TD Power Systems

Stock Opportunities Not-so-Hidden Gems
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Investment theme: turnaround
Industry type: Cyclical – Capital Goods

TD Power Systems(TDPS) is one of the leading manufacturers of AC Generators with output capacity in the range of 1 MW to 200 MW for prime movers, such as steam turbines, hydro turbines, diesel engines, wind turbines, gas engines and gas turbines. Co has tie ups with global OEMs to manufacturer and supply generators. TDPS is market leader in domestic market for sub 52MV generators. Company has 3 manufacturing base in Bangalore of which one is dedicated capacity for large generators with capacity 52MV-200MV. EBITDA margin – 15+%

TDPS is also into EPC and Projects business. Management ventured into these businesses to demonstrate capability of its generators when company did not have any products references during initial years. Management has ramped down projects business and will fully exit EPC business by Q1FY16.

EPC – currently loss making, will exit fully once they commission its last 2 projects by q1FY16. During FY15, EPC division posted EBITDA loss of 24Cr on rev of 157cr.

Projects (TG Island) – Except Japan subsidiary, all other business was ramped down during past 2 years as this was resulting in competition with existing customers. May close entire business once existing order book is over - management is yet to take a call.
EBITDA margin: ~5%

Manufacturing generator is core strength for TDPS and management expects to earn 15%+ margin on current order book. As company fully exit loss making EPC business and execute profitable generator manufacturing orders, TDPS could potentially turn profitable with health return ratios.

Market Cap: 1023Cr.
Cash: 272 Cr (~60-65cr is with EPC subsidiary which would be used to pay payables)
Debt: 0
Pending order book: 464.4Cr (manufacturing: 339.4cr, projects: 112.7 Cr, EPC: 12Cr)
Attaching VP business quality template.
Disc: TDPS_VP-Business-Quality-Ver3 (2).xlsx (39.2 KB) Invested.

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Company was repr by Nikhil Kumar, MD.Key takeaways of call by Capital Mkt
Order inflow in Q1FY16 for manufacturing is Rs 72 crore and for projects is Rs 29 crore. The order backlog as end of June 2015 was Rs 463.2 crore and of which about Rs 299.7 crore was domestic, Rs 119.7 crore exports and Rs 43.8 crore was deemed exports. Of the total order backlog the share of manufacturing was about Rs 320.2 crore (domestic Rs 156.7 crore and balance are exports/deemed exports), projects is about Rs 136.6 crore and EPC is Rs 6.5 crore.Manufacturing revenue growth for FY16 is now expected at 10-15% as domestic market continued to be weak. The small hydro turbine segment witnessed dropped by 90% to 5 units from 50-60 sets earlier. The company had over 70% share in small hydro turbine segment. Similarly there is change in steam turbine generator dynamics as well.
EBITDA Margin for FY16 will be flat at 13.5%. Realizations for us are down due to market conditions this negates the benefits on account of benign material cost as well as cost reductions.
Other interest income and forex fluctuation which is on negative side. The forex loss is Rs 2 crore in Q1FY16.One of our major technology partners is currently negotiating for sourcing Steam turbines from India for their global requirement. The deal is yet to be signed and once that happen the supply from India to them from the company’s plants start from next year.Indian Railways currently buys generators from BHEL and GE and the company is looking at catering to this segment.Currently about 16% of exports are from Eurozone.

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CONFERENCE CALL

TD Power Systems

Manufacturing revenue guidance for FY16 marginally revised downwards

TD Power Systems held a conference call on Feb 4, 2016 to discuss the performance of the company for the quarter and nine month ended December 2015 and future outlook
Key takeaways of the call

Order book as end of Dec 2015 stood at Rs 373.5 crore and of which manufacturing order book was Rs 297 crore, Projects order book was Rs 73.7 crore and EPC order book was Rs 2.3 crore.

Manufacturing order inflow for Q3FY16 is Rs 81 crore (of which exports is Rs 34 crore) compared to Rs 85 crore in the corresponding previous period. The order inflow for 9mFY16 was Rs 250 crore. Project order inflow in Q3FY16 is Rs 5.7 crore.

