Q2 concall summary:
Strong growth in profitability is driven by increased focus on high value added products such as high efficiency conductors (HEC), Elastomeric cables and high end transformer oils which start yielding results.
Conductors order book as on Sep 30, 2016 stood at Rs 1524 crore compared to Rs 1606 crore as on June 30, 2016 in spite of shorter delivery cycle and Tariff based competitive bidding (TBCB). Export orders comprised 30% of current conductor order book.
Odisha conductor plant at Jharsuguda started production in Sep’16.
PGCIL/SEB approval process is underway by next quarter this approval will be in place.
Conductors – The Company has guided a conductor EBITDA of Rs 8500 per MT and the company has bettered that with a post forex adjusted EBITDA per MT of Rs 11463 in H1FY17, a jump of 89% from Rs 6079 crore in H1FY16. This was led by increased execution of HEC. Margin in H2FY17 is expected to be lower than H1FY17. Looking at planned execution of orders on hand the company expects the profitability for the full year has to be anywhere around Rs 10500/MT.
Conductor - post forex adjustment EBITDA per MT in Q2FY17 doubled to reach Rs 10944 from Rs 5422 in Q2FY16
Of the two existing conductor plant at Silvasa one has exhausted sales tax exemptions and the other plant currently has 2% GST exemption. Now with GST rollout that advantage goes off and only cost dynamics comes to play a crucial role. Given this market condition the new Jharsuguda plant which is closer to eastern and central market apart
from source of raw material will have better cost dynamics as far as catering to those regions.
EBITDA (post forex adjustment) of specialty oil was down by 6% to Rs 5775/KL in H1FY17 compared to Rs 6107/KL in H1FY16, on account of lower profitability in Transformer segment in domestic as well as exports market. Some price increase in automotive industrial products did not go through due to fluctuation in crude prices. Specialty oils margin in H2FY17 is expected to be impacted even though the company is taking various measures to manage pressure on margins. Considering whole year volume the specialty EBITDA margin is expected to average around Rs 5200/KL for full year.
Cables sales volume for H2FY17 is expected to be higher by 10% however the margin for second half is expected to be flat at H1FY17 levels.
Cables - Though the power cables segment is witnessing good demand, the prices are facing competitive pressure and thus there is no improvement in unit price and margin is expected going forward.
Cables - Increased ordering in Wind Mill and Solar & Defence segments led to strong performance in Elastomeric segment. However Optical Fibre cable segment continues to witness low demand
Conductors - HEC accounts for 15% of overall conductors’ revenue up from 5% in Q2FY16. Expects HEC to account for 12% of revenue in FY17. In next fiscal about 15% of revenue to come from HEC.
For the year the company is looking at a 10% growth in overall volume from three businesses. As far as profitability is concerned it is expecting 10-15% growth.
Some early T&D tenders started coming out from UDAY. We see positive results in couple of quarters from here.
Specialty oil -Sharjah Plant to be commissioned in Q3FY17