Mishra Dhatu Nigam Ltd (NSE: MIDHANI) Q2 2025 Earnings Call dated Nov. 15, 2024
Corporate Participants:
Sanjay Kumar Jha — Chairman & Managing Director
T. Muthukumar — Director, Production & Marketing
N. Gowri Sankara Rao — Director, Finance
Analysts:
Amit Dixit — Analyst
Amit Kumar — Analyst
Vikas Gupta — Analyst
Neha Joshi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to MIDHANI Limited Q2 FY ’25 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Amit Dixit from ICICI Securities. Thank you, and over to you, sir.
Amit Dixit — Analyst
Yes. Thanks, Manav. Good afternoon, everyone. On behalf of ICICI Securities, I welcome all the participants for MIDHANI Q2 FY ’25 conference call. At the outset, I would like to thank the management for giving us an opportunity to host this call.
From the management, we have with us today Dr. Sanjay Kumar Jha, Chairman and Managing Director; Shri N. Gowri Sankara Rao, Director, Finance; and Shri. T. Muthukumar, Director, P&M; and Mr. Paul Antony, Company Secretary.
Without much ado, I would hand over the call to Dr. Jha to take this forward. Thanks, and over to you, sir.
Sanjay Kumar Jha — Chairman & Managing Director
First of all, I am extremely thankful for the investors for having so much confidence in MIDHANI. I’m very pleased to be part of this conference call today when we are discussing about the second quarter of FY ’25. And this quarter, we have achieved a turnover of INR262 crores sale. And that was, in fact, and almost more than 60% growth from the quarter one, but also around 15% higher than the second quarter of FY ’24.
Subsequently, if the other parameters also have gone up in the — like value of production, as well as, on the higher side, we also have the good impact on the development of the PBT, PAT, everything else in the higher side, which already we have — financial results have been already published. And I think you must be aware of this.
What I would like to mention that some of the highlights in this quarter is we have made very significant contribution, some of our national level programs, which includes supplying the materials for light combat aircraft, Mark II. The Mark II has been under development, and it is going in the very — because of MIDHANI’s timely supply, also before time supply, this program — project is moving very fast. Also, we have started supplying the material for the Sukhoi aero engine materials, which is required for India’s ambitious program to manufacture the entire engine, including the materials also within the country. So there also, we have made a very significant contribution by supplying the many of the materials as we have received the orders in the interval of six months, seven months.
In the product development, I would like to mention here to the investors that our company has made a very important product which is a high-end super alloys in [Indecipherable]. This is one of the most difficult alloys of use in aero engines. And in this alloy, the major challenge is that to make the higher — bigger diameter with a very less amount of defect tolerance. So we have developed 325 mm diameter, almost more than 12 inch. And this has given a very good quality. We have achieved the level of — defect level of very high standard that is around 1.2 mm FBH.
So like that, any other national program also, which includes the various aero engine materials used for DRDO program, which includes ATGG, Kaveri dry engines and STF — small turbo STE, small turbo fan, STFE. So like that, there are many other developments and also some of the strategic program, which India is in contention to strategic program has gone up and that’s also in the large quantity. So not only the technology, in fact, now the volume of production has also gone up. And it has been reflected in our performance coming in the second quarter. And we are hoping that similar type of development and growth we will sign in the third quarter and fourth quarter also. So this is a total development.
On the equipment side, we have commissioned a very high capacity secondary melting furnace, which is called Vacuum Arc Remelting, VAR, of very high capacity and that equipment also, we have commissioned fully in this quarter. It has given a very successful result. And I think in the future, it will be a very big contributor in our endeavor for Indianization and making this MIDHANI on the higher growth path.
We also — I would like to mention here that in this quarter, export has gone up, and we have achieved almost if you see in our first turnover, more than 12% we have achieved from the export. So this is also one of the significant developments and there is a good — we have also a good order book for the export and it is expected to increase further in the coming months.
So with this type of a few things, I would like to — better, I would like to answer the questions queries from our investors. Thank you.
Operator
Sir, should we start the question-and-answer session?
Sanjay Kumar Jha — Chairman & Managing Director
Yes, please.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Amit Dixit from ICICI Securities. Please go ahead.
