TD POWER LTD
Highlights of Q1 FY19 results
o Revenue grew by 24 % to 76.54 Cr compare to 61.7 Cr last year same quarter
o PAT stood at 5.23 Cr compare to loss of 19.17 Cr last year same quarter
o Manufacturing revenue stands at 61.9 Cr compare to 43.9 Cr last year same quarter
o Exports and deem exports contributed 68 % of manufacturing revenues
o Manufacturing order book stands at 1019 Cr in which exports and deem exports excluding the large delivery order of 59 %.
o Order grew by 42 % to 106 Cr compare to 76.8 Cr last year same quarter
o Order inflow from direct and deem exports grew by 15 % to 54.8 Cr compare to 47.6 Cr.
o Project business revenue 6.78 Cr compare to 11 Cr last year same quarter
o Order from the project business stands at 39 Cr
- Consolidated Basis
o Total Income 75 Cr compare to 61 Cr last year same quarter
o PAT stood at (-7.9) Cr compare to (-21)Cr same quarter last year
o Order book stands at 1057 Cr , breakup is as follow manufacturing is total 1019 Cr , large delivery order is 759 Cr, other manufacturing order stood at 269Cr out of which 59 % is exports , Project business is 38 Cr
o Company was able to maintain a strong cash position of 178 Cr.
Market Outlook and Guidance
- Order inflow increase compare to QOQ basis . Pipeline of Q2 and Q3 is strong and this ensures company will deliver the projected results in FY19. See strong order inflow from steam turbine customers for the domestic market and order inflow in the export market are also growing on YOY basis
- Hydro will be weak in this year in terms of sales but confirmed order Inflow has picked up and it is back to the trend line of sales in this segment for the next year . Orders have been received in the Hydro segment from South America , USA and Norway, there is a strong enquiry pipeline.
- In wind company will deliver 100 MW generators this year and customer have order for another 500 MW generators and yet to see the firm execution plan for the 500 MW but company expect that 150 MW project will be executed on confirm basis.
- Order and delivery in the railway business is proceeding as per the plan and requirement of delivering is 50 Cr worth machines till the next financial year.
- Get 26 MW order in Turkish subsidiary for a Geothermal generator of the highest level of complexity and company become first to produce such complex machine in Turkey. Order book for Turkey stood at 1.4 Mn USD.
- Company will at least book 2 orders in the 2 segments before the end of Q3 and both these machines will go for delivery next year.
- Overall company see a much stronger domestic market and orde inflow in the domestic segment and receiving much deeper penetration in the export market where company is getting orders at the most precious level.
- Company expect 405-415 Cr topline in manufacturing business within EBITDA margin of 7-8 %. Company will give profitable operating results because of initiative cost reduction and operating expenses .
- Replace rupee loan with FPNR loan and this will help in decreasing interest cost very significantly this year compare to last year
- Expect manufacturing revenue to be 180 Cr in H1 and 230 Cr in H2 due to lumpy delivery schedule of delivery of generators.
- Expect topline of around 150 Cr including subsidiary
- How is the US market shaping for the company ?
o Company get some good order from US and expect to get reorder from subsidiary to deliver 4-5 Million dollars of business . The US market is little subdued for large markets but company have one big hydro order and also negotiating a large Gas turbine order. Business will come more from Europe because steam turbine business are getting shutdown in US .
- Any chance of getting GE transportation back ?
o No it has been sold out and company had already moved into machinery in line for the attraction in motors or railway project for India and company was not able to deliver machines for the GE and that decision was the right decision of the company.
- Did company has added any new client in any segment ?
o Yes in engine segment where company got trail order from engine company called Rolls Royce based in Norway they are the third largest engine maker in Europe. Company have a trial order for 2 machines and company will deliver it in December and if it pass then company will receive large order from this company in next year.
- Any new or retain customer in Gas Line business ?
o A customer from US that is a type of caterpillar organization where company had a trail order for 17 megawatt generator and company was able to deliver the machine in October this year it will reach US by December and then trials will start and they buy 60-70 machines in a year.
- How will the order book related to exports will sustain as it is decreasing yoy ?
o Last year company has large number of Hydro projects and at that time company was having more than 100 Cr business than today so this year the hydro sales is low and it is pitching up so from next quarter order book will increase so this year company will see more short cycle orders out of steam turbine business and Gas turbine business which are short Cycle . This the nature of the business where one sectors goes up and other goes down and waiting for the day for all sectors to fire.
- How the climate work going forward in passing the price increase to the customers ?
o The operational profit for the company last year was negative 15-16 Cr and this year company want to be operational profit positive so this movement from negative 15-16 Cr is because of two three movements.