Manufacturing revenue for FY16 will register a marginal growth over FY15 manufacturing revenue. The EBITA margin for FY16 is to be about 11%. Initially the company projected a manufacturing sale of Rs 380-385 crore for FY16 and that has now cut-down to Rs 375 crore. Some of customers in hydro segment have postponed their delivery and this has shifted significant amount of sales into Q1FY17 from end of FY16 leading to downward revision in initial revenue and profit guidance.

Project business including Japan Subsidiary - Maintain guidance with STO of Rs 120-130 crore and EBITDA margin of 11-11.5% for FY16.

US Loco order is going to happen in next year. The factor ready generators tested and ready for despatch.

Sees traction in orders for gas and hydro machines apart from railway generator for US Loco. Inflow of US Loco order in FY17 is certain the quantum of order is still uncertain. The company has to execute German order for 20 Gas machines of 10 mw each during May-Sep 2016. In addition good order inflow from hydro will facilitate the manufacturing business to register double digit growth in FY17.

Currently the hydro machines business is export driven with exports accounting for 90% of share of total business of the company. Order traction coming from Central America, SEA and Africa. Currently the company have good pipeline of orders

Other income of Rs 12 crore comprise of Rs 8 crore of interest and forex gain of Rs 3.8 crore.

The company accounted RS 10 crore of revenue and provision of doubtful debt (part of other expenses) in Q3FY16 as this receivables from a customer is under litigation.

Acquired a shell company in Germany and the company applied for name change. This company will handle the European business of the company. This new company will expect to generate revenue next fiscal. Currently the company generates a income of Euro 15 mln in Europe and that will be routed through this German subsidiary. Equity investment in this German subsidiary is Euro 25 million.

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CONFERENCE CALL - from Capital Markets

Exports to drive growth in FY17

TD Power Systems held a conference call on May 13, 2016. In the conference call the company was represented by Nikhil Kumar, CMD and Prabhakar, CFO.

Key takeaways of the call

  • Order backlog as end of March 31, 2016 stood at Rs 375.1 crore and of which domestic orders were Rs 195.3 crore, exports were Rs 122.6 crore and deemed exports were about Rs 57.2 crore. In terms of vertical while the manufacturing account about Rs 294.7 crore (of which domestic is Rs 114.9 crore and balance are exports & deemed exports), project business was Rs 78.9 crore (all are domestic orders) and EPC business was Rs 1.6 crore.

  • Manufacturing order intake for Q4FY16 was about Rs 100 crore compared to Rs 83 crore in corresponding previous period. Order intake Rs 350 432 crore 198 crore

  • Project business order intake for Q4FY16 was Rs 21 crore and Rs 64 crore for full year.

  • Sales revenue of Manufacturing business for FY17 is expected to register a growth 12-15%. EBITDA margin expected for FY17 for manufacturing business is about 10.5-11.5%.

  • In manufacturing business, the growth in revenue is expected to be driven by gas turbines, moderate growth in hydro. The domestic steam turbine and hydro business is expected to be weak with lower volumes. Moderate growth in volume in case of railway exports is expected starting from Q3FY17 onwards.

  • Project business sale for FY17 is expected at about Rs 95-100 crore. The EBITDA was expected to be about Rs 5-6 crore for FY17.

  • EPC business has come to a conclusion. No further loss is expected going forward in current fiscal (FY17) as the company has completely provided for any expected losses. Running expenses of about Rs 8-10 lakh per month is expected to continue till Q3FY17 and thereafter that will also disappear.

  • The company has made a provision of about Rs 5.11 crore towards doubtful debts in case of project business done 3 years ago. This relates to 2X13 mw turbines sold to Indian customers by Japan Office.

  • Expense in case of mfg business has gone up and there is no provision in case of manufacturing business.

  • US operation has ceased and no provision towards it.

  • Gas business is all exports with major customer segment being IPP and captive power. Western Europe and Australia are the major customer markets.

  • Competition is aggressive even in export markets with European players fighting back with price cuts. This is temporary phenomenon and will disappear going forward in medium to long term.

  • The five generator supplied to America customers is already installed in locomotives and are under trial.

