ISGEC HEAVY ENGINEERING LTD (ISGEC) Q3 FY23 Earnings Concall Transcript

ISGEC HEAVY ENGINEERING LTD (NSE:ISGEC) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Aditya Puri — Managing Director

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Analysts:

Ashwani Sharma — ICICI Securities — Analyst

Nishith Shah — Aequitas Investment — Analyst

Rahil Shah — Individual Investor — Analyst

Avadhoot Joshi — Newberry Capitals — Analyst

Khadija Mantri — Sharekhan — Analyst

Jitendra Sriram — Baroda BNP Paribas — Analyst

Ankit Gupta — Bamboo Capital — Analyst

Deepesh Agarwal — UTI Mutual Fund — Analyst

Rajakumar Vaidyanathan — Individual Investor — Analyst

Harsh Sarda — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Earnings Conference Call of Isgec Heavy Engineering Limited, hosted by ICICI Securities. [Operator Instructions]

I will now hand the conference over to Mr. Ashwani Sharma of ICICI Securities Limited. Thank you, and over to you, sir.

Ashwani Sharma — ICICI Securities — Analyst

Thank you. Thank you very much. Good day, everyone. On behalf of ICICI Securities, I would like to welcome you all for the Q3 FY ’23 Earnings Conference Call of Isgec Heavy Engineering Limited. Today, from the management, we have Mr. Aditya Puri, Managing Director; Mr. Kishore Chatnani, Whole-Time Director and CFO; and Mr. Sanjay Gulati, Whole-Time Director and Head of Manufacturing units.

We will start the call with the opening remarks on the results and outlook by Mr. Puri. Post that, we can have the Q&A session.

I would now like to hand over the call over Mr. Puri for his remarks, and over to you, sir. Thank you.

Aditya Puri — Managing Director

Thank you. Thank you. Thank you, Mr. Sharma. Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope that you and your loved ones are all well and safe. We look forward to a fruitful interaction. You would have seen the quarterly financial results that we have published earlier today. We’ve uploading our presentation on BSE, NSE and on our website, www.isgec.com, earlier today. There is also much more information about our business on our website.

The stand-alone revenue for Q3 FY ’23 is INR1,103 crores compared to INR1,119 crores in Q3 FY ’22. The stand-alone revenue for the 9 months ended 31st March 2022 is INR3,261 crores, which is about 5% higher compared to INR3,105 crores for the 9 months ended 31st March 2021. The stand-alone profit before tax for Q3 FY ’23 is slightly higher at INR53 crores against INR50 crores for Q3 FY ’22. Further, for the 9 months ended 31st March 2022, the profit before tax is INR150 crores, which is about 50% higher compared to INR100 crores for the 9 months ended 31st December 2021. The consolidated revenue for Q3 FY ’23 is INR1,598 crores, which is about 14% higher compared to INR1,403 crores for Q3 F ’22.

Also for 9 months ended 31st December 2022, the consolidated revenue is INR4,363 crores, which is 11% higher compared to INR3,915 crores for that of 31st December 2021. The consolidated profit before tax for Q3 FY ’23 is INR85 crores compared to INR78 crores for Q3 FY 2022. And the consolidated profit before tax for the 9 months ended December 2022 is INR164 crores as compared to INR110 crores for the 9 months ended 31st December 2021. In the stand-alone results, the profitability is closer to normal for both the manufacturing segment and the EPC segment. The consolidated profit is better because of higher profits in Isgec stand-alone and in Saraswati Sugar Mills Limited.

I will now talk about the order bookings. The consolidated order booking for Q3 of FY ’23 is INR1,388 crores compared to INR893 crores of orders booked in Q3 of last year. The consolidated order book on hand as on 31st December 2022 is INR7,752 crores compared to INR7,224 crores as on 31st December 2021. The order booking position is satisfactory. Of the consolidated order book, 74% is for the project business and 26% is for the product business. The order book improved INR858 crores for export orders, which is about 11%. The order book for Isgec Hitachi Zosen was also good. It has INR798 crores of orders as on 31st December 2022.

Market demand, the overall demand trend has improved and the inquiry position continues to be good. Export inquiries have also picked up. Philippines project, as informed earlier, construction is progressing at the Cavite Biofuels ethanol plant in Philippines. And we expect to complete it by July 2023 and make it operational in August 2023. My colleagues and I will be happy to answer any questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question we have is from Nishith Shah from Aequitas Investment.

