margin improved by 184 basis points from 37.95% to 39.79%, reflecting better cost management and higher profitability.
Negative Points
- Revenue decreased by about 2.6% compared to the same quarter last year, attributed to strategic exit from lower-margin revenue streams and slower-than-expected realization of new revenues.
- Execution delays, including a three-month postponement in the commissioning of the Raebareli plant, impacted revenue generation.
- US operations faced permitting delays and other operational issues, leading to lower-than-expected revenue.
- 35% of the company's revenue is still in lower-margin businesses, which the company is methodically exiting.
- The company faced internal challenges that prevented it from achieving higher revenue and profitability, despite a strong order backlog.
Q & A Highlights
Q: The PEB order book in India is INR800 crores plus. How many months will it take to execute this?
A: Typically, our order books go out for about six months. However, due to current capacity constraints, it might take closer to eight months. - Aditya Rao, Vice Chairman and Managing Director
Q: When do you expect to completely exit the lower-margin businesses?
A: Currently, about 35% of our business is in lower-margin segments. We are methodically exiting these while maintaining revenue. We expect a complete exit over the next few quarters to a few years. - Aditya Rao, Vice Chairman and Managing Director
Q: What are the blended margins for the PEB division?
A: We do not provide BU-wise margin breakups, but the PEB division's margins are higher than the company's average margin. - Aditya Rao, Vice Chairman and Managing Director
Q: What is the strategy for increasing the US PEB business?
A: We are expanding capacity and have substantial treasury operations in the US. Our goal is to increase our market share to around 5% in the next few years. - Aditya Rao, Vice Chairman and Managing Director
Q: Can you provide guidance on the top line and bottom line for the year?
A: We expect revenue and profit growth this year, aiming for our highest ever revenue and profit. We anticipate double-digit growth in profitability. - Aditya Rao, Vice Chairman and Managing Director
Q: What are the learnings from the US subsidiary, and how are you addressing challenges there?
A: The US market is relationship-dependent and quality-focused. We are expanding our business development and engineering base, ensuring high-quality execution and reliability. - Aditya Rao, Vice Chairman and Managing Director
Q: What is the contribution of the US business to overall revenue?
A: The US business, Pennar Global, contributes about 25% to our overall revenue. - Aditya Rao, Vice Chairman and Managing Director
Q: What is the status of the Raebareli plant, and when will it reach full utilization?
A: The Raebareli plant has been commissioned, and trial production is underway. We expect higher capacity utilization by September. - Aditya Rao, Vice Chairman and Managing Director
Q: What is the impact of US tariffs on your business?
A: Our US business is primarily local, with over 80% of manufacturing and engineering done in the US. Tariffs do not significantly impact us. - Aditya Rao, Vice Chairman and Managing Director
Q: What are the plans for the Body in White and aerospace businesses?
A: Both businesses are growing, with new customers being added. However, they are not core growth drivers and will scale slowly. - Aditya Rao, Vice Chairman and Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
