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.