Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved a year-on-year growth of 32% in revenue from operations.
- Significant improvement in margins, with EBITDA margin increasing to 20.1% from 17.4% in Q1 FY24.
- Highest ever quarterly PAT, reflecting careful project selection and execution expertise.
- Reduction in net working capital cycle by 17 days over Q4 FY24.
- Strong order book of INR8,828 crores, with additional INR1,000 crores from MHADA for the BDD project.
Negative Points
- Labor challenges due to industry-wide issues, impacting project execution.
- Gross debt increased to INR336 crores as of June 30, 2024, from INR326 crores as of March 31, 2024.
- Potential slowdown in public sector orders due to upcoming state elections in Maharashtra.
- High dependency on a few large projects like MHADA and CIDCO for revenue growth.
- Uncertainty in achieving the full-year target due to external factors like elections and monsoons.
Q & A Highlights
Q: My first question is on the labor issues you spoke about, which affected your Q1 numbers. Has this panning out as you speak and expect Q2 FY25 and the balance of the year, this issue to normalize?
A: Yeah, good morning. So labor is a challenge across industry. It's not only for Capacite. So what you can actually do as a company has improved upon the payment terms from earlier a month to 15 day good payment cycle for the labor force. And that has definitely resulted in some increase. So as we move forward, training and retaining the labor force essentially through labor contractors will be a continuous focus. And while if you say it will not be a challenge, no, it is a challenge for the industry because adequately trained labor force is a challenge across industries, especially in the building segment. But we do -- we will ensure that the full year target for the company is achieved if not surpassed.
Q: My second question is on the order inflow outlook, how do you think about how it has panned out in Q1? How do you think it's looking like in the balance of fiscal -- are you seeing the increasing momentum post the election more inquiry?
A: The big pipeline is strong across both public sector and private sector. Of course, there were central government elections. And then as per the CVC guidelines, you do have a blackout period. But we are back to bidding, and we do hope to achieve the target of INR3,000 crores in the current fiscal, if not more. This INR3,000 crores is excluding the fronts open up from BDD project of MHADA and get added into the order book. I just mentioned in my opening remarks, that another INR1,000 crores has opened up. So effectively the order book should be read as INR8,800 plus -- plus INR1,000 crores.
Q: My next question would be on the EBIT margins that we would be seeing for this year. How are you seeing those EBITDA margins for this year?
A: So Darshil we have commented in the last financial year that once our order execution speed improves beyond INR550 crores, you will see an expansion in the margins. That's what you are actually witnessing now because there is a reduction as a percentage to turnover in the fixed cost of the company. So there is no reason why these margins plus or minus 1% should be achievable for the full year, if not better.
Q: Are we looking to expand to new geographies, specifically Andhra Pradesh, considering Central Government allocation to the state for development of infrastructure?
A: Now, you are aware that prior to COVID, the company was present in seven cities. Now, that seven cities basically entail about 10 states to 11 states for other contractors. But we are a pure urban player working in tier one cities. So the company has enough experience of having executed projects and delivered on time with high credit quality across Chennai, Hyderabad, Bangalore, Pune, Mumbai, Goa. We have delivered more than six or seven projects in Delhi NCR and of course Mumbai MMR. So as I speak to you today, we are already there in Mumbai. We are in Mumbai MMR. We are there already in Gujarat, Ahmedabad, Gandhinagar. We are there in Delhi NCR, both in the private and public space. And at the moment, we are actively bidding for certain public sector projects like AIIMS and so on in Bangalore, Hyderabad, and for CPWD projects, apart from active bidding, which is going on in Maharashtra. So yes, there will be an expansion in the geographies. But that will, for at least the current financial year, be limited to what geographies we were servicing prior to COVID.
Q: What is the tax rate that we kind of will be put into for this year? Because I see last year we have seen a higher tax rate.
A: We are at 25% plus surcharge and that would be the tax rate applicable for the full year. If there are reversals in deferred tax, the tax rate would appear to be that much lower and when the reversals don't come, then the tax rate would look that much little bit higher for the full year. However, at the moment, answering your question, it is 25% plus surcharge.
Q: What is the kind of revenue, let's say which we did on the MHADA project in Q1? And something similar status update about the CIDCO, what is the work unavailable and what is the kind of execution that you have done in Q1? And what is our expectation for FY25?
A: On MHADA front, we earlier had INR1,200 crores plus to a INR1,400 crores of order front available. The company has executed in Q1 approximately INR134 crores of work. Out of this INR100 crores is certified sales and INR34 crores is ARPU sales approval. Similarly, on CIDCO front, the company has done certified sales in excess of INR64 crores. We believe that the momentum of CIDCO will be exponential. We have close to INR2,400 crores of land available to execute the project for execution. And we believe that in the current quarter, we should be close to about INR100 crores in CIDCO. And from next quarter onwards, we should be in excess of INR150 crores in CIDCO alone, further improving in quarter four.
Q: What is your guidance for revenues for '25 and '26?
A: So '25, we have already given a guidance of 25%. First quarter has happened and has panned out quite well. We see that, this will continue for the remaining of the financial year. So 25% minimum improvement year-on-year is given. I don't see any reason why we shouldn't exceed that substantially. And while the guidance has not been given, we have already said that we will grow by 25% CAGR from '23-'24 onwards for the next four years. So one year has gone. We have grown by that number. And other three years, we will grow on an incremental base at minimum 25%, if not there.
Q: Do you see any risk to this, especially from labor because multiple avenues have highlighted labor being a very big constraint for execution. Do you see that as a risk for you as well?
A: So we have addressed a certain part of that. And I'd like to speak to you today, we are in 90% manned across projects, manned as the sense, the labor force. And because it's monsoons and elections -- central elections behind us, West Bengal elections is not coming up this year, Bihar elections happening next year. So for the current part of the remaining fiscal, I
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