  • Captive power market in domestic market in FY16 was about 600 mw down from about 3000 MW in 2012. This is not expected to go down further. Enquiries are there but that is not got converted to orders in last year. Steam turbines are having a delivery period of 9 months minimum. So this year growth for domestic manufacturer of small turbine manufacturers is expected to be export driven.

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what is the reason behind fall of TD power…

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Q4 2017 Concall Notes

Attendees:
Nikhil Kumar, CEO- MD
KG Prabhakar- CFO

Investor Presentation - http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/5e495f92-13ca-4e27-a305-befa772d035e.pdf

Overall Guidance
Guidance of FY18 -
Manufacturing business - 400 Crores - EBITDA margin of 8-9%
Q1 will be weak; H1 to be ~ 45% of the guidance given
Projects business - ?
While the opening order book is flat (300 Crores) -Need to add another 100 Crores, don’t see that as a challenge. Overall expect around 15% growth given the momentum

Domestic Market
All time low order inflow in Q4 FY17. Order inflow this quarter was ~ 96 Crores v/s 125 Crores in the same quarter previous year. GIven the order inflows are an all-time low maybe an indication of bottoming out. However management is unsure of the domestic market even in FY18
Domestic market is still subdued however showing some signs of green shoots. Expect sugar to do well this year. Expect policy changes in the small-hydro segment which will revive this market. Cement is also looking strong. Seeing enquires from cement & steel players.
Have maintained market share in the domestic business.
Expect some orders from Railways and MNC Wind OEMs in India. These orders will be significant volumes, however if they do get finalized they will be not substantial in FY18, however it will be significant in FY19 and even more significant in FY20. Expect a final outcome on these orders by end of Q1’ 18 or by July.
The momentum is strong in domestic markets - however it will not impact in FY18 , if the momentum continues in H2 FY18, then FY19 will be much better.
Cycle is clearly changing. Even last year around Sep - the things were changing however, demon and other disruptions happened. This time hopefully things should change for the better.
Market of captive power plants has gone down from ~1000+ MW to ~ 300 MW. The market is abysmally low at this moment and has reached all time lows- however TDPS hasn’t lost market share. Pricing is brutal though
TD Power is not diluting on payment terms but is fighting on price
Expecting some orders from Siemens which will fructify in FY19 this is largely in the 52 MW -200 MW

Exports Segment
Exports business will be continue to the mainstay of the business. FY18 order inflow looks strong and also FY19 looks strong
Pipeline for Hydro business is very strong- Business getting traction from South East Asia and Europe and Central Americas.
Last year did 45 machines in the US locomotive segment. This year already have order for 15 machines. Pretty much sure that we will be able to better the volumes achieved last year
Exchange loss this year was INR 6.7 Crores
Machines which were supposed to be dispatched this quarter couldn’t be dispatched so
Order book - 74% exports + deemed exports
Rupee Appreciation - Has impacted us- have taken an exchange loss. Euro has come back from 67-68 levels however dollar is still a challenge
Globally there is over-capacity,so it is very tough to get orders.

Other Points
Cost reduction - Shifted production from one unit to other unit. Down-sized management team. Have re-opened the all the units given the increase in volumes we are seeing. Not hiring at the moment. So fixed costs may increase slightly from these levels.
Product mix has changed dramatically -average price of the machine has reduced dramatically
We need to increase capacity utilization in our business. Even at 400 Crores we will be ~ 55% utilizations. We need big volume orders, if we are able to do that then we can do 14-15% EBIT margins. Peak reveneus would be ~ 750 Crores excluding the 50 MW -200MW segment. That segment can do ~ 100 Crores in revenues.
Capacities are very low in the supply side and demand is sluggish. So competition is high and some competitors are getting desperate. Some capacity has reduced- however the pace of reduction in capacity hasn’t been at the pace at which it should be
. Competitors in segments
Hydro - 5-6 companies globally
Wind - Competition is lower in this segment. However we are focusing only in the domestic market. Given the current prices Wind power OEMs only can afford Indian players. So lot of indigenisation is happening. On the domestic side there are only 3-4 players - TD Power, ABB, Siemens
Locomotive - It’s a captive business. So competition is largely with their internal dept
EPC Segment - Had 2 projects a)Dalmiya Cement - completely out of it b) Shree Cement - June 15th is the date where we will cease our contracts.
Projects Segment - Legacy business. Can do anywhere between 60-100 Crores depending on the year. However don’t want to pursue growth in this segment. We will ramp it down when the time is opportune.
If there is a big order or scale up in the business, then can take a quarter or so to ramp up.