Amit Dixit
Yes, hi. Good afternoon, sir, and thanks for the opportunity. By the time the question queue assembles, I would take this opportunity to ask few questions of my own. The first one, you mentioned that the VAR furnace had been commissioned. Is it that titanium VAR that we’re talking about 500 tons?
Sanjay Kumar Jha
Yes, yes, yes. It is.
Amit Dixit
Okay. So when it was commissioned, sir? And when we will — when we expect it to be ramped to the full capacity?
Sanjay Kumar Jha
So, already when I was talking about the commissioning, commissioning means we have to take certain number of trial melts. So those things we have completed. And now the furnace is in continuous operation and we have sufficient load now that we are trying to extract from this furnace as much as possible in next — in the coming months.
Amit Dixit
Okay. Sir, continuing on the furnace side, some of the peers like PTC Industries, for example, they are also going to commission their own VAR very soon. Kalyani Steels has also planned for commissioning a titanium VAR furnace again. So don’t you see this competition intensifying in this particular segment?
Sanjay Kumar Jha
Yes, it’s true. In fact, if there is an increase in capacity, demand also will be increasing because, you know, in the titanium, as of now, as per my understanding, it will take another three years to four years for these people who are already entering in this field to establish. And we have a totally established line. So — and our order book also for titanium is very good. So I am not saying that there will not be a challenge. But we have technology for all the products, because if somebody is going in titanium, they have to go for round, they have to go for flats, they have to go for this cast product. And at MIDHANI, we have all varieties of products available with us. So we are not — we are sure that we’ll be able to do lot of value addition in our melting. Melting is the first phase. After that we have to go for forging, then we have to go for rolling, we have to go for sometime ring rolling, we have to go for tube making, we have to go for wire making. So everything is already we are having in house. So we have all the ecosystems. We are able to compete in the market as far as MIDHANI is concerned and market is totally not limited today to India. We have many requirements coming from the foreign countries also, foreign OEMs. So if they are coming up, they will also get the market segment. And competition, already we are in the competition for many other products also. So that we have work in that [Indecipherable].
Amit Dixit
Okay. Great. Manav, please move on to the next participant.
Operator
Thank you. We have our next question. [Operator Instructions] The next question is from the line of Amit Kumar, an individual investor. Please go ahead.
Amit Kumar
Thank you for the opportunity. Sir, I have two questions. First is would you like to provide some guidance for the H2 and next two financial FY ’26 and ’27? And second is the what sort of the market size of the quarter we are making in India and in the world and what is our market share? These are my two questions, sir. Thank you.
Sanjay Kumar Jha
You are talking about our financial results expected for next two years, if I understand correctly. We are targeting, our aim is to grow in double-digit and that will be almost in the range of 20%. So that growth we are planning and it is expected to be in this financial year also and next also. So that part we had planned.
Coming to the market shares. I am not talking about the India. If I am taking the entire world market, in fact India — in India — India is doing only serving today not more than 5% of the international requirements. I am talking only about the aerospace. If you see the aerospace sector itself, India has been serving less than 5%, I will say today. So we have the ample opportunity even if you grow, make 15% — 10% to 15% also, not only MIDHANI, like MIDHANI we need four — three, four companies in parallel. So there’s no lack of, I would say the market potential in this sector. I’m just talking about the nickel-based alloys, titanium-based alloys.
But the one advantage which MIDHANI has got that we have a complete technology and know-how in under one roof. We are not depending on melting to somebody. We are not melting — depending forging to some other company. We are not depending on the machining. We are not depending on the castings. So everything is entire — rolling, we have the titanium rolling, it’s the unique. Titanium rolling today, very I think maybe one and two company in the world, they are doing. So recently, we are also trying to see that how we can get the slab from outside and we can roll in MIDHANI and we can supply them in the form of the plates. And people are approaching to us for that purpose also.
So what we — I would like to say that this type of facility which we are having for a titanium, if somebody has to develop like just now we have mentioned about a company or any — for that matter any other company, it takes time. And then also — and even they develop also — they also have the market available. We are also having our market abilities there. So these things are going to be very good time I’ll say for the Indian industry. So India in the industry is going to see a very good time as far as the mixed material is concerned. And today the production is very less. As I said, hardly, I’ll say less than 2% of the requirement in the world we are producing. So we have the good opportunity.