Pricing in term of company and realization in terms of Euro has gone up on exchange rate and company has secured much large orders for the next seven months up to march at around 80 Rs per Euro compare to last year average which was 74.5 so company is going to see better margins to about 6-7 % coming out of the Euro as well as US.
Company will be able to get marginal price increases in domestic market not big but yet reversing the trend which yet steadily going downward from the last four years which has also dramatically affected company profitability so with increase in capacity utilization company would be able to get something from the domestic market.
Very large effort by the company to reduce loss and that will be affected from H1 numbers in two or three quarters company would see reduction of cost showing up more strongly. This is how company is going to deliver profit going forward.
- Is there anything which will impact business going forward ?
o No there is nothing that is going to disturb company in coming 3-5 years.
- Any new opportunity in railways in terms of metro for company ?
o Yes the customer with whom company is working for railway is having a order for metro . In India they won the Bombay metro so company will see the business coming for the company. It will take time but the whole intention for the company was to tie up with the customer so that company will get other business also from them.
- Kindly give outlook on steam for domestic and export market and in which sector company see revival?
o In domestic company see revival across all sectors in steel , sugar , chemicals , fertilizers , waste energy also, captive power plant business and every company which are doing brown field or green field expansion have to put captive power plant because commercial power in the country is expensive for a power consuming industry like Cement and steel. Captive power plant is still more cheaper than electricity so that realization has come into industry and there is no looking back for the next few years on this so there is a strong demand and as CAPEX revival take place company will see larger demand in terms of megawatt it back to 1000 MW from about 700 MW last year. So there is 40-50 % improvement in demand in domestic side compare to last year.
o On export side company get very good order from European market specially western Europe from mainly Garbage plants they got 20-30-43-50-55 MW orders . Company is really working with the top level of the business with best EPC contractors and first few machines are going out for delivery in next month and company have strong enquiry pipeline for next year also. Company have reach the top of the business in the Europe right now and value wise company would be at 15 % market share in Europe
- In Hydro how much is in domestic market and how much in export ?
o 90 % export and in domestic it base on government which is going very slow
- How there was a reduction in working capital , rise in inventory and reduction in debtors ?
o Because company had very huge collection in last month of Q1 and inventory is high because company expect higher billing in next quarter , debtor has come down because collections were good
- How long will be the losses in EPC business will continue ?
o This loss is just because of transportation that company has done as company have to pay vendors in dollars and the currency movement from march to June was from 64 to 68 Rs so that amount was equal to 1.2 Cr
- What is the company market share in domestic as well as export ?
o Very High in Steam Turbine it must be 85 % in domestic market , Internationally there is a low market share making good progress in Europe but overall it is still single digit.
- Is there any change in the competitive intensity in the past six month ?
o Yes there are people who are now out of the game , company is seeing large restructuring in companies and larger manufacturers are now shutting down the factory and now the game has become for second tier company and company is in the second tier but company is the only one who have manufacturing unit in the low cost country and has delivery high quality machines in the market. So from positioning point of view company is taking larger position for the future.
- What about railway business orders ?
o Company will do 60 Cr from railway business in next year and then 100 Cr but this year no and if this business remains same then it will reach to 500 Cr and EBITDA margins will go to 12-14 %.
- Does company have price pass on clause for the railway contract ?
o Yes any increase in raw material prices then company can pass on . It kicks in after the second year
- Any other segment which can kick off revenue for the company going forward ?
o It could be Gas turbine less than 50 MW will be refineries and that is the segment where customers buy together and BHEL has lock on it.
- How much growth can been seen in steam turbine business in next 3-4 years ?
o At least 40-50 % and there will be only 2-3 players in the market going forward and company want to be one of them. Advantage for the company is company is only the one who have low cost high quality production house and market it very tight relating to pricing and company pricing is unbeatable .
- Did India and Europe makes 70 % of company business on geographic basis ?
- What is the current capacity utilization of the company ?
o 700 Cr plus so it could be 57 % to 60 % capacity utilization .
- What would be the CAPEX for the year ?
o This year company have put it into railway but next year there will be a maintenance CAPEX of about 8-10 Cr.
- Did company has gain in Europe because of order coming or increase of market share ?
o Company is well positioned in Europe and answering a lot of inquiries across the entire market so acceptance level is very high right now. Company have to win the order against competition . Potential to do better in next year is there. There is a potential to increase the market share next year.
- On project side is there any opportunity to get more projects as company is very low on it ?
o It is not a focus business for company as long as it makes money for company will do it and company don’t see a long term future for the company in this business. Company may exit it in next 2 years from now .
- Did all the money related to EPC comes to company ?
o Yes company don’t have any receivable and no payable
- Did cost reduction initiative will be on material side or all the side ?
o All the side.