Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue from operations for Q1 FY25 reached INR393 crore, representing a 22.5% increase from INR320 crore in Q1 last year.
- Smart metering segment saw a 35% growth in revenue to INR238 crore, driving overall topline growth.
- EBITDA increased by 40% from INR40 crore to INR56.13 crore, with EBITDA margin expanding by 180 basis points to 14.29%.
- Profit before tax doubled, growing by 113% to INR23 crore, and profit after tax surged by 145% to INR17 crore.
- Current order book is over INR3,700 crore, with 95% of it coming from the metering segment, ensuring continued revenue visibility.
Negative Points
- Debt equity ratio is around 0.76, indicating a relatively high level of leverage.
- The consumer and industrial product business does not normally have a large order book, leading to less revenue visibility in this segment.
- Lighting segment experienced 18 months of price erosion, impacting overall revenue from this segment.
- Execution of smart meter orders can take up to 24-27 months, potentially delaying revenue realization.
- Dependence on imported components like ICs and electronic parts, which could be affected by geopolitical situations and supply chain disruptions.
Q & A Highlights
Q: Can you provide some qualitative insights into the smart metering business and the traction in orders? Are the 10 crore orders you mentioned in previous presentations underway or at late stages?
A: Gautam Seth, CFO and Joint Managing Director: Approximately 11 crore meters have been ordered out to AMISPs, with HPL Electric supplying these meters. Out of the 22 crore sanctioned meters, about 11 crore have been given out. HPL Electric has a healthy order book of over INR3,700 crore, with 95-98% of this being meters. The inquiry banks are strong, and we are actively supplying to all top AMISPs. The overall scenario is positive, and the demand for smart meters is expected to remain high.
Q: The recent order of INR2,100 crore, was it from a single AMISP or aggregated across multiple AMISPs? Also, what is the current capacity for smart metering?
A: Gautam Seth, CFO and Joint Managing Director: The INR2,100 crore order is largely from a single AMISP. Our capacity utilization is increasing, and we are shifting more towards smart meters, which now constitute about 95% of our production. We have automated many of our production lines, and the capacity ramp-up is ongoing.
Q: Considering our strong financial performance, are there any plans to strengthen our equity capital base to reduce leverage ratios further? What are our strategies for debt management moving forward?
A: Gautam Seth, CFO and Joint Managing Director: Our debt-equity ratio is around 0.76, and we have maintained this over the last few quarters. While ramping up production, the debt has increased slightly, but we are conscious of managing it. The smart meter business, with its secured payments, will eventually reduce working capital requirements. We are evaluating options to bring down debt but have no immediate plans to change the equity structure.
Q: Are there any 5G infrastructure projects to boost the consumer and industrial segments? Are these strategies sustainable or just a temporary boost?
A: Gautam Seth, CFO and Joint Managing Director: We are a preferred supplier to large telecom players and intermediaries for 5G infrastructure. Our products, including electrical equipment, wires, and cables, are regularly supplied for 5G projects. This is a continuous requirement, and we have a good track record with multiple repeat orders.
Q: With the recent turnaround in the lighting segment, do you believe this growth is sustainable? Could it lead to a significant market share in the future?
A: Gautam Seth, CFO and Joint Managing Director: The lighting segment has stabilized after 18 months of price erosion. The channel is not heavily stocked, and the demand is there. The unorganized segment has shrunk, and we anticipate growth to return in the lighting segment from Q3 onwards, driven by construction, real estate, and infrastructure projects.
Q: What is our plan to increase our smart metering capacity from the current capacity of 11 million units?
A: Gautam Seth, CFO and Joint Managing Director: We aim to reach optimum capacity by the end of the year or early next year. The capacity is flexible, and we can work 16 to 24 hours in our factories. We are continuously building our capacities to meet future demand without significant new investments.
Q: What sort of revenue growth do we expect going forward? Is there any change from the previous guidance?
A: Gautam Seth, CFO and Joint Managing Director: We expect solid growth, with the first quarter showing a 35% increase. The second half of the year is expected to see even higher growth, especially in the smart metering segment. The overall business outlook is positive, and we anticipate growth to exceed our previous expectations.
Q: Do we expect the margin level seen in this quarter to be sustainable going forward? What is the major reason behind this expansion?
A: Gautam Seth, CFO and Joint Managing Director: The 15-16% EBITDA margin in the smart metering segment is sustainable. The dominant share of smart meters within the metering segment contributes to this margin expansion. Raw material prices have been stable, and we do not foresee significant supply chain disruptions affecting margins.
Q: How is Q2 revenue execution looking versus Q1? Are we seeing secular improvement through the year?
A: Gautam Seth, CFO and Joint Managing Director: The metering segment is expected to perform better in Q2 compared to Q1. Other products, such as lighting, wires, and cables, are also seeing good traction. Overall, Q2 should be slightly better than Q1, with continued growth and stable margins.
Q: Are we seeing new players entering the smart metering segment? What would the competitive landscape look like?
A: Gautam Seth, CFO and Joint Managing Director: New players are entering the market, but HPL Electric has a strong R&D, large capacity, and a long history in the metering industry. We focus on quality and technology, which gives us a competitive edge. While the market is open, our strengths position us well to capture significant business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