Amit Kumar
And sir, what is the market value in terms of value in INR or dollar terms if you could provide in India and global?
Sanjay Kumar Jha
Very difficult to tell with the right figure, but I will — sometime I’ll share with you. And also we may have to update the data also because this data what I am talking in the percentage terms maybe three years, four years back when we have a study. So we will give that input to you.
Amit Kumar
And China, does China have bigger market than India? If yes, then how many times does it have?
Sanjay Kumar Jha
China? Yes, definitely. China has grown in this segment in the big way. But one advantage which we are having in our country that we have — our systems are having highly flexible. We can make the standard European standard, we can make the Russian standard, we can make follow the American standard. So that type of our systems are laid here. But how much they are serving today? They are serving today to the many big companies. But they are all looking towards China Plus One. Since the China Plus One policy, India has got a very good opportunity. That’s what I can tell you at this juncture.
Amit Kumar
And who are our major competitors in India?
Sanjay Kumar Jha
In India, as you have mentioned already, some of — already we have started that some company they are already coming forward in this area. But I — practically how much they have gone to aerospace, I think aerospace contribution is negligible from them so far as of today.
Amit Kumar
Okay. Thank you very much, sir. Thank you for the opportunity. All the best.
Operator
Thank you. [Operator Instructions] We have our next question from the line of Amit Dixit from ICICI Securities. Please go ahead.
Amit Dixit
Yes, sir. We’ll wait for question queue to assemble. Meanwhile, just few questions. So you mentioned about titanium that we have integrated capacity under one roof. Just wanted to understand what is the our casting and casting capacity in titanium and super alloy?
Sanjay Kumar Jha
Yes. So titanium we have investment casting. The furnace capacity is 300 kg and we can make the size of around 1 meter diameter — 1 millimeter to 1.2 millimeter diameter casting we can make. And that defines basically the casting capacity. And as wise if you see it, it will — mostly casting is sold as per the complications of the casting design. So it is that the every — if the furnace can be utilized every day we can make 300 kg. But all the castings will not be of the same size. Same [Indecipherable] weight, but weight is not the constant, it is definitely the size and thickness of the casting. So it’s like right now we are trying to develop the casting of 6 mm thickness, 7 mm thickness. So that type of technological challenge we are doing. But our idea is to make the castings for naval requirement now. Naval and then also for certain requirements have also come from nuclear power plants, because [Indecipherable] nuclear power plants requires titanium as a castings for putting in their walls. So that type of requirements are there. But our capacity today it is sufficient to meet the requirement from the our domestic industry. And we are trying to see that how we can integrate with the international in that export market also by aligning with the major aerospace companies. So there we need certain upgradation in our facilities or some sort of system development. So in that area the various level of auditing and its improvements are going on.
Amit Dixit
Okay. If I heard you saying correct, it is 3 tons per annum.
Sanjay Kumar Jha
300 kg is a single size, single melted. And that can convert — you can convert that every day, if you take around — even take the one casting also it will be — in tonnage wise may not be very high, but it will be around 4 tons to 5 tons in a month.
Amit Dixit
And how about super alloys, sir?
Sanjay Kumar Jha
Super alloy investment casting a very small size furnace at present. And that we are doing exclusive for ISRO requirement, ISRO’s program. So — and which is used for their cryo and semi-cryo engine. So that requirements we are meeting now with our super large casting. But there is a plan to enhance it to the higher capacity. But right now it is very less and highly specific to a program of ISRO.
Amit Dixit
Okay, great. Thanks. Thank you so much.
Operator
Thank you. We have our next question from the line of Vikas Gupta from Wealth Guardian Services. Please go ahead.
Vikas Gupta
Hello. Good afternoon, sir.
Sanjay Kumar Jha
Good afternoon.
Vikas Gupta
Sir, my first question is about the margins. So margins have recovered during the quarter. So can you please give us the guidance for H2 and the next year?
