Sanghvi Movers Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from Sanghvi Movers Limited (SANGHVIMOV) Q4 FY24 Earnings Concall

• Financial Performance
  • Topline grew 33% YoY to INR647 crores in FY24.
  • Net profit after tax grew 68% YoY to INR188 crores in FY24, a new historical high.
  • EBITDA percentage increased by 4% in FY24 compared to FY23.
  • Average blended yield increased from 1.97% per month in FY23 to 2.2% per month in FY24.
• Fleet and Capacity
  • Company had a fleet of 346 cranes with an aggregate value of INR2490 crores as of 31st March 2024.
  • Excluding 47 cranes considered for asset sale with a gross block of INR83 crores and WDV of INR4.75 crores.
  • Average capacity utilization increased from 83% in FY23 to 84% in FY24.
• Capex and Asset Sale
  • Completed capex of INR334 crores in FY24.
  • Planned capex for FY25 is INR250-300 crores, subject to board approval.
  • Planned capex to be funded 70% from bank borrowings and 30% from internal accruals.
  • Most of the capex is expected to be completed by December 2024
  • Added 34 new cranes and 44 other equipment in FY24.
  • Sold 32 cranes in FY24, generating a profit of INR15.63 lakhs.
• Yields and Margins
  • Management expects yields to remain flat between 2% to 2.2% in FY25.
  • Operating margins are expected to decline by 1-2% due to higher contribution from lower-margin EPC business.
  • Inflationary pressures and salary escalations may also impact margins slightly.
• EPC Business Margins
  • EPC business contributed INR25.47 crores in revenue with 23% EBITDA margins in FY24.
  • Margins are expected to decline going forward due to higher volumes and cost pressures.
  • However, higher volumes in the asset-light EPC business are expected to improve overall returns.
• Asset Life and Depreciation
  • The company aggressively depreciates cranes as per Companies Act Schedule 2.
  • However, the economic life of cranes is much higher, leading to higher cash profits.
  • The company plans to continue with the current depreciation policy.
• Remuneration Increase
  • Board approved increase in commission for managing directors from 1.5% to 3.5% of net profit for FY24.
  • This led to an increase of INR5.5 crores in employee costs.
  • The increase is subject to shareholder approval and may be reconsidered for FY25.
• EPC Business Outlook
  • EPC business revenue expected to be INR200-250 crores in FY25, a significant jump from INR30 crores in FY24.
  • Margins for EPC business will be lower than core crane business, leading to some blended margin dilution.
  • IPP Tie-up and Opportunity
  • Company incorporated 100% subsidiary Sangreen Renewables Private Limited.
  • Strategic tie-up with an Independent Power Producer (IPP) to eventually sell stake in Sangreen to the IPP.
  • IPP tie-up and EPC business present significant growth opportunities across sectors like wind, oil & gas, metros, etc.
• Working Capital for EPC
  • EPC business is working capital intensive, but tied to crane rental business.
  • Company mitigates working capital needs by closing crane operations if EPC payments are delayed.
  • Cash credit interest paid in FY24 was only INR1.62 lakhs on INR100 crore limit, indicating judicious working capital management.
• Capacity Expansion Strategy
  • Company invested INR924 crores in cranes over the last 4 years, including current year’s INR200 crore capex.
  • Despite this, net debt is only INR250-280 crores.
  • Capacity expansion plans for beyond FY25 are still being finalized.
• Debt Position
  • Net debt as of FY24 is INR287 crores after netting off INR15 crores of bank FDs against LCs.
  • If INR70 crores of liquid investments are also netted off, net debt reduces to INR150 crores.
  • Company aims to maintain some debt for tax benefits but can become debt-free within 12 months.
• Order Book Breakup
  • Total order book of INR426 crores was disclosed, including EPC orders.
  • Company had previously announced a INR15 crore EPC order but no details on other EPC orders.