Mishra Dhatu Nigam Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Mishra Dhatu Nigam Ltd (MIDHANI) Q4 FY22 Earnings Concall

Q&A Highlights:

• Kavitav Shah from White Equity asked why the inventory of sub-line item, called internally generated scrap and rejected material, is increasing consistently over past 5 years. Sanjay Jha MD said that these scrap materials cannot be sold outside as they are very valuable in nature. And some of these materials are used for new orders internally.

• Kavitav Shah from White Equity asked if there is any plan to write off these sub-line items in near future. Sanjay Jha MD answered that the consumption of this scrap internally has increased year after year. In FY22, the company saved around INR43 crores of raw material by utilizing the internally generated scrap.

• Aditya asked about the countries and the kind of products MIDHANI is targeting for exports growth. Sanjay Jha MD replied that the company is targeting Germany, Turkey, Bahrain, France, US and UK. On products, MIDHANI is targeting the mix category, titanium alloys, special steels and super alloys.

• Aditya enquired about the status of NADCAP certification for aerospace international companies. Sanjay Jha MD answered that NADCAP is on the advanced stage of approval. And MIDHANI is expecting that in in the next 6 months, it will be getting the certification.

• Aditya asked about the opportunities for MIDHANI with NADCAP certification. Sanjay Jha MD replied that in the aerospace industry, unless a company is NADCAP certified, it cannot get orders. The main objective is to get international orders.

• Abhijit Mitra with ICICI Securities asked about the capex scheduled for Wide Plate Mill, armor plant, spring plant, and the powder plant. Sanjay Jha MD clarified that for Wide Plate Mill the capex is completed and it was around INR500 crores. For armor and spring also the capex is more or less completed, which is INR60 crores and INR30 crores respectively. And on powder, nothing is spent, but has an estimate of INR35-40 crores.

• Abhijit Mitra with ICICI Securities asked about the estimate of the maximum revenue possible from Wide Plate Mill, armor, spring, and the powder plant. Sanjay Jha MD said that Plate Mill at full capacity can get around INR500 crores. Armor, for FY23, order book is of INR100 crores, and it should be not less than INR60-70 crores for FY23. Spring is dependent only on one customer, railways, and the certification is on the way and orders are to be seen. Revenue from the plant can be not less than INR25-30 crores per annum. Powder plant is in the R&D stage.

• Romil Jain of Electrum asked about the Sukhoi material and when MIDHANI can expect revenue from it. Sanjay Jha MD replied that MIDHANI’s Sukhoi material is already certified. Only for the components the company will require some time for certification.

• Romil Jain of Electrum also asked about the opportunity size on the aerospace side. Sanjay Jha MD answered that today MIDHANI’s business in aerospace is very less. In future, the company expects 30-40% of its revenue to be coming from aerospace.

• Abhijit Mitra from ICICI enquired about the maximum potential revenues from armor plant and if MIDHANI has enough capacity to address that. Sanjay Jha MD said that MIDHANI has a potential of INR250-300 crores, but added that the capacity is not enough to address that. MIDHANI is in the process of improving the capacity.

• Abhijit Mitra from ICICI also asked about the expectations of order inflow for FY23 and revenue target for FY23. Sanjay Jha MD answered that for FY23, MIDHANI has a visibility of around INR1,200 crores of order. Revenue target for FY23 is of INR1,000 crores.