733 crores of new orders in this quarter?
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Q4FY25 Conference Call Summary
- Expecting a double digit growth in PEB segment, Ascent, Boilers and Process Equipment.
- Expect margin improvement due to increase in higher margin products, working capital days to reduce to 72 and long term target of 60 days. They are confident of strong double-digit profit growth. Over the next 3 years a 200 bp improvement in PBT is achievable.
- Targeting D/E to be 0.7 in the long term and interest to net sales to less than 4%.
- Order book for PEB India business is 780 crores, US business is $53.1 million. The India and US business are completely independent and most parts for US are sourced and produced locally (5% is imported which they can pass on). Hydraulics however has an overlap.
- US PEB business has quicker execution timeline and margins are significantly higher compared to India.
- The 10% gap of ROE and ROCE is due to interest costs and working capital days. They have a long term target of 30% ROCE which they will achieve by reducing the working capital day and growing their EBIT by selling higher margin products. However there would still be 5-7% gap due to interest cost structure.
- 100 crores capex is confirmed for the fiscal.
- Engineering services is not expected to improve the topline significantly but more of a margin enhancer.
- The de-prioritized segment which includes railways, steel, etc. contribute 35% of the consolidated revenue.
- Acquiring Telco which is a structural steel fabrication company located near Birmingham, USA, a promoter driven business with a revenue of $25 million and healthy margins.
- The PEB market in US is $8-10 Billion while the structural steel fab market is even more which helps them open new revenue stream.
- It has been approved by the board but not yet completed, planned to complete the deal in next few weeks and revenue stream from next quarter.
- Long term target to have a A+ credit rating.
- Peak revenue from Raebareli plant would be 36000 tons per annum which would be 38 crores gross sales aka 30 crores net sales per month
- Current capacity utilisation is 60-65% and once it reaches 75% they will look to expand.
Disclaimer: Tracking
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Results declared
Honestly results look disappointing compared to its peers
Also missed guidance by management on margin expansion.
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It’s a bad miss.
Pennar very rarely declare results on Saturday. I kind of figured they had missed some numbers somewhere when the result dates were declared!
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