Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CG Power & Industrial Solutions Ltd (BOM:500093, Financial) reported a 19% year-over-year sales growth for Q2 FY25, indicating strong business performance.
- The company achieved its highest ever adjusted PBT for Q2 at INR344 crores, showcasing effective financial management.
- Order intake for the quarter was INR3,196 crores, reflecting a 43% growth year-over-year, which suggests robust demand and business expansion.
- The unexecuted order backlog increased by 50% year-over-year to INR7,831 crores, providing a strong pipeline for future revenue.
- The company completed the acquisition of G.G. Tronics India Private Limited, which is expected to enhance its capabilities in the railway sector with new development orders.
Negative Points
- The PBT margin was lower at 13.1% of sales due to strategic expenses, including INR36 crores on acquisition-related costs.
- Margins in the railway business were impacted due to tender-based pricing pressures, affecting overall profitability.
- The Industrial Systems segment experienced a decline in PBIT margins, attributed to strategic expenses and a shift towards the railway business.
- The Motors business faced continued weakness, particularly in the LT segment, due to market conditions and high market share impact.
- Capacity expansions in motors and switchgear are expected to take more time, potentially delaying revenue contributions from these segments.
Q & A Highlights
Q: What is the outlook for the railway margins, and when can we expect a recovery?
A: Amar Kaul, Managing Director & CEO, explained that the railway business is currently in a transitional phase due to tender processes impacting margins. However, CG Power is focusing on exports and has received American Railroad Association certification, opening doors to the US market. The recovery will take time, but strategic execution is underway to strengthen the company.
Q: Can you provide an update on the railway propulsion system offering and its integration with the Kavach system?
A: Chidambaram Balakrishnan, Vice President - Railways, stated that the Kavach system is in the development phase, with 20% market share expected. Qualification is anticipated by January next year, allowing CG Power to offer bundled solutions with propulsion systems, particularly for Train 18.
Q: What is the potential for margins in the Power segment given the current market conditions?
A: Amar Kaul highlighted that the focus is on both top-line growth and margin improvement through operational excellence and commercial strategies. The company is well-positioned to capitalize on the demand for high-voltage transformers and export opportunities.
Q: How is the company addressing the competitive intensity in the Industrial Systems segment?
A: Amar Kaul mentioned that CG Power is expanding into new markets such as desalination and compressed biogas, and engaging with government agencies like EESL. The strategy involves increasing market size and improving operational excellence to enhance margins.
Q: What is the rationale behind the Renesas acquisition, and how does it fit into CG Power's semiconductor strategy?
A: Amar Kaul explained that the acquisition of Renesas' Radio Frequency Components business aims to enhance design capabilities in wireless communication and STATCOM. This aligns with CG Power's long-term strategy to build a comprehensive semiconductor business, including OSAT operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
