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.