Nishith Shah — Aequitas Investment — Analyst

Sir, I would like to understand how is the bid pipeline going forward? And which segments are we focusing on?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

As Mr. Puri mentioned in his opening remarks, the market demand and inquiry person is very, very good. And we are –for almost all our product lines, it is good, including — for boiler applications, the boilers for sugar machinery for distilleries, for air pollution control equipment for process plant, almost everything the inquiry person is very good.

Nishith Shah — Aequitas Investment — Analyst

So currently, how our CSR — our order book for Power segment is like 23% and — but 2 years back, it was more than 36%. And similarly, for refineries that has gone up from 10% to 26%. So going forward, how do you see this mix changing?

Aditya Puri — Managing Director

We can’t comment because capital orders are always lumpy, but we don’t foresee any significant changes to this mix as of now in the next few years.

Nishith Shah — Aequitas Investment — Analyst

And sir, my second question is that earlier, we had a few orders like FGD, where we had big retention money stuff. So when is that expected to be released?

Aditya Puri — Managing Director

In the next 6 to 8 months.

Operator

[Operator Instructions] The next question we have is from Rahil Shah [Phonetic] an Individual Investor.

Rahil Shah — Individual Investor — Analyst

Just wanted to know your outlook for financial year ’24 in terms of revenue growth and margins.

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Base, you can see our order book is good. It’s about 7% higher than what it was about a year ago. There is plenty of work in the market. So while we can’t give you any figure as to how much increased revenue will be there, but it will be higher than what it’s going to be this year.

Rahil Shah — Individual Investor — Analyst

Higher than what we’ll see end of this year overall for the business?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

That’s right.

Operator

The next question we have is from Research Assistant from Newberry Capitals.

Avadhoot Joshi — Newberry Capitals — Analyst

This is Avadhoot from Newberry Capitals. Just 1 question about the EPC business, the EBIT margins have declined. I would like to know what’s the sustainable level of EBIT margins for — sorry, I’m talking about manufacturing business. Manufacturing business, there is an EBIT margin decline. So what’s the sustainable level margins for the manufacturing business? And what’s the reason for this quarter’s decline in the manufacturing business EBIT margin?

Aditya Puri — Managing Director

Sustainable would be about — EBIT would be about 8%.

Avadhoot Joshi — Newberry Capitals — Analyst

8%. Okay. And this quarter decline, if you can elaborate little bit.

Aditya Puri — Managing Director

See, quarter-to-quarter, it’s not that we are producing one sort of product. We are making many sorts of products and within those products also every product is tailor-made. So sometimes you make a bigger margin, sometimes you make a smaller margin. It’s not like an assembly line production where margins can be uniform. So the decline — the fluctuation in margins will happen. But as we said, we hope to maintain an 8% margin through the year.

Avadhoot Joshi — Newberry Capitals — Analyst

Okay. And the second question is on the foreign orders. The order book of this foreign orders geography wise, it looks at again at — export orders at 11%. Are we seeing any traction or any RFQs from that side from foreign orders to increase that percentage to go up?

Aditya Puri — Managing Director

Interest, it has increased, interest has certainly increased, but India seems to be doing better than a lot of other foreign countries. So the interest has increased, and we think there will be a gradual ramp-up in the export order booking, not very dramatic, but a gradual ramp up.

Operator

The next question we have is from Khadija Mantri from Sharekhan.

Khadija Mantri — Sharekhan — Analyst

So first of all, can you give us the consolidated debt at the end of December 2020 [Phonetic]?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Yes, please. The consolidated debt across all the companies is INR1,064 crores as of 31st of December 2022.

Khadija Mantri — Sharekhan — Analyst

Okay, sir. And out of which this I think INR270 crores is related to the Philippines plant.

Kishore Chatnani — Whole Time Director and Chief Financial Officer

The Philippines plant as of now a total of INR350 crores of debt.

Khadija Mantri — Sharekhan — Analyst

Okay, sir. And also what is the update on the Philippines — this construction?

Aditya Puri — Managing Director

So construction is going as scheduled, and we hope to finish the construction by July, early August and to commission the plant at that point in time, sometime in August, early September.

Khadija Mantri — Sharekhan — Analyst

And has there been any progress on finding a suitable buyer for the same?

Aditya Puri — Managing Director

The inquiry level is increasing, but it’s also very profitable. It is also profitable to run the plant. So right now, we are concentrating on completing the plant.

