Bumper result: TD Power Systems Ltd.
Q4 FY25 Results
Revenue
348.21 crore (QoQ: -0.6%,YoY: +31.9%)
Net Profit (PAT)
53.02 crore (QoQ: +18.0%,YoY: +82.7%)
EPS
3.40 (QoQ: +18.1%,YoY: +82.8%)
Exceptionl YoY growth, strong margin expnsn leadng to
Decent QoQ profit.
9 Likes
Yes but expecting it to be a stable compounder not trailblazing growth. A 25% cagr grower over the next 2 years. Waiting to see how the Tractions business shapes up with higher margins and the new capacity to come online. Not complaining, the company delivering what it said but I guess its priced in.
7 Likes
The company is demonstrating robust growth; however, its 5-year CFO-to-PAT ratio is only 45%, and FY24-25 CFO/EBITDA is at 20%. What might be driving this low CFO conversion? Could it signal potential future QIPs or debt raises to support working capital needs?
3 Likes
The management of TD Power Ltd has clarified that the company has secured a healthy inventory of copper and special steel at attractive prices, anticipating a future rise in commodity costs. They continue to maintain a strong cash position of over ₹200 crore, which indicates no foreseeable issues with capital requirements. Furthermore, all ongoing capital expenditure is being funded entirely through internal accruals. As discussed in their concall today, the company has also made good progress in recovering outstanding receivables as at March 31, 2025 and they said 80% of o/s receivables are less than 90 days.
6 Likes
slight decrease in topline from Dec to Mar. should we be concerned about this and is order book getting thinner?
1 Like
Q4 FY25 Concall Summary
- The current manufacturing segment’s order book totals 1366 crores:
- 1012 crores for regular manufacturing business
- 316 crores for railway business
- 11 crores for states and aftermarket
- 29 crores for Turkey business
- Highest quarterly order inflow of 413 Crores
- Domestic market is dormant with only 4% growth mostly driven by captive power plants and select green/brownfield investments. Hydro refurbishment can help them deliver double-digit order growth if their bids succeed. Indian railways orders are currently muted.
- Exports is the primary growth engine for them with strong growth in order books of gas turbines, engines, motors.
- For their Traction Motors segment, Prototype deliveries underway for Germany, US, and CIS and they have firm contracts for FY27 and they expect good volumes of order, with impact in FY27.
- They have secured business for 40-45 MW sets in large data center farms which unlocks a TAM equivalent to their current market. They see huge market potential from FY27 and could be 25% of their total revenue.
- They received an order in Turkey after a pause, but the local regulations and guidelines is making Turkey operations unsustainable and they are planning to shut the plant post this order completion. However, they are a known brand there so they will likely export in the market.
- They believe they can sustain 36% as the gross margin with slight deviations. Also, they clarified that staff costs are not being capitalized.
- Increased net working capital days which affected the operating cash flows. This was due to:
- They built their inventories by buying significant quantities of copper and electrical steel when prices dropped due to the tariff situation.
- March is invoicing heavy time which lead to higher receivables
- They expect significant improvement in their cash flows from Q1 as they utilise the cheaper raw material and collections from March will be realised in H1.
- Tariff Implications:
- The demand is very high and the OEMs are passing the cost to the customers.
- AI related machines are imported from Europe in US, so if a trade deal with India comes out faster that can give them an advantage over their peers.
- As long as tariff rates for imports from India and Europe remain comparable, there shouldn’t be a significant advantage for US customers to choose one over the other.
- Design Center in UK as talent pool for larger machines (up to 100 MW) is concentrated in the region. It will also help in improving the existing designs and to enhance their technology for larger machine.
- The new plant’s commissioning is on track, with its financial contributions expected to materialize in the second half of the fiscal year.
- What happened in Spain and Portugal:
- The blackout was triggered by a sudden and significant drop in renewable energy production (wind and solar) across the region.
- Since there was insufficient immediate backup power to compensate for this loss, the remaining grid became overloaded which lead to a domino effect and lead to progressive grid collapses.
- This has opened another tailwind as governments are now looking at gas power to stabilize the grids more seriously.
- Historically, the company has executed around 60-70% of its annual order book as revenue. However, last year saw high execution rate of approximately 110%. The management acknowledged the current guidance suggests a similar 110% execution and such trend to continue.
- Dividend payout is not a priority and they are investing in growth by conserving cash and fund any initiatives using internal accruals.
- The primary competitor for NPCIL orders is BHEL. The current order is for replacement motors for existing Russian equipment in the nuclear power plants. The execution timeline for the current NPCIL order is within the next 12 months.
- They feel that they can achieve 20-25% of their revenue from US in the next 2 years.
- Guidance:
- The initial guidance for FY26 is set at 1500 crores with potential for upward revision due to sustained order inflow and the new third plant becoming operational in the second half of the financial year. Margins are expected to be in the range of 18% to 18.25%.
- They also believe that with strong demand and order execution of traction motors they can achieve 1900-2000 crores revenue in FY27.
- Revenue growth up to 2200 crore will be achieved by optimizing the efficiency of their existing capacity. No new capacity addition is planned until the revenue reaches this level.
The management sounds confident/bullish about the future.
Let me know in case of any errors
Disclaimer: Biased, do your own diligence
27 Likes
Considering the potential future trade implications between India and Turkey due to Turkey’s alignment with Pakistan in the recent conflict, do you foresee any mid- to long-term impact on TD Power’s plant in Turkey and its associated business operations?
1 Like
I think if you will read the con call they have mentioned that they will close their turkey operations due to regulations
6 Likes
Yes, they mentioned in the concall. Looks like well thought out decision in hindsight.
3 Likes