Electrosteel Castings Limited Q1 FY25 Earnings Conference Call Insights

Key highlights from Electrosteel Castings Limited (ELECTCAST) Q1 FY25 Earnings Concall

• Financial Performance
  • Consolidated revenue increased by 18.9% year-on-year to INR2,036 crores in Q1 FY25.
  • Total income in standalone results grew by 21% year-on-year to INR1,851 crores.
  • EBITDA increased by nearly 102% year-on-year to INR378 crores in Q1 FY25.
  • EBITDA margin expanded by 761 basis points year-on-year to 18.5%.
  • Standalone EBITDA grew by approx.. 92% year-on-year to INR354 crores.
  • Company repaid INR30 crores of debt during Q1 FY25.
  • Net debt-to-equity ratio improved to 0.33 times.
• Sales Volume
  • DI pipe sales volume reached 1.93 lakh tons in Q1 FY25.
  • Exports contributed 12% of the total volume.
  • Company remains a preferred supplier for major water infrastructure projects.
• Expansion Plans
  • Ongoing CapEx initiatives progressing as planned to meet growth demand.
  • Company aims to expand production capacity to 1 million tons by FY26 end.
  • In process of acquiring land in Odisha for upcoming Greenfield DI pipe and fitting project.
  • Total ongoing CapEx of approximately INR700 crores, with INR410 crores spent till Q1 FY25.
  • Company plans to expand into Southeast Asian markets like Vietnam and Thailand.
  • Singapore chosen as a hub for these markets due to its strategic location.
  • Aim is to become more competitive with Chinese manufacturers in these regions.
  • Opportunity in Singapore being capitalized to support the expansion strategy.
• CapEx Updates
  • Total ongoing CapEx of approximately INR700 crores, with INR410 crores spent till Q1 FY25.
  • Company spent 390 crores last quarter and 20 crores in the current quarter on CapEx.
  • Capacity expansion to reach 5.5 lakh tons by end of FY25 for the south unit.
  • Eastern unit capacity to be approximately 3.5 lakh tons.
  • New facilities expected to be commissioned by end of third quarter.
  • Benefits from expanded capacity to start accruing from 4Q.
• Export Strategy
  • Export mix reduced to 12% in the current quarter.
  • Reduction in exports is a deliberate decision due to robust domestic demand and better margins.
  • Fluctuations in ocean freight costs affecting export decisions.
  • Company plans to increase export presence in tandem with capacity growth in the long term.
  • Temporary reduction in exports not expected to cause significant loss in market share.
• Production Capacity
  • Additional 75,000 tons capacity expected from Srikala Plan for FY25.
  • Company plans to sell most of the additional capacity within the year.
  • Total production expected to reach approximately 8.5 lakh tons this year.
  • Capacity expansion driven by strong domestic demand.
  • Increased material availability expected to drive up overall demand in the industry.
  • Company sees potential for growth in water pipeline infrastructure across urban and rural sectors.
• Regional Demand
  • No single state is dominating demand, with work spread across the country.
  • Andhra Pradesh expected to show increased demand in the near future.
  • Odisha, Madhya Pradesh, Rajasthan, and Uttar Pradesh remain strong markets for the company.
• Demand-Supply Gap
  • Current gap between demand and supply estimated at 1 to 1.5 million tons.
  • Demand scenario has been picking up due to increased spending on irrigation and Amrut projects.
  • Industry expected to meet demand in 3-4 years, with projected demand of 5-6 million tons annually over the next five years.
• Export Outlook
  • Export volume reduced YoY to 12% from 20% in Q1.
  • Demand in Europe and Middle East markets remains stable.
  • Middle East experiencing an upswing in demand.
  • Temporary downswing in Europe due to seasonal factors and elections.
  • Company aims to maintain 20% export contribution in the future.
  • S. market challenging due to protectionist policies and strong indigenous manufacturing.
• Fittings Contribution
  • Current fittings capacity at 24,000 tons.
  • Plans to expand fittings capacity in the Greenfield project in Odisha.
  • Fittings currently contribute 4-5% of total sales.
  • Company aims to increase fittings contribution to 5-10% in the next two years.
• Order Book Composition
  • Current order book covers approximately 11 months of production.
  • 15% of the order book is from exports, with the remainder from domestic markets.
  • Company maintains full capacity utilization.
  • Total expected sales volume for the year is 8.5 lakh tons of ductile iron pipes.
  • Additional expected sales of 36,000 tons of cast iron pipes and 22,000-24,000 tons of fittings.
  • Majority of domestic orders come from EPC contractors, not directly from the government.
  • 85% of order book is backed by LCs, bank guarantees, or advance payments.
• Margin Outlook
  • Company expects to maintain EBITDA margins around 18,000 per ton for the current financial year.
  • Management is optimistic about sustaining these margins for the next 3-5 years.