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4b5243bf-cd20-4786-90a3-01212d401683.pdf (66.5 KB)

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Thanks @rohitbalakrish_for sharing the info. The share reacted to this…

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Hi @desaidhwanil ,
I would like to know your thoughts on TD power systems post Q2 management commentary.
Siemens and GE capacity reduction may not directly benefit TD but they will definitely lose their locomotive business from GE.Siemens also seeing 70% drop in large gas capacity power.Domestic market is shrinking Y-O-Y and still no revival seen in wind in next 6 months.
On the positive side , looks like there is a big pipeline of orders in hydro yet to be finalized.Good progress seen in Traction motors as well and domestic revival in Capex will also increase orders for TD

How do you see the company’s business going forward say in next 5 years.I also could not understand your question regarding there is no alternates for Gas Turbine in industry as it provides large peak/initial power - would be great if you can throw some light on that.

Thanks
Anindya

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@stockjobinvest,

Sorry for late reply as I forgot about the post moving to this thread.

I think overall, if both GE and Siemens reduce their production by shutting the capacities, it will be good for TD Power as at the moment the market is witnessing extremely high competition and thus shrinking margins. GE Locomotive business line getting impacted is definitely a negative, but the scale seems low as management said, the number from that business line is not very high. I think, large gas based power generator business- there is hardly any business for TD in this segment at the moment. So, impact is likely to be insignificant.

What I like about the business is that, with the kind of customer set that they have and have been working for many years- it creates significant entry barriers for others. In fact, in generator business, there may not be other players (other than MNCs) who will match the competence and track record of TD.

Another thing that I liked about the company was, it withered an excruciatingly tough business cycle (just look at the demand drop in domestic side)- however, what they did right was, developed capabilities across new segments such as Hydro,wind and traction motors. Thus, the reliance on thermal power is reduced significantly. I think, that is structurally a big positive because in next down cycle- company will be able to weather the storm with less damage. As in all cyclicals, what we can rely on is the “Supply” side- while demand is completely unpredictable. However, whenever it returns, the sheer amount of operating leverage, will make it worth to wait!

On my comment on there is no alternate to gas turbine to peaking power- Generally power from renewable sources in “infirm” power- i.e. one can not predict the quantum and timing of power. On the other hand, industry will always need “firm” power- because one can not rely on sun to shine or wind to blow for running a process plant or a foundry. Thus, one will need fossil fuel based power generation- for the comfort of predictability and on demand generation. Natural gas is the cleanest fossil fuel- hence the “greenest” way to generate “firm” power is through natural gas. I can only foresee one situation, where fossil fuel based power can be replaced with renewable on very large scale - is when “flow battery” becomes commercially viable and we can store large amount of electricity at very low cost. However, my understanding is that we are till nowhere near that time.

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TD POWER LTD
Higlights of Q3 FY18 and Nine month FY18 performance

  • Q3 Performance
    o Standalone
     Total revenue grows 36 % to 99 Crore from 56 Crore
     PBT for the quarter stands at 0.58 Cr v/s loss of 11 Crore same quarter last year.
     PAT stands at 20 Cr v/s loss of 3 crore loss in same quarter last year.
  • Nine Month Performance
    o Standalone
     Total revenue grow to 294 Cr from 253 Cr nine month last year
     PAT stands at 7 Cr from 11 Cr loss nine month last year
  • TDPS : Subsidiary of company receive credit guarantee from bank which was earlier restricted . Commission was 17.02 Cr for recovery. Other commission include 3.12 Cr.
  • Segment Wise Performance
    o Manufacturing Business
     Total revenue grew to 95 Cr from 57 Cr last year same quarter.
     Total revenue grew to 264 Cr from 240 Cr comparing to nine month performance last year.
     Export Business
    • 71 % of manufacturing revenue come from export
    • Order book stand at 1016 Cr out of which 64 % comprises of export
    • Order inflow remain at 98 Cr v/s 54 Cr last year same quarter
    • Order inflow for export stand at 68 Cr v/s 40 Cr last year
    o Project Business
     Total revenue stand at 1.8 Cr v/s 13 Cr in Q3 FY17
     Total revenue stand at 30 Cr v/s 450 Cr in 9 month FY17
     Order book stand at 54 Cr
  • Consolidated business for 3rd quarter
    o Revenue stands at 99 Cr v/s 68 Cr in Q3 last year
    o Revenue stands at 290 Cr v/s 265 Cr in Q3 last year
    o PAT stands at 2 Cr v/s 12 Cr in Q3 in last year
    o PAT stands at 18 Cr v/s 12 Cr in 9 month last year
  • Order book

