Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GE T&D India Ltd (BOM:522275, Financial) reported robust order growth with bookings of INR10.3 billion in Q1, up by 2% year-on-year.
- The company's order backlog increased significantly to INR62.8 billion as of June '24, a 59% year-on-year rise.
- Q1 revenue stood at INR9.6 billion, marking a 34% year-on-year increase.
- Profit before tax in Q1 '24-'25 was INR1.8 billion, a substantial rise from INR386 million in the previous year.
- Cash and cash equivalents improved to INR4.4 billion as of June 30, '24, from INR2.8 billion as of March 31, '24.
Negative Points
- Order inflow for the quarter was slightly subdued, with only a 2% increase year-on-year.
- The company faces risks related to government policy changes and cross-border relationships, which could impact future order bookings.
- Capacity utilization varies across product lines, with some products needing to catch up in terms of utilization.
- The company refrains from providing forward-looking guidance, making it challenging to predict future performance.
- There is no clear strategy disclosed for significant capital expenditure, which may be needed to sustain growth.
Q & A Highlights
Highlights from GE T&D India Ltd (BOM:522275) Q1 FY '24-'25 Earnings Call
Q: The gross margin improvement has been very sharp. How much of this is sustainable?
A: Sandeep Zanzaria, CEO and MD: The gross margin depends on various factors, including the mix of revenue between projects and products and export and domestic. We evaluate gross margin performance on a yearly basis. This quarter's 40.3% gross margin gives us confidence that our efforts to improve margins are working. We aim to achieve better margins compared to last year.
Q: The order inflow for the quarter was slightly on the lower side. Are you seeing larger inquiries that could lead to higher order inflow going forward?
A: Sandeep Zanzaria, CEO and MD: There was some impact due to elections, but we maintained an order inflow of INR10.3 billion, a 2% growth. In July, we declared an order of about INR13 billion. Our order backlog has grown impressively to INR62 billion from INR39 billion last year. We are optimistic about the pipeline and sustainable growth.
Q: Can you provide more details on the gross margin expansion?
A: Sushil Kumar, CFO: The gross margin improvement is due to better pricing, a favorable mix of projects and products, and internal efficiency improvements. We have also focused on selective projects that are profitable and lead to better cash generation. Our efforts have resulted in a significant improvement in EBITDA and cash generation.
Q: What is the outlook for export orders, especially from group entities?
A: Sandeep Zanzaria, CEO and MD: The Indian manufacturing setup supports many geographies. While it's difficult to predict exact numbers, we aim to grow export orders as they generally offer better margins. We have a strong focus on both domestic and export markets.
Q: What are your plans for capacity expansion given the current trends in the industry?
A: Sandeep Zanzaria, CEO and MD: Capacity utilization depends on multiple factors. We identify and remove bottlenecks to increase capacity. For many products, we are at better capacity utilization, especially transformers. We will continue to monitor and adjust as needed.
Q: Are you participating in the upcoming HVDC tender for Bhadla-Fatehpur and the STATCOMs?
A: Sandeep Zanzaria, CEO and MD: We have the technology for both LCC and VSC HVDC projects. While we can't discuss specific bids, we are one of the top players globally and aim to capture market share in HVDC and STATCOM projects.
Q: Can you provide a breakdown of product versus project revenue this quarter?
A: Sushil Kumar, CFO: Approximately 20% to 25% of the revenue comes from the project business, with the rest from the product business. We focus on maintaining a balance between these segments to optimize profitability.
Q: What are the growth prospects for your automation business?
A: Sandeep Zanzaria, CEO and MD: The automation business is integral to our growth strategy. With increasing demand for power and upgrades in load dispatch centers, we see strong growth prospects. Automation remains a key focus area for us.
Q: What is the timeline for executing the INR62 billion order backlog?
A: Sandeep Zanzaria, CEO and MD: The execution timeline varies by product line. Short-cycle products like automation and AIS typically take 6 to 12 months, while larger projects and transformers may take longer. We aim to execute the backlog within two to three years.
Q: Are there any risks you are currently managing?
A: Sushil Kumar, CFO: We continuously manage and mitigate risks, including market-related risks like government policy changes and cross-border relationships. Our focus is on maintaining a balanced approach to order intake and execution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
