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Ion Exchange (India) Ltd Q1 FY25 Earnings Conference Call Insights

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.
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