o 1071 Cr is current order book out of which
 1017 is from manufacturing which include 116 Cr of deemed export , 96 Cr from Domestic , 750 Cr in railway business and 55 Cr of export.
 Project business order book is 54 Cr.

  • Cash position is 167 Cr.
  • Market Situation & Guidance
    o In FY18, manufacturing business top-line range will be between 380 Cr to 400 Cr with EBITDA margin of 8-9 %.
    o In FY18, project business top-line range will be around 58 Cr.
  • Order Inflow
    o Strong order inflow which will execute in Q4 FY18 and Q1 of FY19. Hydro project running in domestic market is showing recovery by taking large orders.
    o New Machine: OEMS are very strong and see impact of order flow in TDPS this month and next month.
  • Gas Engine Business
    o It is showing strong growth and there will be strong growth in in 2019 and it will benefit company directly.
  • State of business
    o Large orders are coming from Europe of 42 MW more such job in pipeline. There is significant increase in acceptance of product in Europe for waste energy plant.
  • Wind Business
    o OEM customers get a big order which will execute in FY19. Also well placed few orders in generators package greater than 55 MW.
    Q&A
  • Speak more about Hydro business?
    o There are 7-8 jobs a year in India for refurbishment. So company existing 20-30 Mega Watt machines can go for refurbishment and then they could operate the plant replacing 30-40 old parts and they may be able to get 10-15 % more power output and increase efficiency. Market size for company is 50-60 Cr . Company had taken the order last month. Company don’t require new licence and construction. Basically it is replacing old part from machine. Company is also comfortable from the price getting at this moment.
  • Did Gas engine business will continue to grow strong?
    o Company partners indicated a very strong growth this and next year. They are being prepared for large increase in volume and company is ready for it.
  • What will be company outlook on wind business?
    o Company have customers who have order with payments in line and ready to place order for generator. We are the only suitable generator maker for him. Order will come in Q4 FY18 but execution of revenue will be done in FY19.
    o Overall wind business for new machines is very bad, but it is very small part of business and company is not dependent on it.
  • Any planning for Domestic CAPEX is going on?
    o Lot of enquiry are increasing in domestic business. There will be lot of business coming in near future for waste energy plant. More and more municipality putting their plant together and order will start. So a huge business for small carbo thermal power plant will come. It will start with 5-6 plant a year and may end with 25-30 plant in next 2-3 years. Plant size will be in range of 12-15 MW in some cases it will be above 30 MW and that will be good for company.
    o On capacity power plant side- Cement, Sugar, Steel is larger dependent on CAPEX cycle. So it will continue in low form.
  • Is the pricing which company is getting is comfortable?
    o In general domestic market is pretty hard in pricing In TDPS export side presence is reduce and company is getting tremendous benefit from current exchange rate . So it will be a big game change for number of company in coming next year. If Euro remains in range of 70-80 rs then it will be a big game changer.
  • Did gross margin of 30-35 % will sustain for next 2-3 years?
    o It is possible especially when current exchange rate is likely high .
  • What steps will company take to control fix expenses?
    o Tight control on general factory expenses, travelling expenses, communication expenses, etc. So company don’t see major change. Employee expense is a major part of fix expenses. Company don’t expect to reduce any manpower. Company has to give appropriate salary YOY.
  • How would be the domestic market in FY19?
    o Overall order book is in line for next 3-4 month and order book is same as last year in Q1, Q2,Q3 but in last year Q4 was 99 Cr and this time it will be much more higher than that year. Every order company get now will get executed in FY19 and in some cases FY 20.
  • Does company get all orders by 1-2 month?
    o There is a big pipeline that will continue to Q4 FY18 or even Q1 FY19 . At this stage company is very positive. Lot of OEM partner get the order and company is chosen as generator partner. There is a small matter of some price issue, some contractual issue. It will solve soon .From April 2018 to December 2018 Management is very optimistic for the first time after a very long time for FY20.
