Steelcast has reported excellent results-
Revenue 116 cr vs. 52 cr,qoq 93 cr.
EBITDA 24 cr. vs 12 cr.,qoq 18 cr.
margins have expanded to ~21%
Concall was held today. Some highlights:
→ Q1 capacity utilization improved to 53% vs. 49% in fy22.Current order book is 300 cr. and should continue to stay in this range.Expect to end FY23 with 57% utilization.
→ Seeing some slowness in offtake from Caterpillar.Q1 was inspite of that,would’ve done much better otherwise.
→ Expect margins to improve with op leverage kicking in more.RM has cooled off,EBITDA/kg is constant and won’t get hit.Realisations vs. fy22 could drop 3-4% in fy23.All supplies were on ex-work basis so logistic cost had 0 impact.
→ Have enough visibility to continue with quarterly growth.So every quarter should be better on volumes vs. Q1.
→ Being very cautious on new capex,since previous experience has been bad.Greenfield plant will take 2 years to commission.Will decide in March '23.
→ Company has concrete plans to reduce dependence on earth moving,mining segments…expect dependence to fall to 60% vs. 85% currently in 3-4 years.
→ Average selling price is 25-30% lower than competition in Europe & America.Globally,only a handful plants like Steelcast.
→ Seeing good demand in most segments but not chasing just volume growth,focus is on getting good margins as well.
→ Customer engagements are suggesting that Fy24 capacity utilization could be 70-75%.
→ Putting up 2 power plants which will take care of 80-90% of the requirement while co will purchase rest from SEB. This will result in significant power cost savings from FY24.
→ RM inventory at 40 days,total inventory at 143 days.
For probably the first time,Steelcast paid an interim dividend and wishes to continue doing so.Overall company seems to be in a sweet spot with little pinch from US/EU slowdown so far.
Disc.: Invested.Views are biased.