Sanjay Kumar Jha
Yes. As to margin also we expect in the similar lines maybe it can improve also, but it will be in the similar line because — why, maybe slightly on that improved side because this has seen the impact of Q1 also. Q1 also has been — was very low. So we are hopeful that this will continue. And as you know your sales turnover increases. It will have the positive impact on various parameters which includes even the — this margin on the profit also. So we will be seeing that improvement only.
Vikas Gupta
So for next year, FY ’26, is it the same? Margin side?
Sanjay Kumar Jha
FY ’26, again the product mix is very important. Many orders which we are expected now is coming from — we have the mixed bag of orders which include coming from either high margin and low margin. So we are trying to see that. We should try to — since our volumes are increasing, I think percentage [Phonetic] that will remain there in the similar terms as per the percentage is concern.
Vikas Gupta
Okay. And sir, I just wanted to understand about the revenue guidance that you gave. What is the figure for H2?
Sanjay Kumar Jha
H2, you’re telling the figures?
Vikas Gupta
Yes, I mean figure or percentage, what’s your guidance on them?
Sanjay Kumar Jha
Similarly, whatever we have achieved in the Q2 will remain. It will [Indecipherable].
Vikas Gupta
Okay. And sir, any capex plan for next year or next two years?
Sanjay Kumar Jha
The capex plan already this year we have for INR60 crores and next year and next to next also we are having the plan, but depends on the ability of the fund and all we’ll decide. But possibility is there to add it further, but our idea is just to see that how effectively can it lies that whatever capex we have now put in this — our operations and mainly main focus today is basically the modernization of our old facility which has been installed and commissioned in the ’80s. So those things we are trying to modernize now with various options available like either going for the new equipment or even revamping the old facility and then going, it’s modernizing. So this [Indecipherable]. But it will be — capex will be almost in the similar rather maybe around INR100 crores will be there.
Vikas Gupta
Okay. Sir, my last question is about the export numbers. So what — how much was the export revenue for this quarter and for H1?
Sanjay Kumar Jha
H1 we have achieved — we have almost — our export was around INR49 crores and we are planning to achieve in the similar range. Maybe that is not slightly on the higher side because we have around INR60 crores order is available. So that we have to execute in this financial year. So we’ll be touching around INR100 crore plus, it will go into around INR110 crores.
Vikas Gupta
Okay. That’s it from my side. Most from my side, sir. Thanks.
Operator
Thank you. [Operator Instructions] The next question is from the line of Neha Joshi, an individual investor. Please go ahead.
Neha Joshi
Good afternoon, sir. May I know about any progress on Rolls-Royce or GE or Pratt & Whitney orders?
Sanjay Kumar Jha
Yes, whatever export you have seen the figure of around INR50 crore, INR49 crore, precisely. All these supplies mainly have gone to GE and also Pratt & Whitney. Some supply has gone to Rolls-Royce also. So it is a mixed type total like supply has gone to these type of companies only. And we are also now working out to have a long-term contract with Pratt & Whitney and also for many other similar type of aero engine manufacturing company.
Neha Joshi
Okay sir. Thank you sir. That was it from my side.
Operator
Thank you. [Operator Instructions] The next question is from the line of Amit Dixit from ICICI Securities. Please go ahead.
Amit Dixit
Sir, one of the things that we saw in this quarter or in the half year, I should say, that the inventory increase has been much lower compared to H1 FY ’24. In the last call you highlighted that the objective is to control the VoP and to you know, sell whatever we can produce. So just wanted to understand, you know that VoP is also down we are seeing. So what specific steps we have taken in that direction, because this is a very positive thing, I mean coming in MIDHANI now?
Sanjay Kumar Jha
Yes. One, it has been — as I told you from last, I think, few quarters, that our main focus is to cut down the inventory. And in this endeavor, we have taken the number of steps. Like first one is that how to reduce the — our generation of our scrap or rather I can improve the yield. And second point is that whatever we generate the scrap, how we can best do the recycle. So you can see our recycling percentage of the scrap also has gone up. At the same time, we also work in such a way that we should try to supply the products in a very short cycle time. The cycle time reduction also is the one area which we have tried to do and we have put lot of effort in this direction.