    o Company is doing more and more intro in international market and getting more and more acceptance from export market.
  • Company’s cash value is reduced so when it will come back to appropriate level?
    o All of it goes to working capital. Working capital is going to be tight. Company can’t tell you when it will be get back to appropriate level but it will not spend on expense side, CAPEX side all will go to working capital only as cycle increase it will get back.
  • Guarantee commission for subsidiary is received or pending?
    o It is received
  • What is cycle time for refurbishment for Hydro refurbishment and is there any efficiency commitment make to customer and is this business sustainable?
    o Nothing can be predictable beyond 12-18 months at this point of time. It takes around 8-10 months for hydro refurbishment cycle. Depending on funding in long term, company range 4-5 order should come and of course there are efficiency commitment and technical commitments.
  • In past waste energy project were not be successful so what is making company positive this time and what will be the business model ?
    o Business Model: EPC will be the contractor and then company take order from EPC.
    o It gives comfort at this stage as order and plant are coming for it. It could be static business for at least 5 year.
  • Once company get order is there any chance of cancelation?
    o Very rare
  • Will growth come from railway segment in FY19?
    o No real growth will come from FY20 and same business will continue in FY 19.
  • Can company give more outlook on export?
    o Company have good order of 42 MW of machine from Western Europe and great acceptance with heavy enquiry. Once company get accepted then it will be difficult for Europe manufacturer to compete with us.
  • Any update on US theme?
    o There is steady business coming from US in steam turbine side. Mostly coming out of Ethanol base plants out of mid-west in US.
  • On gas engine side does company add new customer?
    o Yes company have but still on trial stage and volume are not very large when company will complete qualification, company will update for it. Right now existing customers are doing very well. 50 % of business is coming from Europe in general and rest from all over the world like China, South East Asia, Australia and Africa also.
  • How much company order book in export is there in value?
    o Company can’t give number it is around 60 machines in number.
  • Company need to do 400 Cr business for Breakeven point, can company sustain it?
    o Company will get clear everything in FY 19 and Yes Company will do it for further growth and sustainability can be possibly in upcoming year. It will be very critical for company for company will receive very large number of order and company have to deliver it on time and do good job then nothing can stop company to grow.
    o In FY19 company will get additional order from railway project which provide a big jump in numbers .
  • Any CAPEX plan further?
    o There is a 27-28 Cr regular CAPEX every year out of which 1/3rd will go in refurbishment and for maintaining capacity here and there.
    o There will be a small CAPEX of 12 Crore on railway segment.
  • Any consolidation seen in market?
    o No right now people are talking about closing the plants. There has been global over capacity from past 5 years. Everyone is struggling to deal with demand is 50 % of supply. Big players are not going to tolerate this and they not see a dramatically change in business for future. It means that once big player get out of business will create a great opportunity for people in tier-2.
  • What does term of trade in Tuffer refer?
    o It refer to receivables not paying on time.
  • Company refer 380-400 Cr order for FY18?
    o Yes it came from overseas and from existing customer . Company is comfortable till 750 Cr.
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Can someone please post the transcripts or recordings of con calls? Unable to find them.

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Demand for smaller size turbines set to go up?

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Hi All,

The co. has shown tremendous strength by creating a mark in export market as domestic market shrunk in size. Sales from exports and deemed exports contribute roughly 70% of manufacturing revenues now from nearly 30% in fy12. The co. has also diversified its product portfolio all this while with contribution from steam segment coming down to nearly 40% now from 85% in fy12.

The co. is operating at approx 50% capacity which is its break-even point and any up tick in volumes could lead to operating leverage kicking in.

