Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mazagon Dock Shipbuilders Ltd (BOM:543237, Financial) reported strong and consistent performance, with expectations to continue improving quarter on quarter.
- The company achieved a significant increase in margins, from 15% to 26%, attributed to efficient cost management and project execution.
- The order book stands at INR 40,400 crores, indicating a robust pipeline of projects.
- The company has achieved over 75% indigenization in its projects, reducing dependency on imported components.
- Mazagon Dock Shipbuilders Ltd (BOM:543237) has been conferred Navaratna status, providing significant advantages such as higher decision-making powers and better standing with foreign customers.
Negative Points
- Technical difficulties during the call led to interruptions and reconnections, affecting the clarity of some responses.
- The company faces long gestation periods for orders, with liabilities continuing post-delivery and commissioning, which can impact financials unpredictably.
- There is uncertainty regarding the continuation of nomination-based orders from the Ministry of Defense, which could affect future order inflows.
- The company has significant infrastructure augmentation plans, requiring an expenditure of INR 4,000 to INR 5,000 crores over the next two to five years, which could strain financial resources.
- Employee costs as a percentage of sales have decreased, but there is no clear plan for managing workforce size, which could impact operational efficiency.
Q & A Highlights
Highlights of Mazagon Dock Shipbuilders Ltd (BOM:543237) Q1 FY25 Earnings Call
Q: Can you provide an update on the status of P75 and P75(I) projects?
A: For P75, we have submitted prices and are awaiting final recommendations from the costing committee. For P75(I), field evaluation trials have been successful, and we are awaiting the next phase of technical discussions with the Navy. - Sanjeev Singhal, Chairman and Managing Director
Q: The margins this quarter are quite high. Were there any LD refunds?
A: No LD refunds were received this quarter. However, we expect LD refunds for two more submarines in the coming quarters. The high margins are due to the release of excess provisions for destroyer deliveries. - Sanjeev Singhal, Chairman and Managing Director
Q: Can you provide insights on the P77 project?
A: Currently, there is nothing to share regarding the P77 project. - Sanjeev Singhal, Chairman and Managing Director
Q: What is the current order book size, and how much is implementable before March '25?
A: The order book stands at INR40,400 crores. We are targeting an increase in revenue over the previous year, with more clarity expected after the second quarter. - Sanjeev Singhal, Chairman and Managing Director
Q: What are the benefits of the Navaratna status for Mazagon Dock Shipbuilders?
A: The Navaratna status provides significant advantages, including higher powers for the Board, quicker decision-making for CapEx, and better standing with foreign customers. - Sanjeev Singhal, Chairman and Managing Director
Q: Can you elaborate on the provision write-backs and their impact on margins?
A: Provision write-backs are due to the estimated cost to completion fluctuating. As we near project milestones, excess provisions are released, positively impacting profits. - Sanjeev Singhal, Chairman and Managing Director
Q: What are the expected deliveries for FY25 and FY26?
A: For FY25, we target three deliveries: one destroyer, one frigate, and the sixth submarine. For FY26, we plan to deliver the third frigate, one merchant ship, and one hospital vessel. - Biju George, Director - Shipbuilding
Q: What is the sustainable margin outlook beyond FY25?
A: Sustainable margins for nomination-based orders are around 8% PBT. However, efficiencies and early deliveries can positively impact margins. - Sanjeev Singhal, Chairman and Managing Director
Q: What is the status of the P75(I) order and its potential value?
A: The AON value for P75(I) as of 2018 is INR43,000 crores. We have submitted our bid, and the final numbers will be disclosed once evaluated. - Sanjeev Singhal, Chairman and Managing Director
Q: What is the impact of indigenization on raw material costs?
A: We have achieved over 75% indigenization. The remaining 20-25% is imported, with an estimated value of INR12,000 to INR13,000 crores for the destroyer project. - Biju George, Director - Shipbuilding
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