Khadija Mantri — Sharekhan — Analyst

Okay, sir. And I would also like to know the order mix between private export and PSU orders in the current order backlog? Is it the same as earlier or…

Kishore Chatnani — Whole Time Director and Chief Financial Officer

For PSU is 44%. We’re talking about the consolidated order, doesn’t it?

Khadija Mantri — Sharekhan — Analyst

Yes.

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Give me just a second. So PSU is 44% of the order book — 56% was private. Export, as Mr. Puri mentioned, is 11% in exports and all of it is from private customers. We don’t have government customer orders next quarter.

Khadija Mantri — Sharekhan — Analyst

Okay, sir. And if I remember correctly, last quarter, we had said that in the manufacturing segment, we may have revenue growth of about 15% in FY ’24. So does this hold true?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Somewhere in that range, 10% to 15%, yes.

Khadija Mantri — Sharekhan — Analyst

10% to 15%. Okay, sir. And would we be able to reach to our sustainable margin of about 8% in this manufacturing segment?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

It will take us a year, 1.5 years to reach that margin, which we thereafter hope to sustain.

Operator

The next question we have is from Jitendra Sriram from Baroda BNP Paribas.

Jitendra Sriram — Baroda BNP Paribas — Analyst

I wanted to, first of all, understand on your technology transfer programs. So in your presentation, you detail the FGDs or the tangentially fired boilers, a lot of the programs are pre-2021. So what could be the level of indigenization that you achieved there? And what is the road map for upping that content over a period of time? And corollary to that, what are the new areas that you’re looking at for absorption of technologies going forward into, say, the next 3 years.

Aditya Puri — Managing Director

So as far as technology transfer agreement, the indigenization is concerned, it is indigenized to a very large extent. There is vehicle that we purchase for these technologies that we purchase from abroad. Obviously, technology keeps evolving. So we do keep getting some technology from there, but it’s indigenized to a very large extent. And as far as looking for new technology is concerned, one of the areas we cannot go into details at this stage, but as everybody is looking at clean energy and sustainable clean energy and a clean environment and those are the areas that we are looking at this point in time.

Jitendra Sriram — Baroda BNP Paribas — Analyst

Sure. My second question was relating to, if you could just help us understand the working capital breakdown between the EPC business and the manufacturing business?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

So as of now, our retentions, roughly, we have about INR1,100 crores — INR1,150 crores of retention which are largely from the — largely from the projects business. So when you say EPC, actually EPC for us, we call it as a project, and it includes the boilers and the sugar machinery and the air pollution control and the — what we internally call as EPC. So, there is, as Mr. Puri mentioned earlier, some of those larger projects of the FGD types. So some of them are — we expect to receive a large part of those retentions in about 6 to 8 months’ time.

Jitendra Sriram — Baroda BNP Paribas — Analyst

I got that. But I’m — sorry, sorry to interrupt. I’m just saying on a steady-state basis, assuming the retention was not the issue, like what is the typical working capital to base in, say, the projects business versus the manufacturing business?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

I don’t have a ready answer for that. I didn’t think about it like that. But — so I can’t give you a number. I don’t have a number. But let me try to describe how things work here. For the manufacturing business, the investment is largely in the inventories and the work in progress. Inventories includes raw material and work in progress. There is some amount of investment in receivables, and there is some amount of investment in retentions. The investment in the EPC projects, normally because cash flow of the advances are better, the EPC or the projects business is on a steady state basis, we are no longer booking very long division orders, orders with a lot of site work. We are no longer booking those kind of orders.

So there is presently more investment in the EPC business. You’re absolutely right, more of these are still employed there. But it is largely because of the retentions that — retention with it [Phonetic] milestone payments, which are part of those kind of projects. So as the order mix is changing towards projects which are less long shall I say. So today, we have FGD projects, which are 36, 39, 40, 40 months, and we are no longer taking that kind of orders. We are taking orders, which are typically not more than 2 years. So this — over the next year or so, you’ll find a lot of working capital getting released.

Operator

[Operator Instructions] The next question we have is from Ankit Gupta from Bamboo Capital. Please go ahead.

Ankit Gupta — Bamboo Capital — Analyst

Well, thanks for the opportunity. On the EPC side, sir, what kind of sustainable EBIT margins are we looking at over medium to long-term?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

So EPC, we are focusing more and more on the boilers, which — where it’s all technology-led. Our technology is very, very good for different kind of boilers for sugar machinery and distilleries as well as air pollution control equipments. So these are the areas where we are booking new fresh orders. We think the margin which is presently about — what’s reflecting in the numbers today as about 4% should be reaching 6%, 6.5%.

