Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Texmaco Rail & Engineering Ltd (BOM:533326, Financial) achieved record revenue of INR891.7 crore, a 35.8% increase compared to Q1 FY24.
- The company sold 1,967 units of wagons, reflecting a 48% increase from Q1 FY24.
- EBITDA reached INR97 crore, representing a 62% year-over-year growth with a margin of 10.9%.
- PAT for the period stood at INR40.2 crore, reflecting a 176% year-over-year increase.
- The company has a healthy order book of INR7,500 crore, with 60% from the freight car business and 88% of that from Indian Railways.
Negative Points
- Margins in the quarter were lower compared to the last three quarters, raising concerns about future profitability.
- The Infra Rail & Green Energy segment reported a negative EBIT of INR10.1 crore due to legacy contracts.
- The demerger process is still in progress with no clear timeline for completion, causing uncertainty.
- There are ongoing supply chain and design issues affecting production efficiency.
- The company faces challenges in realizing claims from government contracts, impacting cash flow.
Q & A Highlights
Q: The margins in the quarter were quite lukewarm compared to the last three quarters. What is the margin level one should look for? Is 9% a fair margin to look at?
A: Hemant Bhuwania, CFO: In Q1 this year, we reported an EBITDA of close to 11%. Moving forward, this will depend on the number of wagons executed and the economy of scale. We expect an upward trend in the execution cycle, which should result in better EBITDA percentages.
Q: How do you see the tendering pipeline for Railway wagons coming in this year? Are you expecting some tenders in the near future?
A: Hemant Bhuwania, CFO: The Railways plan to procure a little more than 30,000 wagons annually. This financial year, a small tender for around 2,000 wagons has come up, and we expect the balance to come within this financial year. Additionally, we foresee a strong pipeline for private procurement, particularly from industries like steel, mining, and cement.
Q: What is the update on the demerger of the business?
A: Indrajit Mookerjee, Executive Vice Chairman: We have received no objection from the statutory authority for the demerger. However, there are internal issues, such as arrangements with banks and legal matters, that we are currently addressing. The process typically takes about 9 to 12 months.
Q: Are we planning to sell any of our lands to raise additional funds?
A: Hemant Bhuwania, CFO: Currently, there is no plan to sell any of our land parcels. In fact, we are in the process of acquiring additional land through the acquisition of Jindal Rail.
Q: What is the manufacturing capacity of Jindal Rail, and what kind of investment would be required for a greenfield project of similar capacity?
A: Sudipta Mukherjee, MD: Jindal Rail's assessed capacity is around 2,200 wagons annually, which can be increased by 60% to 70% without significant CapEx. A greenfield project would require substantial investment and time, making the acquisition a more favorable option.
Q: Can you share some outlook or financial vision over the next three to five years?
A: Indrajit Mookerjee, Executive Vice Chairman: We aim to be the best-performing company in freight car manufacturing, with a focus on optimizing product mix, reducing costs, and gradually moving into passenger mobility. We also plan to increase our foundry capacity to meet global demand.
Q: How do you see the execution of wagons in the balance of this fiscal year?
A: Sudipta Mukherjee, MD: We are currently on a run rate of 750-plus wagons per month and expect to maintain or increase this number in the coming quarters. Our contracts spread up to September 2025, with some extending a few months beyond that.
Q: What is the update on the modern value in tenders?
A: Sudipta Mukherjee, MD: The tender has not yet been released. The previous draft indicated a spread over more than two years, but we await the revised tender details.
Q: In the previous call, you mentioned a target to improve EBITDA to 12.5% to 13%. Is there hope to reach that target this fiscal year?
A: Hemant Bhuwania, CFO: Yes, we are working towards achieving the 12.5% EBITDA target within this fiscal year.
Q: What would be your monthly rate in terms of wagon manufacturing going forward?
A: Sudipta Mukherjee, MD: Our capacity is more than 1,000 wagons per month, depending on the type of wagons. We aim to improve efficiency and maintain a consistent production rate, although the exact number may vary month to month.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