As far as visibility is concerned, the management sounded bullish for fy19 in last concall particularly with respect to export market on back of reducing supply in the co.’s area of focus and acceptance for its products for various applications with various partner OEMs. Though the management reiterates on its inability to see beyond 12 months, could the co. be at a critical juncture with support from export market, visibility of the 750 cr order for traction motors to be executed across 10 years and possible revival on domestic front in 2-3 years? With economic activity in India improving and capacity utilisation levels slowly inching up, its not far when capacity expansions start in a couple of years. Domestic market could propel capacity utilisation for TDPS and lead to a sweet operating leverage.

Any threat to traditional ways of setting up captive power plants needs to be watched with respect to domestic market. Euro is favourable at the moment and needs to be watched for any u-turn affecting realisations for export market. Would appreciate any positive/negative thoughts on my understanding of the business and its future.

Thanks.

Disc. - Invested

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i think you have summarize it pretty well… Wind revival could also be good for TD as he has tied up with seimens gamesha for wind generators.

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Results for Q4 declared

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why the company had declared dividends despite in losses in last financial year?

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anyone attended Investor meet?. Looks like stock hit fresh 52 week low after this meet.

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Is there a way to access the minutes of meeting, if maintained ?

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				TD Power Ltd
  Highlights  of Q4 FY18 and FY18 results

Financial Highlights

  • Standalone Basis FY18
    o Revenue grew by 16 % to 449 Cr over 387 Cr previous year , growth coming mainly from the manufacturing business
    o PBT stands at 17.11 Cr over 1.12 Cr previous year
    o PAT stands at 12.5 Cr over 0.18 Cr previous year
  • Subsidiary company DF Power systems had recover guarantee from DFPI which was earlier restricted under terms of guarantee agreement of the banks . Recovered commission from the subsidiary is 17.02 Cr
  • Manufacturing Business FY18
    o Revenue grew by 19 % to 388 Ce over 326 Cr previous year
    o Export and deemed exports contribute around 68 % of total manufacturing revenues
    o Total manufacturing order book stands at 1049 Cr
    o Order inflow for FY18 was 392 Cr excluding the order from the railway business over 355 Cr previous year
    o Total order inflow including railway is 1142 Cr
    o Order inflow for Q4FY18 is 128 Cr over 98 Cr last year same quarter
  • Project BusinessFY18
    o Revenue stand at 61 Cr over 60 Cr last year
    o Order book stands at 64 Cr
  • Consolidated Basis FY18
    o Revenue 451 Cr over 400 Cr last year
    o Full year Loss after tax is 14.12 Cr over 4.39 Cr in last year
    o Order book stands at 1069 Cr which include manufacturing of 1005 Cr and project business at 64 Cr
    o Cash position of 168 Cr including 21 Cr of customer advance
  • Key Highlights
    o Face big increase in raw material cost in last year despite hedging
    o Weak Euro from last 8 months giving average Euro realisation of 74 rs which affected margins . Affected gross contribution by 400 basis points to about 16 Cr of margins overall
    o In FY19 company see challenging environment for raw material prices . Company is trying to increase price as soon as possible . Push for cost reduction ongoing . Overall see a profitable year for both top line and bottom line but no dramatic change unless get good fortunes with major orders
    o Got first order for TDPS-30 and expect to get another 3-4 large machines in next 6 months
  • Market Segment Analysis for FY19
    o Steam Turbines company see a big order inflow and pipeline in this segment . Domestic market has also picked up significantly and for the first time company see active and steady orders
    o On export side the creditability has increased because of hard work . Currently have orders for 2-3 MW machines , One in 50 MW , One 243 MW .One in 30 MW from European countries to convert waste into energy segment
    o Hydro
     Because of delay in order finalisation in large projects all of which are assured orders from major turbine partner . There will be a dip in Hydro business overall for FY19.
     Company have exclusive pipeline from Norway and other parts of the world and continue to dominate market in Norway for small Hydro machines and other parts of the world
     Double digit growth is now reduce to high single digit growth while long term business potential is still secure and growth will remain positive it will remain subdued until next years
    o Wind
     Company had delivered 100 Mega watts in full year and turbine customers have 300 Cr of additional secured orders in the pipeline
     Execution is going slow then expected due to financial closure reasons . Execution of 300 Cr order will take place in next 2 years FY20 and FY21
    o Railway
     On track to deliver contracted units in financial year and on track on the project overall
  • Guidance
    o Certain segments which were promised high growth are now getting tempered
    o Company will have the top line of 405 Cr to 420 Cr for the manufacturing business in FY19 and company have a potential for significant upside
    o Project business will provide top line of 50 Cr for FY19

