Release Date: May 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Titagarh Rail Systems Ltd (BOM:532966, Financial) achieved its highest ever turnover in FY '24, crossing the INR1,000 crore per quarter mark for the first time.
- The company produced approximately 8,400 wagons in FY '24, reaching its rated capacity of 700 wagons per month and occasionally surpassing 1,000 wagons per month.
- The Passenger Rail Systems division is expected to ramp up production from Q2 FY '25, with significant contributions anticipated from Surat and Ahmedabad Metro projects.
- Titagarh Rail Systems Ltd (BOM:532966) has secured export orders for components, including traction converters and other electrical components for Europe.
- The company is confident of achieving a run rate of 15-20 metro cars per month by the end of FY '25, with a long-term capacity target of 72 cars per month.
Negative Points
- Q4 FY '24 saw muted performance in the Passenger Rail Systems division due to the completion of the Pune Metro contract and delays in the Bangalore Metro project.
- Supply chain disruptions, particularly related to machinery imported from China, affected production timelines.
- The company faces challenges in maintaining consistent margins in the Passenger Rail Systems division, with current margins around 2-3% and expectations to reach 10% only after significant ramp-up.
- There are uncertainties regarding the exact revenue contributions from ongoing projects like the Pune Metro and the timeline for substantial revenue from new projects like Surat Metro.
- The company has earmarked a significant CapEx of INR1,000 crores over the next couple of years, which could impact cash flow and financial flexibility.
Q & A Highlights
Highlights of Titagarh Rail Systems Ltd (BOM:532966) Q4 FY '24 Earnings Call
Q: Can you provide insights into the industry's transition and potential supply chain disruptions?
A: The overall demand for wagons has been robust, and we plan to increase our run rate to around 950 wagons this year. Supply chain constraints are a normal part of the business, but we do not foresee any significant disruptions that would hamper our targets. - Umesh Chowdhary, CEO
Q: What are the expected volume numbers for Passenger Rail Systems, and when will Surat and Ahmedabad Metro execution ramp up?
A: We dispatched 14 trains last year, averaging four cars per month. We aim to achieve 15-20 cars per month by the end of this financial year. Margins for Passenger Rail Systems should reach low double digits, around 10%, with further expansion expected in the coming years. - Umesh Chowdhary, CEO
Q: Are there any export opportunities for metro coaches?
A: Metro coaches are easily exportable due to their high cost relative to transportation expenses. We have already secured some export orders for components and are producing traction converters for Europe. - Umesh Chowdhary, CEO
Q: What is the current capacity utilization for metro and Vande Bharat projects, and what are the future plans?
A: We are setting up a stainless steel production line with a capacity of 36 cars per month, aiming to achieve 15-20 cars per month by the end of this financial year. The Vande Bharat line's production is expected to start by the end of this financial year. - Umesh Chowdhary, CEO
Q: What is the CapEx outlook for FY '25 and '26?
A: We have earmarked a total CapEx of INR1,000 crores, which includes capacity building for passenger coaches, backward integration, and special projects like the wheel project. This will be spent over the next couple of years. - Umesh Chowdhary, CEO
Q: Can you provide details on the traction motor production for Indian Railways?
A: We have a capacity to produce up to 150 traction motors, and we aim to reach 60-70% capacity utilization within this financial year. This business is growing rapidly, and we are taking firm steps to establish ourselves for the long term. - Umesh Chowdhary, CEO
Q: What are the plans for the Shipbuilding and Defense business?
A: We are exploring options to grow this business, including the possibility of making it independent or partnering with a strategic partner. Concrete steps will be taken within this financial year. - Umesh Chowdhary, CEO
Q: What is the demand outlook for private wagon orders?
A: Historically, private sector demand accounts for 10-20% of total wagon orders. This trend is likely to continue, barring short-term fluctuations. We maintain a healthy mix between private and government orders to sustain capacity utilization. - Umesh Chowdhary, CEO
Q: What is the expected order pipeline for Vande Bharat trains?
A: We are building capacity to produce 36 cars per month and have an order book of 1,280 cars. The demand for Vande Bharat trains is expected to grow, driven by the government's focus on waitlist-free railways and intercity transport. - Umesh Chowdhary, CEO
Q: How will the new procurement policies impact working capital and EBITDA margins?
A: The new procurement policies have already led to margin expansion and improved EBITDA. This is an ongoing process, and we expect to maintain our working capital cycle and achieve 11.5-12% EBITDA margins on the freight side. - Umesh Chowdhary, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