Ankit Gupta — Bamboo Capital — Analyst

Okay. So this is — historically, if we look at, we have done around 3.5% to — FY ’22 was an aberration because of raw material price increase, but you have done around 4%, 5% kind of margins in the segment. So you’re looking at, at least 6%, 6.5% is what you’re saying?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

That’s right.

Ankit Gupta — Bamboo Capital — Analyst

Okay, okay. And on — there were some new segments that we have entered some time back into on the LV side and on civil construction side. So if you can tell us how is the progress in the segments? And how much is the order book from this new segment that we have entered over the past year or two co-pay order book currently?

Aditya Puri — Managing Director

Sure. As Mr. Chatnani has said earlier in this conference, we are sort of realigning ourselves and not doing very long duration projects. We are also doing the projects where the percentage of site work compared to the total order value is lower than what we have been doing. So we have become selective in our order booking and yet we’ve been able to maintain our order book in number terms. So we cannot give you a break-up of which segment exactly we’re going to be booking orders from the future, but these are going to be the guiding principles.

Ankit Gupta — Bamboo Capital — Analyst

And if you look at nine months, we have done almost 4.6% kind of EBIT margins on the EPC side and we have aspirations of reaching 6%, 6.5%. So when do we expect to reach those aspirational EBIT margins that we had?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

About a year, year and a half, because the existing orders that we have — the new orders that we have been booking, we are trying for better margins and lesser site work. Basically existing orders need to be completed.

Ankit Gupta — Bamboo Capital — Analyst

Sure. So let’s say, the new boiler order that we have got recently of INR500 crores, there the scope of work on the site front is pretty low. And what will be — like when — till when do we have to…

Kishore Chatnani — Whole Time Director and Chief Financial Officer

If you talk about specific customers or specific orders.

Ankit Gupta — Bamboo Capital — Analyst

So let’s take an example of any order that we have got recently. So normally, earlier, what used to be the duration of the project that we used to complete? And for new orders that we are taking, how much has that reduced? If you just can give an example and explaining to us.

Aditya Puri — Managing Director

Mr. Chatnani was saying that we’ve taken orders earlier, which was 36 to 48 months. And now we are planning — our wish is that most of the barring maybe one order, we should — one or two orders, we should — all the orders should be below 24 months.

Ankit Gupta — Bamboo Capital — Analyst

Sure. Okay, okay. Thank you, sir, and wish you all the best.

Operator

Thank you. The next question we have is from Deepesh Agarwal from UTI AMC. Please go ahead.

Deepesh Agarwal — UTI Mutual Fund — Analyst

Yeah. Good evening, gentlemen. My first question is, if I look at subsidiary manufacturing revenue, there seems to be a sharp jump if I have to control minus standalone. How is — there is a loss during this quarter. So can you explain what has happened at the subsidiary level?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Pardon me, which subsidiary are you talking about?

Deepesh Agarwal — UTI Mutual Fund — Analyst

I’m being concerned by the standalone and the revenue has increased to around either number which is completed is INR194 crores, but there is a substantial loss?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

I can’t hear you too well. So there is a loss in this quarter. Let me try to answer. There is a loss in this quarter in Eagle Press. That gets consolidated into manufacturing of machinery and equipment.

Deepesh Agarwal — UTI Mutual Fund — Analyst

And was there any one-off in Eagle Press?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Pardon me, was there what?

Deepesh Agarwal — UTI Mutual Fund — Analyst

Was there any one-off in Eagle Press?

Aditya Puri — Managing Director

Sorry, what in Eagle Press? Sorry, we didn’t get you.

Deepesh Agarwal — UTI Mutual Fund — Analyst

My question was, was there any one-off in Eagle Press?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Actually, Eagle Press has been passing through a difficult time, more because of the customer industries in the U.S. has not doing too well. So Eagle Press have been under-loaded for some time. Though recently, it’s booked one large order and there are many more orders to bid for. But for the moment, Eagle Press has been passing through a difficult time with less work.

Deepesh Agarwal — UTI Mutual Fund — Analyst

Okay. Second, can you highlight what is the outstanding order book from FGD and the current execution cycle? And by when do you expect a substantial working capital release from the FGD projects?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

So FGD order book today, I have a combined thing which is FGDs plus other air pollution technology. So that is INR1,400 crores as of now. And in terms of the retention, so this order book is the balanced order to execute. So if there is a project which is INR500 crores and we have executed INR400 crores, the balance order to execute is considered only INR100 crores. So balance order to execute on the air pollution side is INR1,400 crores. And there are two large FGD orders, which are closer — getting closer to completion. And as Mr. Puri mentioned earlier, in about six to eight months’ time, we should get substantial money, the milestone payments and retentions coming back from that.