And raw material also inventory has come down because first of all the prices of the raw material has been on the lower side in this quarter also. At the same time, we have made our procurement in such a way that we should not build up large amount of raw material inventory. So these are the various measures which we have taken up and it is giving a good result. And I am sure in this year itself we have the target that our VoP and sales should have almost mis-matched that type of steps we have taken.
And as I told, there was some impact in the first quarter because of that one because we wanted to control the inventory of WIP right from the last quarter of the last financial. So — but now things are — we are streamlining. You will see the better impact, better result now in coming days.
Amit Dixit
Now one of the basic data-based question, that what is the kind of order inflow do we expect in FY ’25? And what is the end year order book that you are expecting?
Sanjay Kumar Jha
Yes, I think so-far we have booked up to October more than INR1,000 crores, INR1,000 crores plus we have already booked order. And we are expected to book around not less than INR600 crores in the months to come from this financial year FY ’25. So that will build-up our — and if we are doing our sales turnover also around INR1,300 crores, INR1,400 crore this year, definitely we’ll have more than INR2,000 crores our order book at the end of this financial year. And as I told rightly that today the market is good, provided you can produce the material and supply in short time.
The short delivery is a requirement of the — need of this hour and probably it is suiting to the industry also and it is good for our inventory position also. So we are trying to take the orders from delivery period and many orders we are not trying to now take because not — people are not giving because moment you see that your lead-time is more, so that orders are not coming. But I am sure that as we are improving our — increasing our capacity, efficiency, order book will not be the issue.
Amit Dixit
Okay. Sir, in terms of current order book, is it possible to provide the split in terms of sector and in terms of product?
Sanjay Kumar Jha
[Foreign Speech] You want a breakup.
Amit Dixit
Yes, sir, break up.
Sanjay Kumar Jha
Breakup figure, I will ask my Marketing Director, TPM [Phonetic] is sitting there to give the order breakup as far as the sector-wise concerned. So he will give the breakup, but the maximum order today we are having from the defense. And when I say defense, defense we have the two types aero and the naval put together is almost, I’ll say, 70% to 80% we have the order book from these two segments only and rest others. Space is very less today. I think hardly we have 10% to 15% in that space. But expected to — indications are there that things are going to come, but not now. The space is less.
Amit Dixit
And, sir, in terms of material split between titanium, super alloys and special steel?
Sanjay Kumar Jha
That breakup I’m not having here right now but reasonably we have — both the things are very good. Titanium order book is very — it is definitely very good now. And we have [Indecipherable] that a lot of things are under process, some effect has come because of problem in the supply chain of the some of the master alloys which we are trying to dissolve, but order book for titanium is must be around INR600 crores to INR700 crores, INR600 crores at least.
Amit Dixit
Okay. Okay, okay. And sir, is it possible to provide the contribution from Wide Plate mill and Armor factory revenue contribution?
Sanjay Kumar Jha
Yes. Armor — Wide Plate mill contribution is less in this quarter or say the first quarter also, Q1 and Q2 mainly because the plate required for ISRO almost we have order we have completed. So that was coming in the big way in the last — earlier FY ’23 and ’24, but we are trying to now develop some of the products which are recently, we have made one product for BHEL turbine blades. So those things are expected, but they are all coming not in the very high volume. Technologically, they are very challenging, but not high volume. So it is going to increase further. Then also we have some product we have made for titanium plates for ISRO. So those things are already going on. So we are hopeful to get some more orders and in this process we have made good progress in getting some tie-up with AVISMA VSMPO for rolling of titanium slabs using our plate mills. So that type of work is going on. I think we will be having this year-around INR150 crores to — INR150 crores with on Wide Plate mill, INR150 crores, I’ll say conservative ones. It may increase more also, let us see.
Amit Dixit
Okay. And Armor factory?
Sanjay Kumar Jha
Armor this year is going, but we had some backlog things which we wanted to do some value addition because of some technological challenges we had faced in the jacket. So that supply is going on, but since it is VoP [Phonetic] the first time. So a lot of testing trials is going on that product. So far we have supplied around maybe INR6 crores, INR7 crores worth. And some orders are from [Indecipherable] State police for vehicles. So vehicle development also, there are number of developments they are told to do for the first time. So I’m expecting that also. So this quarter, quarter three and quarter four, we will get the same figure [Phonetic], but we will not — our idea is to cross INR100 crore, but this will be a — it will be in the lower side because of that type of development. But we have participating in the very big, big, tenders, let us see how we can solve this.
