Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved highest quarterly and annual sales in company history.
- Strong demand across sectors, especially from construction, infrastructure, and railways.
- International sales crossed INR 500 crore mark for the first time, contributing approximately 12% of total sales.
- Significant growth in B2B business with a 22% year-on-year increase in quarterly sales.
- EBITDA margin improved to 12.8% for Q4 FY24 from 11.2% in Q4 FY23.
Negative Points
- Farm mechanization business continues to decline, with a 45% year-on-year drop in quarterly revenue.
- Increased import content for CPCBIV products, rising to 9-10% from 3% for CPCBII.
- Debt levels expected to remain the same, with no significant reduction planned.
- Challenges in transitioning to CPCBIV+ norms, impacting production and supply chain agility.
- Potential flat volume growth in the short term due to the transition to CPCBIV norms.
Q & A Highlights
Q: Can you provide some insight into the volume growth versus value growth in the B2B business, especially considering the CPCB-IV transition?
A: Rahul Sahai, CEO, B2B Business: We are seeing significant volume growth along with value growth. Compared to FY22, the volume growth is about 25%. The CPCB-IV transition has not yet fully impacted prices, but we expect a 35-40% price increase after June when CPCB-IV+ norms take full effect.
Q: What is the outlook on margins and debt levels going forward?
A: Gauri Kirloskar, Managing Director: We expect to maintain our current debt levels around INR200 crores due to our strong cash position. Rahul Sahai, CEO, B2B Business: Our current EBITDA levels are around 14% in B2B, and we will look for opportunities to enhance that. Aseem Srivastav, CEO, B2C Business: Our EBITDA level in B2C is around 6.6% and is expected to slightly increase.
Q: How do natural gas gensets compare to traditional diesel engines in terms of performance and pricing?
A: Rahul Sahai, CEO, B2B Business: Natural gas gensets are cleaner and more sustainable, with simpler after-treatment systems. They are about 30-40% more expensive than diesel gensets but offer better overall cost of ownership.
Q: What is the CapEx plan for the current and next year?
A: Gauri Kirloskar, Managing Director: Our CapEx plan for the current year is approximately INR400 crores, which is 1.5 to 2 times what we did last year. This investment is for capacity enhancement and R&D along our defined technology tracks.
Q: Can you provide an update on the demand scenario for CPCB-II and CPCB-IV gensets?
A: Rahul Sahai, CEO, B2B Business: Demand for CPCB-II remains strong, and we expect it to continue until June. CPCB-IV+ demand will pick up slowly and is expected to switch over fully by the end of this quarter.
Q: What is the strategy to increase exports from the current levels?
A: Rahul Sahai, CEO, B2B Business: We are focusing on developing international markets, particularly the Middle East and the US. We have appointed GOEMs in these markets and are evaluating the necessary structures to build our presence.
Q: What are the key technology tracks for future investments?
A: Rahul Sahai, CEO, B2B Business: We are focusing on four technology tracks: fuel-agnostic internal combustion technologies, energy solutions including microgrids, electrification, and electrolyzers and fuel cells. Most of our capital allocation is happening along these tracks.
Q: What are the trends and opportunities in the US market for power generation?
A: Rahul Sahai, CEO, B2B Business: The US is one of the largest power generation markets. We have invested in Wildcat, a local American-made genset company, to leverage its brand positioning. Even small market share gains in the US can be very meaningful for us.
Q: What is the import content for CPCB-IV gensets compared to CPCB-II?
A: Rahul Sahai, CEO, B2B Business: The import content for CPCB-IV gensets is around 9-10%, compared to 3% for CPCB-II gensets.
Q: How do you see the realization and market share trends post-CPCB-IV implementation?
A: Rahul Sahai, CEO, B2B Business: We expect realizations to be somewhat similar to CPCB-II, but with a 35-40% price increase due to enhanced after-treatment systems. We anticipate market share gains as we have our portfolio certified and ready for CPCB-IV.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
