Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VA Tech Wabag Ltd (BOM:533269, Financial) reported a consolidated revenue increase of over 13% year-over-year to INR627 crores.
- The company achieved a consolidated EBITDA growth of 23% year-over-year to INR81 crores.
- The PAT stood at INR55 crores on a consolidated basis, up by 31% year-over-year.
- The company has a high-quality order book of around INR11,000 crores with a healthy mix of 55% EPC and 45% O&M.
- VA Tech Wabag Ltd (BOM:533269) is a preferred bidder in projects valued over INR6,000 crores, indicating strong future growth potential.
Negative Points
- India's revenue declined by 22% year-over-year, raising concerns about domestic market performance.
- Margins were weak at 11.6% on an EBIT level basis for the domestic business.
- The company faced challenges in the Indian market due to the general election phase, impacting project execution.
- There were issues with the audio quality during the Q&A session, leading to communication difficulties.
- The company has not yet received the arbitration award money, indicating potential delays in cash inflows.
Q & A Highlights
Q: My first question will be, so with regards to execution, India's revenue declined 22% for you. So despite Chennai contributing to the execution, also the margins were weak at 11.6% on EBIT level basis. So what happened here, if you could help us understand the lower execution and margin during the quarter for the domestic business?
A: No. When you are giving these numbers, to which quarter you're comparing these revenues and margins?
Q: I'm comparing Q1 to Q1.
A: In Q1 to Q1, our growth has been almost -- if you say on a consolidated basis, it's about 13%. On a stand-alone basis, it's 7.2%. On margin, it's 14% EBITDA versus 11.9% and 14.5% versus -- all the numbers are up and PAT is almost 31%. So I don't know where you are reading these numbers. You said Q1 to Q1, Rahul. Please check your numbers.
Q: I see you have a pipeline of around INR6,000 crores in India and EMEA regions, right? So what are these orders related to? And when can we expect this to come in our order book?
A: See when we say that we are confident and we use the word preferred contracts, that means this is a question where we are already a lowest bidder declared. Some places, evaluations have been done. Some places still evaluation is going on. And post that, there is a process at the client's end to go through all the internal approvals, then we will get into contract discussion. And it should happen within this fiscal year. Normally, it takes anything between one to four, five months. So we think so even in this calendar year, we should see this order progressively. Some of it will start in the next one or two months. Some of it in three, four months and some of it in four, five months. This is a strong pipeline. It's not a normal pipeline. This is all we have bid. We are preferred bidders, we are lowest bidders. All that is a very concrete pipeline.
Q: In the budget, it was noted that government will be promoting water supply, sewage treatment, and solid waste treatment projects and services in 100 large cities. So how you're looking at this opportunity? And can you highlight how can be the competitive intensity in such projects because there are several other EPC players, which are going for the water projects wherein they have highlighted a significant opportunity in India as well as globally. How is the competition scaling up on the business side?
A: See, Rahul, it's very clear where there is opportunity, competition is most welcome. We have never worried about competition because we understand our strength, we understand our technology superiority, we understand our offerings what we give it to our customer and how do we add value. One thing is very clear that we select our projects very carefully, where we see that we have a good chance of payment security there, cash flow is there, and we have an opportunity to use our technology superiority. We select a few projects and projects we target, generally, we are both technically and commercially very attractive. So competition, yes, will be there, has to be there, but that does not put us in any concern. We are happy to fight the competition and win our quota of projects.
Q: Are there any semiconductor or CBG or green hydrogen projects in pipeline in the next two years if you can highlight that also?
A: This is definitely -- if you've seen our presentation, we put it on our website for investors and analysts, I think it's clearly saying that we are into this new field. You've mentioned the two, which is semiconductor, which needs industrial water, compressed biogas, which is a new initiative of the government to -- for clean and green environment. We have been in this business already for 30 years. Now it's only question of converting that into a specification, which we can directly pump into the fuel stations or into the pipeline. We have to do a little bit of more cleaning up, which we have already announced a few months back. We have signed with Peak Ventures to develop it together, and we're ready to take it -- these projects forward. And we are planning at least 100 projects to do it over the next few years. Same thing is in semiconductor. We have ultra-pure technologies, we have our references. We are talking to a few other global leaders where we will be the technology champions in that, and we will then be going after the projects. Same thing we are doing for hydrogen and same thing for digitalization and AI to be included in our projects. These are the core initiatives we will work over the next few years and make sure they all get integrated in our business.
Q: So my first question would be on the segmented result that you've declared on a consolidated basis. For India, we can see that this quarter YoY, there was a decline of 22% of revenues. Could you give some color as to, firstly, why the India business is down? Number one. And number two is that we can see that the export revenue was more than doubled. So again, is there a focus shift in the company? What is going on? That's my first question.
A: See the mix of revenues between India and ROW is usually how the projects are progressing. You have seen in the last few years with the strategy shift, we have focused more on the international business. Also over the last six, nine months in the general election phase, there has also been a lull in terms of the Indian business. The main contributors for revenue are the SIBUR project and Senegal project, as Mr. Mittal mentioned in his opening remarks, which are completing their supply phase and moving into the installation commissioning phase. So deliveries have been happening over the last H2 as well as into Q1 and will get largely completed by Q2. So these are the revenues which are getting a bigger share, and that's why you see versus first quarter of last year in the segment results, the international revenue is better, while the Indian revenue on the other side, it's a mix of projects. You will see over this year, this will slowly change because the newer projects in India, specifically the 400 MLD desalination plant, will start picking up, the delivery start in Q4. So the manufacturing will happen over the next few quarters. And next year, you will have a lot of deliveries here. Of course, this mix will -- is dynamic because the INR6,000 crores worth of projects where we said we are preferred bidders, has a very good mix of international large complex projects, so when they also come in. So the mix is likely to swing, but I would allude you to look at us over, say, a three-, four-year kind of period, which is what we presented during the year end, and you saw we were about 40
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
