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Co was rep by Vir Advani, ED & President-Electro Mechanical Projects Group and B.Thiagarajan, ED & President Air Conditioning and Refrigeration Products.
Key takeaways of the call by Capital Mkt; Order backlog as on September 30, 2014 declined by 14% to Rs 1492 crore as the company was selective in pursuing orders which offered healthy margins and better commercial terms. Order inflow for Q2FY15 declined by 37% to Rs 558 crore (from about Rs 889 crore in Q2FY14) on high base. In corresponding previous period there were good number of large order but that is absent in Q2FY15.Operating Income for the quarter ended September 30, 2014 registered a growth of 9% Rs 637.97 crore and the operating profit (PBIDT excluding Other Non Operating Income) was down by 20% to Rs 20.61 crore as OPM skid by 120 bps to 3.2%. Fall in operating profit despite higher sales is largely due to increase in marketing, advertising, sales promotion expenses and provisioning. However helped by higher other income and lower interest cost the net profit was eventually higher by 20% to Rs 9.05 crore. Spurred by provisions write back the other income jumped by 180% to Rs 8.16 crore. The interest cost was down by 17% to Rs 10.57 crore for the quarter. Electro Mechanical Projects and Packaged Air-conditioning Systems (EMP&PAS): Sales for the quarter ended Sep 2014 has seen a marginal increase of 2% to Rs 396.13 crore but its segment profit declined by 5% to Rs 19.74 crore. Fall in segment profit is largely on account of higher input costs. The erosion in profitability of this business is now under control since legacy orders now form only a small portion of the order book.Cooling Products (CP): Sales for the quarter while increased by 21% (to Rs 204.96 crore), the segment profit grew an impressive 74% to Rs 14.17 crore. Though Q2 is typically a lean season for this line of business, an extended summer coupled with stable foreign exchange and commodity prices resulted in enhanced profitability.Professional Electronics and Industrial Systems (PE&IS): Revenues increased by 25% (to Rs 36.88 crore), while its segment profit registered a growth of 16% (to Rs 8.76 crore) due to enhanced demand. Legacy orders to be executed numbers about 80-85 and is valued worth about Rs 125 crore as end of Sep 2014. Due to client side pressure the company could not close these legacy projects as early as it wants to. But the company is to take some hard decisions in second half. Negative impact of closure of legacy orders may happen in H2FY15 when the orders get completed. EMP& PAS: Competitive intensity has not diminished in the last 6 months. Order booking is low as good quality orders are few. However the company have fairly healthy firm enquiry base and the order enquiry pipeline stand higher compared to corresponding last year at about Rs 3000 crore. Of the order in enquiry pipeline about 15% is from integrated commercial complexes, 13% from power, 12% from hospital and balance from metro, banks and others. Order inflow/finalization for H2FY15 is looking healthier and will be better than H1FY15 and H2FY14. EMP& PAS: Expecting revenue to be flat for FY15 and the operating margin for the whole year to be about 4%. EMP&PAS revenue to grew by about 10-15% in next fiscal i.e. FY16 and see operating margin trending up.Tax รข current year it will be about MAT and next year the company will return to normal tax. Cooling products: Volume growth for water cooler was driven by education institution and manufacturing segment. Modular cold room demand is driven QSR segment and this is expected to see growth going forward. The cooling products business is expected to drive growth considering that Blue Star enjoys a strong brand perception in a low penetrated market thereby offering significant potential.Cooling Products: Room AC the company grew 30% while the market grew by 20% and the company expect to grew in excess of 20%. Market share in H1FY15 including both retail and commercial segment is 8.5% compared to 8% in the corresponding period. While the market data for retail is GSK and for commercial is industry estimate. Next 6 months the focus on room air-conditioner business is improving dealer productivity. PE&IS: No pickup in demand from government, PSUs and defence segments but industrial investment has reviewed. So second half will be better than first half. Contraction in profit margin is largely due to change in biz mix. Overall prospect is good.Decision on Greenfield plant in southern region is put on hold as the division of Andhdra Pradesh into two states and likely tax exemption given to these states. Exports: UAE construction market is seeing aggressive growth led by building followed by infrastructure. About 9% average growth in expected going forward. Hospitality driving growth demand in Sri Lanka and Maldives.The electro mechanical projects business was adversely affected as the closure of specific legacy orders in its last phase is taking longer than expected. Further, the commercial construction industry is yet to revive. However, considering the imminent improvement in the economic climate, this business is likely to improve in the long term.The Company will continue its pursuit of prudent fiscal management in order to sustain this performance for the balance half of the year. |