Release Date: October 31, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Premier Explosives Ltd (BOM:526247, Financial) reported a strong order inflow, with the current outstanding order book standing at approximately INR1,054 crores, a 75% year-on-year growth.
- The company achieved record export revenue of INR29.4 crores during Q2 FY24.
- Premier Explosives Ltd (BOM:526247) reported a 29% year-on-year increase in revenue for Q2 FY24, reaching INR78.4 crores.
- The company achieved its highest-ever EBITDA margin of 28% in Q2 FY24, driven by higher execution of defense orders and contributions from commercial explosives.
- Premier Explosives Ltd (BOM:526247) is the only qualified Indian company for countermeasures and the only Indian company exporting fully assembled rocket motors.
Negative Points
- The company faces uncertainties in future order inflows, as the defense sector's order placement can be unpredictable.
- There are potential risks associated with geopolitical conflicts, such as the ongoing conflict in Israel, which could impact future orders.
- Premier Explosives Ltd (BOM:526247) has a high dependency on defense orders, which form 84% of the total order book, making it vulnerable to changes in defense spending.
- The company's receivables have almost doubled, indicating potential cash flow challenges.
- There is a significant increase in other current liabilities, primarily due to advances from customers, which may impact the company's financial flexibility.
Q & A Highlights
Q: In your slide 21, you mentioned a lot of India's prestigious missile programs. Are any orders from these programs included in the current order book? How do these orders come in?
A: We have orders for MRSAM and Astra missiles, which are in production by Bharat Dynamics Limited (BDL). We expect bigger orders in the future. Other programs in DRDO labs are progressing and will soon be productionized, with us providing the propellants as the sole provider.
Q: Regarding the ongoing conflict in Israel, will it impact our rocket motor shipments to Israeli customers?
A: As of now, there is no impact on our orders from Israel. We are executing the current orders smoothly. It is premature to speculate on future impacts, but we are prepared to handle any increase in demand.
Q: Can you help us with the execution timeline for your order book, particularly for services, explosives, and defense?
A: The operational maintenance order book of INR119 crores spreads over seven years. Commercial explosives orders are to be executed within 12 to 15 months. Defense orders vary, with execution timelines ranging from 9 to 24 months, and some extending to 24 months.
Q: Are there any supply chain issues affecting your receivables or order flow from defense PSUs?
A: Currently, we are not facing any supply chain issues, and orders from defense PSUs are on track.
Q: Could you give us some understanding of the large order for shafts and flares? What is the timeline for the requirement by MOD?
A: This large order is under emergency procurement to build up inventory and must be executed within 12 months from the date of receiving the order. Future replenishment orders will continue, though not necessarily in the same volume.
Q: What is the maximum revenue we can achieve in the grenade ammunition division over the next two to three years?
A: We have the production capacity to achieve INR100 crores of business in this line. The current order is around INR40 crores, and we expect further orders as the products are now being sourced internally.
Q: Are there any new orders from Israel or the missile program due to the current conflicts?
A: We are executing existing orders from Israel with no new orders currently. In the space sector, we are involved in the SSLV project and expect opportunities to arise from the government's encouragement of private sector participation in satellite launching.
Q: How are the margins for defense and explosive segments? Can we expect similar margins for the next two years?
A: We do not provide separate margins for each segment, but overall margins are expected to remain around 27-28%.
Q: What is the CapEx required to fulfill obligations for FY24 and FY25?
A: The CapEx will not be large as we have already invested in capacity. We expect around INR10 crores for balancing equipment and tooling.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