Deepesh Agarwal — UTI Mutual Fund — Analyst

Understood, understood. And sir, lastly, if I look at the ordering across the board in your sub-segments, that has been slightly strong in the industry, whereas your inflows has not been so strong. Possibly, you have highlighted, you have been selective with the order intake. Can you highlight what would be the quantifiable benefits in terms of profitability from the selective approach? Because earlier also, you were guiding kind of an 8% to 10% margin on manufacturing. So is there over the next two, three years, you’ll look at a different margin trajectory?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Margins of the manufacturing segment, as Mr. Puri mentioned a few weeks ago, the sustainable margins would remain 8%. The selective ordering is — selective order booking is largely in the project business where we are focusing more and more on technology-led orders, which means our boiler — orders for boilers, orders for sugar machinery and distilleries, orders for air pollution control equipments. So margins are certainly going to improve in the EPC side, the project side. On the manufacturing side, different or at some point of time, you can get a one order with a larger margin, one order with a lower margin, but typically 8% is certainly going to be sustainable.

Deepesh Agarwal — UTI Mutual Fund — Analyst

Understood. Thank you, and all the best.

Operator

Thank you. [Operator Instructions] The next question we have is from Rajakumar Vaidyanathan [Phonetic] an Individual Investor. Please go ahead.

Rajakumar Vaidyanathan — Individual Investor — Analyst

Yeah. Good evening, sir. Thanks for the opportunity. I have a couple of questions. So the first question is on the sugar and ethanol segment. I see that the segment has done well compared to the last financial year. So just wondering what is the outlook for this segment for Q4 and as well as financial year ’23-’24?

Aditya Puri — Managing Director

So as far as the next year is concerned, it’s a commodity. So we hope things will remain good, but commodities are subject to fluctuations. And the remaining — Q4 should remain — should not be very different from Q3 and Q2.

Kishore Chatnani — Whole Time Director and Chief Financial Officer

I can add a little to that. The ethanol plant, we would have mentioned earlier that the ethanol plant capacity has been increased. And that will of course help in reducing — it will not really change the revenue very much, but it will reduce the fuel cost, it will reduce some of the costs. To that extent, next year, ethanol will show a better margin.

Rajakumar Vaidyanathan — Individual Investor — Analyst

Okay. And sir, from the segment result, what is the operating profit standpoint is the best part of the quarter is already lower or Q4 will be much better than the Q3 numbers?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Q4 for sugar and ethanol, it’s largely going to be the same as for this quarter.

Rajakumar Vaidyanathan — Individual Investor — Analyst

Okay, great. Sir, last question. Sir, if I see the next segment, the ethanol plant under construction at Philippines, I see the revenue has been shown in negative INR27.6 crores and the segment result shows a positive INR9.7 crores number.

Kishore Chatnani — Whole Time Director and Chief Financial Officer

That’s forex fluctuation.

Rajakumar Vaidyanathan — Individual Investor — Analyst

I’m sorry, sir.

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Forex fluctuation.

Rajakumar Vaidyanathan — Individual Investor — Analyst

Okay. So what would be the run rate we should take, sir? So this segment will continue to be lost in the country projects overall?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Plant is still under construction. As was mentioned earlier, that plant is expected to be commissioned in August of 2023, after which you can get figures which we can compare quarter-to-quarter.

Rajakumar Vaidyanathan — Individual Investor — Analyst

Yeah. Till that time, what would be the run rate we should take, sir, for the next two quarters from a negative…

Kishore Chatnani — Whole Time Director and Chief Financial Officer

I really don’t know.

Rajakumar Vaidyanathan — Individual Investor — Analyst

Okay, sir. Thank you.

Operator

Thank you. The next question we have from Harsh Sarda [Phonetic] an Individual Investor. Please go ahead.

Harsh Sarda — Individual Investor — Analyst

Hi. Good afternoon. Can you give some visibility on the order book pipeline and bidding? What kind of order book you are looking at for next three quarters?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

So next three quarters should be roughly at the same levels as we’ve seen, maybe slightly higher. The inquiry level is good. And we hope to sustain our good order booking that we’ve had in the previous quarters.

Harsh Sarda — Individual Investor — Analyst

Okay. Broadly, we see order book and revenue in capital with manufacturing sector have grown in the last three years and we have been almost flat in the revenues. How would you like to address that?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

So revenue growth has been flat. But as we said, we — next year, we should see about a 10% increase in revenue.