Q&A

  • Kindly provide more brief on Steam turbine business ?
    o There is a overall revival in Industry Captive power plant business in India .There is no more gap between Supply and Demand . Supply is going down spot prices are going up significantly . Nobody can refill plant capacities or industrial without having Captive Power plants . Realisations have come in the market and that result is shown in order inflow . There are also some waste to energy project which have achieve financial closure and ordering some larger one like 30 MW from Punjab area and expect it to pick in few quarter. Overall the steam turbine market will be very good.
    o On export side company see huge opportunity as competitors are closing and shutting down and company had very good track record of insulation and delivery in western European market and this year company had taken a clean sweep of all large orders. Company will deliver on time , quality machines . Company will get a dominating position in Europe
  • What level of margin can be seen in FY19 ?
    o 9-10 % at EBITDA level for manufacturing business . Things are changing and it difficult to predict what going to happen
  • Kindly give some guidance on wind sector ?
    o Company have assured deliveries of 100 MW turbines for this year . Company have a major customer who is one of the 3-4 large in the market it is a German based company who is the largest player in the world. 300 MW in the pipeline and these are won by auctions. Company will get incremental revenues from this business . In general there is not a rapid movement or real urgency from the market side. It is slow
  • What are the orders which company plans to get in this year and executed also ?
    o In project business order book will not change much
    o In manufacturing company have 260 Cr order book already for delivery in this year and company have to book and build 150-160 Cr and there is a upside for another 20-30 Cr . So in bear case situation to book and build 200 Cr of business
  • What incentive company get in Exports ?
    o Company get drawback of 1.9 % in Generators
  • What is the outlook on Hydro business?
    o All orders are still in market that was talked in last quarter. Company will get the orders after few months . There will be not a overall dip in hydro business company have a dramatic market share in Norway in all machines beyond 10 MW
    o Norway market is about 15-20 machines per year market of 100-150 MW
  • What about railway business outlook ?
    o Lot of order from International company for Electro locomotive company is a single supplier for the electric motor . This year company is going to deliver Prototype units and next year ramp up will take place . Full year production wil be 100 Cr per year which will start from FY22 with full volume
  • How much of total 700 Cr order book will be delivered before FY22 ?
    o 100 Cr before FY22 and 100 Cr after that per year
    o There are large number of railway project in the countries and company is well connected with the international players who are bidding for railway projects and if they win company will be part of supply chain
  • How much will be company grow in Gas engine business without knowing that how the business is going to shake up ?
    o When large companies getting sold off things does not change on the ground level the business continuous with new ownership and people who run the business remain in same system and procedures. Company have a very long process for new quality customer addition so they will not change that actually what happen is the big player will announce in September that they will go with the sale or not
  • Is company adding any major clients ?
    o Company will add two major clients this year business potential will be same as from existing customers
  • What is the outlook on US market ?
    o Good pipeline of business , it improve drastically . Expect 3-4 million dollar order book from US alone
  • Does raw material prices are fixed at time of taking orders only ?
    o Yes prices are fixed and company do a large amount of raw material Hedging. But last year there was exceptional increase in copper and steel and impact is very low because of hedging . There will be some margin pressure from regular and large customers
  • Does company get affected from Geopolitical situation in Turkey ?
    o No company don’t get affected from it because orders are coming form European countries company only. Market is attractive company will take Geothermal , Hydro , Biomass , renewable of 100-150 MW per year. Get first order of 6 MW and 10-12 machines are coming soon.
  • How much was exports in total sales last year ?
    o It was 68%
  • Who are the competitor in Domestic market ?
    o BHEL , Siemens , ABB, Japanese companies
    o Overall company market share is about 70 %
  • After railway orders start does it affect combined sales up by 100 Cr and margins from operating leverage ?
    o Yes that will change the whole company numbers and company is going to bear only the incremental cost not full cost
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