Key highlights from Ion Exchange (India) Ltd (IONEXCHANG) Q1 FY25 Earnings Concall
- Financial Overview
- Reported operating income of INR5,676 million, an increase of 18% year-on-years.
- EBITDA was INR641 million, representing an increase of 31% year-on-year.
- EBITDA margin stood at 11.29%.
- Net profit was INR448 million, an increase of 35% year-on-year.
- PAT margin was around 7.89%
- Engineering Division
- Revenue for the 1Q25 was INR3,235 million, an increase of 13% year-on-year.
- EBIT was INR180 million, representing an increase of 26% year-on-year.
- Steady order inflows of capital of medium-sized jobs during the quarter.
- Domestic inquiry bank remains robust.
- Improved turnover due to the execution of international contracts.
- Total order book for the engineering division stood at INR3,394 crores at Q125 end.
- Technical Segment
- Revenue for 1Q was INR1,994 million, an increase of 36% year-on-year.
- EBIT was INR498 million, an increase of 36% year-on-year.
- Segment recorded improved revenue year-on-year while maintaining steady margin.
- Consumer Division
- Revenue was INR660 million, an increase of 9% year-on-year.
- Loss for the quarter was INR34 million vs. INR15 million in 1Q24.
- Segment has shown revenue growth on a year-on-year basis.
- Engineering Order Book
- Order book position remains good with expectations of good order flows in the ensuing months and quarters.
- Execution of UPE contract expected to improve in subsequent quarters due to removal of election-related cash flow impacts.
- Second half of the year expected to be significantly better than the first half.
- Substantial completion of UPE contract by the end of the year, dependent on funds release and government approvals.
- Margin of 9.6% reported with cost overrun from legacy project impacting the next quarter.
- Overall engineering margin maintained at a decent level despite adverse impacts from specific contracts.
- Chemical Segment Performance and Outlook
- Chemical business continues to perform well with 15% revenue growth and robust profitability.
- Growth momentum expected to continue for the full year barring significant changes in input prices, foreign exchange, or supply dynamics.
- Positive movement on large deals expected to convert into announcements in the coming quarters.
- Chemical Segment Growth and Strategy
- Positive outlook on the chemical segment with capacity expansion moves targeting international markets.
- Improvements in European and North American markets driving increased exports of chemicals.
- Substantial investment in innovation and R&D to move towards more valued products and maintain a competitive edge.
- Strategy to create customer confidence and trust in North America and Europe, leveraging partnerships and relationships.
- Guidance for 15% revenue growth in the chemical segment for FY25.
- CAPEX at Roha expected to start commercial operations in the next financial year, reaching optimum capacity utilization in 3-4 years.
- Saudi Arabia market showing good improvements with order inflows expected to contribute substantially in a couple of years.
- Engineering opportunities in Saudi Arabia not restricted to specific technologies, targeting a broad range of medium to large-sized projects
- UP Project Execution
- Residual value of UP project is around INR817 crores.
- Significant part planned for execution by end of current financial year.
- Execution slowed to INR26 crores in current quarter, down from 78 crores in March.
- Slowdown attributed to election season uncertainties.
- Execution expected to improve from second half of year.
- Consumer Segment Growth
- Focus on achieving larger scale of operations rather than immediate EBITDA positivity.
- Reinvesting surpluses into growth, team expansion, and infrastructure.
- Product margins comparable to other segments.
- Investments in overheads and capabilities impact current EBITDA profitability.
- Aim to reach scale where EBITDA positivity happens naturally.
- Water Treatment Market
- Positive outlook due to government policies and investments.
- Increasing focus on technology interventions beyond infrastructure.
- Initiatives for improving water quality, tackling contaminants, and reaching rural areas.
- Emphasis on river cleaning and groundwater quality augmentation.
- Expectation of larger role for technology companies in future projects.
- Roha Plant Investment
- Total investment of around INR400 crores.
- INR125 crores targeted for specific technology interventions with additional benefits.
- Remaining INR275 crores expected to achieve 2-3x revenue multiple.
- Aiming for optimum capacity in 3-4 years.
- Margin levels expected to stay in current ballpark, barring exceptional circumstances.
- Engineering Segment Outlook
- Projected growth of 15-20% for engineering segment.
- Aim to reach margin levels achieved in financial year ‘22-‘23.
- Current chemical plant capacity utilization at 65-70%.
- Roha and other capacity utilizations to aid faster growth in coming years.
- International Contracts
- Company is close to finalizing a couple of large international orders.
- Target markets for large engineering orders are Middle East, Africa, and Southeast Asia.
- Steady stream of inquiries and orders coming from these regions.
- Increasing pace of capitalizing on opportunities in these markets.
- Initiatives being taken to improve overall order flow across all segments in these regions.
- Sri Lankan Order
- Execution pace remains extremely different due to fund release issues.
- Sri Lankan government has released significant sums in recent months.
- Company has been able to invoice small portions as a result.
- Remaining un-executed portion is around 10-12% of the contract.
- Closure of balance could happen within current financial year, pending clarity on fund arrangements.
- Odisha Expansion
- No detailed information currently available for public sharing.
- Intention is to expand capacity for other chemicals.
- Plans include backward integration aligned with domestic and international market aspirations.
- Company to make an announcement once there are further developments to share.
- Demineralization Segment
- Demineralization is a subset of the company’s technology portfolio, not the primary focus.
- Company operates in various other technology areas, including membranes and pre-treatment processes.
- Service and spares revenue accounts for approximately 20% of engineering segment revenue.