Amit Dixit
Okay. Sir, are we also going to participate in this FRCV development for this? The AoN has been issued. So do we also have some take there?
Sanjay Kumar Jha
Yes, FICV, the armored side, we have — people have approach to us. So since we are doing the armoring for the tanks now, that is for MBT Arjun. So this — for this vehicle also, the armor requirements, they will be coming to us and we are — we will be participating in that because we have the technology for armoring for the tanks. Similar thing with some modification will be utilized for FICV also.
Amit Dixit
Is it possible to quantify the opportunity for this?
Sanjay Kumar Jha
Broadly, not very difficult to say at this juncture because it is in the discussion stage. So right now how they are going to deal with that and some place probably the technology part also where they are sure for using the same technology or not, I am not sure. But initial indications are that similar type of armor they are going to utilize in FICV also. So let’s see how it is going to be around in the future. Very difficult to pinpoint at this stage.
Amit Dixit
So the last one from my side, what will be the scrap recycling percentage in H1 and how has it changed from FY ’24?
Sanjay Kumar Jha
Scrap recycling, I think our DPM will put something.
T. Muthukumar
This is scrap rate recycling, we are gone in a long way. That is the reason that we could be able to see in the last — fourth quarter. Our virgin consumption has come down from about the previous quarter. It was about 60% and the scrap consumption has gone to about 40%. Now we are identifying every grade whenever we process, what is the possibility of using the scrap. And since the super alloy consumption is more and that too mostly we need to use it for aero, where there is a recession that we cannot use any scrap. So we have to use only 100% virgin material. But however, non-aero grades, we are trying to use more and more scrap recycling. And we are planning that in the coming quarters also our scraps consumption that is reuse of internal scraps, it will be about 40% and the virgin material will be 60% compared to what it was — earlier about 70% was virgin material and 30% — 20% to 30% was a scrap. So we’ll continue to do that. We are putting a lot of effort. In addition to this, we are also identifying a lot of scrap materials, which cannot be used at MIDHANI. That we are putting it for action. We are putting it for action. That is also compared to earlier years, our sales through action in stores has gone up. So all efforts are there to liquidate the scrap and the re-usage of the scrap. Okay. Thank you.
Amit Dixit
And sir, is this scrap consumption also there in titanium or is it only for super alloy?
Sanjay Kumar Jha
No, no. Titanium we cannot be able to scrap. This can be used only in the steel and the super alloy.
Amit Dixit
Okay. Okay. Understood, sir. Great, sir. That’s it from my side. Thank you and all the best.
Sanjay Kumar Jha
Okay.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.
Sanjay Kumar Jha
Okay. I will now ask Director of Finance, to give the closing remarks in detail.
N. Gowri Sankara Rao
Thank you, sir. In the closing remarks, I would like to mention that year compared to year ’23-’24, ’24-’25 is an opportunity year where our exports have gone up. And also what I see, though there is a reduction in the turnover and the margins in the first quarter, second quarter of FY ’25 has shown a good improvement and we achieved INR262 crores turnover, which is our best. But also as our CMD, DPM explained, regarding the control — to control the inventory, we have not gone for a higher production, where both we are matching and our VoP is INR268 crores and our sales is INR262 crores. And by using the more planned rewards [Phonetic], even our profitability has gone up and we are at 22% EBITDA now for the second quarter, because of the first quarter it is reduced. However, we are expecting third quarter and fourth quarter, it will further improve.
And as it rightly told, because of the new VAR introduction, the commissioning, the titanium production will go up compared to the last year only we did in the first half 7%, now it has gone to 10%. Whenever the company goes more titanium, the margin is also good and we can achieve. And as far as exports are concerned, we have orders. We will execute with the new companies that is our side and hope that quarter three and quarter four will give a bright results.
And on this, I extend my thanks to — on behalf of MIDHANI, my thanks to all the esteemed investors for their confidence on MIDHANI. And in MIDHANI we have a bright future. I also thank ICICI for arranging this conference call. Thank you.
Operator
[Operator Closing Remarks]