Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IRCON International Ltd (BOM:541956, Financial) has been upgraded to Navratna status by DPE, reflecting strong financial performance and credibility.
- The company reported its highest-ever turnover and PAT for FY24, with total revenue reaching INR12,871 crores, up by 20% from the previous year.
- PAT increased by 21.5% to INR930 crores compared to INR765 crores in the previous year.
- Earnings per share rose to INR9.88 per equity share in FY24 from INR8.14 in FY23.
- The Board of Directors recommended a final dividend of INR1.3 per equity share, bringing the total dividend for the year to INR3.10 per equity share.
Negative Points
- The company expects flattish growth in revenue for the next financial year due to the current order book and market conditions.
- Margins are expected to remain stable but not increase due to intense competition and pressure on margins.
- One of the coal connectivity projects, CERL, is running into losses and is expected to continue incurring losses for another two years.
- The first quarter of the next financial year has seen a slowdown in order inflows due to elections, impacting the company's ability to provide a clear outlook.
- The company faces significant competition in bidding for new projects, which may affect its ability to secure new orders and maintain growth.
Q & A Highlights
Q: What percentage of the order book is linked to high-speed rail contracts, and how do you see this evolving over the next two to three years?
A: The order value of the bullet train project is roughly INR5,200 crores, which is about 19% to 20% of our order book. We are working towards the timelines announced by the Prime Minister, with certain stretches expected to open in '25-'26 and '26-'27, and full connectivity a year after that.
Q: What is the expected order book for FY25?
A: In FY23-24, the order book increased by about INR10,000 crores from new projects. For FY25, we aim to increase the order book to match or exceed our revenue for the current year, but this will depend on the number of bids and tenders coming out. The first quarter has seen a slowdown due to elections.
Q: Are you maintaining your guidance of 15% to 20% CAGR growth over the next two to three years?
A: We aim to double our turnover over four to five years. While we have grown from INR10,000 crores to almost INR13,000 crores, year-on-year growth may not always be 10% to 20%. We expect flattish growth for the next financial year, depending on the orders procured this year.
Q: What initiatives are being taken to increase margins?
A: Our margins are already quite good compared to the industry. We aim to maintain our margins rather than increase them due to intense competition. We expect PAT margins to remain around 7% to 7.5%.
Q: Can the current margin levels be replicated going forward?
A: This quarter's higher margins were partly due to a one-off income from an arbitration settlement related to a South Africa project. Overall, we aim to maintain PAT margins at about 7% to 7.5% going forward.
Q: Are there any large projects in the pipeline that were previously put on hold?
A: Some large domestic projects were delayed due to elections. We are targeting various bids in both domestic and international markets. We hope to see positive results after the June quarter.
Q: What is the status of investments in SPVs and the solar project?
A: We have invested about INR112 crores in the solar project and will infuse another INR89 crores this year. Cumulative investments in all SPVs and joint ventures are around INR2,000 crores to INR2,200 crores, with another INR1,000 crores to INR1,100 crores expected over the next two years.
Q: Can you explain the recent loss from an associate and its future impact?
A: The loss of about INR25 crores this year is from our coal connectivity project, CERL. This project will continue to incur losses for another one to two years until the traffic from this line picks up.
Q: What was the quantum of the arbitration claim that positively impacted margins?
A: The overall quantum was INR97 crores, with an impact of about INR66 crores on the P&L. INR22 crores was booked in other income, and INR44 crores in project revenue.
Q: What is the expected tax rate going forward?
A: The tax rate is expected to be around 25%. The variation in Q4 was due to deferred tax entries and a one-time tax refund last year.
Q: Are there plans to monetize HAM projects?
A: We have taken steps towards asset monetization and have received in-principle approval from the board. We are awaiting further approvals from the Ministry of Railways and other government bodies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
