CG Power and Industrial Solutions Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from CG Power and Industrial Solutions Ltd (CROMPGREAV) Q4 FY24 Earnings Concall

• Financial Performance
  • Q4 FY24 sales grew 17% YoY, PBT grew 25% YoY.
  • FY24 sales grew 16% YoY, PBT grew 24% YoY.
  • Margins improved due to higher realizations, favorable product mix, and cost efficiencies.
  • ROCE for FY24 was 37%.
  • Free cash flow generated in Q4 was INR 178 crores, and in FY24 was INR 784 crores.
• Order Book
  • Unexecuted order book as of March 31, 2024 was 45% higher YoY at INR 6,276 crores.
  • Industrial division order book was 28% higher YoY at INR 2,544 crores.
  • Power systems order book was 64% higher YoY at INR 3,731 crores.
• New Venture
  • Received approval to set up an outsourced semiconductor assembly and test facility in Sanand, Gujarat.
  • Estimated investment over 5 years is INR 7,600 crores, funded by govt. subsidies, equity, and potential bank borrowings.
  • Partners are Renesas Electronics Corporation and Stars Microelectronics.
• Industrial Segment
  • Industrial division order inflow up 33% QoQ and 45% YoY in Q4.
  • Large part of order inflow came from railways business.
  • Ex-railways industrial motor business activity still muted, expected to pick up post elections.
  • Industrial segment volume growth around 12% in Q4.
  • Competitive intensity still high, difficult to predict pricing due to volatile commodity prices.
  • No revenue deferral in the segment in Q4.
• Semiconductor Venture
  • Received approval to set up outsourced semiconductor assembly and test facility.
  • Partnering with global leaders like Renesas and Stars Microelectronics.
  • Huge demand expected in India for semiconductors to reduce import dependency.
  • Right to win seen as strong given partnerships and demand outlook.
• Margins Outlook
  • Power segment margins expected to sustain at high teens if material prices remain stable.
  • Industrial margins may improve post elections if demand picks up.
  • Railway and power being tender-based, margins depend on competitive bidding.
• Railway Business
  • Strong 40% revenue growth expected in railway business this year.
  • FY24 railway sales around INR 1,300 crores.
  • Efforts ongoing at advanced stage for railway propulsion and other offerings.
  • Working with Korean company for train set propulsion system.
  • Project expected to be completed by June 2024.
• EV Motor Development
  • Prototypes for one EV application under testing.
  • Designs for two more applications at advanced stage.
  • Once testing done, motors and controllers to be provided to OEMs for approvals.
• Exports
  • Current industrial exports around 3-4% of industrial motors business.
  • Target to take industrial exports to 20% in 3-4 years.
  • New motor capacity expected to start contributing to revenues from next financial year, which should aid growth in industrial exports from FY25 onwards
  • Exports growth linked to capacity expansion plans.
  • Limited scope for power transformer exports as domestic demand to consume expanded capacity.
  • Selective high-margin export orders considered based on payment security.
  • No concrete plans yet for dedicated export facilities.
• Consumer Products Business
  • Part of industrial segment, degrew marginally in FY24.
  • Plans approved to scale up this business going forward.
  • Investments and actions initiated to drive growth.
• Power Transformer Capacity Expansion
  • Doubling power transformer capacity from 17,000 MVA to 35,000 MVA.
  • Adding 50% capacity in distribution transformers from 5,500 MVA to 8,500-9,000 MVA.
  • Expected revenue potential of INR 1,800 crores from incremental PT capacity.
  • DT capacity expansion to take revenues from INR 450 crores to INR 700 crores.
  • Both expansions expected to be completed in next 12 months.
• Railway Business Growth Drivers
  • Supplying directly to Indian Railways production units for Vande Bharat, Metros, Sadharan.
  • Growth driven by increase in locomotive production from 1,200 to 1,500 units.
  • Limited approved suppliers giving advantage to bag more orders.
  • 40% revenue growth expected in railway business this year.