Harsh Sarda — Individual Investor — Analyst

Okay. Thank you.

Operator

Thank you. The next question we have is from Ashwani Sharma from ICICI Securities. Please go ahead, sir.

Ashwani Sharma — ICICI Securities — Analyst

Yeah. Thanks for the opportunity. Sir, my first question is, if you can tell me what is the order book — standalone order book?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Standalone order book is INR6,917 crores.

Ashwani Sharma — ICICI Securities — Analyst

And what was the number a year before, sir?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

I think Mr. Puri mentioned in his speech, but I will just check it for you in a minute. So INR6,917 crores as of 31st of December. I have readily — for 31st of March, it was INR6,458 crores. So it’s grown by about INR500 crores in nine months

Ashwani Sharma — ICICI Securities — Analyst

Okay. Thank you. So if I look at your standalone revenue, it’s down 1.5% or flat. Is there a execution challenge that you’re facing or it’s mainly because of the lower order book?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

The order book is not low, it’s actually higher. You understand it better than I do actually. I think capital you don’t have a steady run rate, different projects are at different stages of execution. So [Technical Issue] for us to think that the revenue will be exactly the same as any other quarter, that’s not necessarily the case, it is depending on the projects under execution.

Ashwani Sharma — ICICI Securities — Analyst

Sir, if I look at your run rate, it has been between INR1,000 crores to INR1,100 crores, which is the point I was trying to make. So what is the outlook for Q4 and after that?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

Q4 will be a little better, a little higher than Q3. And after that, I think [Technical Issue] a few minutes ago, that we are expecting a higher revenue. It may be as high as — higher by about 10% next year.

Ashwani Sharma — ICICI Securities — Analyst

Right. So if I look at your order backlog contribution, so contribution from the chemical, petrochemical has been consistently rising from single-digit to now low-double-digit. So what is driving this growth, sir? Is it chemical or is it a refinery? How this contribution is increasing?

Kishore Chatnani — Whole Time Director and Chief Financial Officer

It’s classified separately. So when we say refinery, we may have orders for process plant equipment. We also have orders for boilers, oil and gas fired boilers. Now if you look at chemicals, that is basically the companies from chemicals — we have booked orders from companies which are active in the chemical space. So it’s not really — which can be casting orders.

Aditya Puri — Managing Director

Chemicals could be castings, it could be boilers, it could be pressure vessels.

Ashwani Sharma — ICICI Securities — Analyst

Okay, okay. Even refinery, if you look at refinery also, I think the contribution continues to be strong for the last two quarters. What is your outlook on this segment? Because one of your competitors has been communicating that there has been some slowdown as far as the inquiry pipeline is concerned. How do you read the market, especially in the refinery space?

Aditya Puri — Managing Director

So refinery space as of now, the order pipeline, it’s fine, it’s good. In January also we booked orders from the refinery.

Ashwani Sharma — ICICI Securities — Analyst

Okay, sir. That’s all from my side.

Operator

Thank you, sir. [Operator Instructions] We have a follow-up question from Khadija Mantri from Sharekhan. Please go ahead.

Khadija Mantri — Sharekhan — Analyst

Yes. Sir, I would like to know what is — how has been the performance of our subsidiary, Hitachi Zosen, because there was a delay in receipt of some equipment by the customer in the last quarter?

Aditya Puri — Managing Director

So those equipments have still not gone, although we’ve received 95% of the payment. So because of various reasons, they have not been able to pick up the order, the equipment. And it’s not — we completed it on time. So it’s not attributable to us. We are hopeful that maybe this quarter or first quarter of next year, the equipments will get picked up.

Khadija Mantri — Sharekhan — Analyst

Okay. But how has been the quarter for us, sir?

Aditya Puri — Managing Director

Quarter for us has been…

Kishore Chatnani — Whole Time Director and Chief Financial Officer

For Hitachi Zosen, we’ve done about INR160 crores in revenue and about INR4 crores in profit.

Khadija Mantri — Sharekhan — Analyst

Okay. Thank you.

Operator

Thank you. [Operator Instructions] So at this stage, there seems to be no further questions. I would now like to hand the conference over to Mr. Puri for closing comments. Please go ahead, sir.

Aditya Puri — Managing Director

Thank you. Thank you everyone for attending this conference, and we will meet you again next quarter. Thank you.

Operator

[Operator Closing Remarks]