MTAR Technologies Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from MTAR Technologies Ltd (MTARTECH) Q3 FY22 Earnings Concall

Management Update:

• Looking at the current year and the final quarter, the company is confident of the revenue guidance given earlier of 20-25% and also revises it upwards to about 30-35%. And having a clear roadmap of order book, the company also would like to give initial guidance of 45-50% revenue growth for FY23.

Q&A Highlights:

• Santosh Yellapu from Asian Market Securities asked that looking at the early double digit increase in prices of raw material QoQ, does the company feels that clean energy segment despite strong growth could impact the margin profile for FY23. P. Srinivas Reddy MD said it’s not the case. The company has signed a contract for FY22 where the price is already fixed. If there is any escalation of price for FY23, it’s captured in the cost itself.

• Renjith with Mahindra Manulife asked that sequentially there has been a drop in execution and does the company expect that to get normalized in 4Q22. P. Srinivas Reddy MD said the company won’t give importance to that at all, because looking at the numbers in the past, from 4Q21 to 1Q22 there was a drop, but overall MTAR has been achieving the guided numbers.

• Renjith with Mahindra Manulife asked about nuclear orders pipeline. Srinivas Reddy MD answered that the company’s business plan for next year, more or less does not include the new nuclear orders. Therefore, MTAR has a good prospect of getting good orders from nuclear division. The release of purchase orders is a timing issue and it’s not going to impact MTAR in FY23 or subsequent years.

• Renjith with Mahindra Manulife also enquired about the Hot Box units, how much was supplied in 3Q22 and the numbers compared to YoY and sequentially. Srinivas Reddy MD replied that the company doesn’t have the exact numbers currently, but is doing substantial number of boxes of more than 2,500 and for next year is about 4,000 plus boxes is what MTAR is looking at.

• Renjith with Mahindra Manulife asked of any price increase in the Box realization given the commodity prices going up. Srinivas Reddy MD answered that it’s not about the commodities. The company sign contracts with every supplier for the entire calendar year, so MTAR is well protected in that aspect.

• Renjith with Mahindra Manulife asked about the other expenses increasing QoQ and YoY, if there were any one-offs impacting it. Gunneswara Rao CFO said the other expenses consist of manpower cost and G&A expenditure and other direct cost. Therefore, these expenses increased in 3Q22 vs. last year. The other direct expense increased in proportion to revenue. Manpower cost also increased due to anticipated growth next year.

• Renjith with Mahindra Manulife asked how many people have been added in manpower for the anticipated growth next year and in other expense if there is any forex related gain. Gunneswara Rao CFO said that around 80 people have been added as on date. On the forex related gain, it’s very less, around INR2 crores.

• Nitin Arora of Axis Mutual Fund asked about the breakup of the INR120 crore order received in January-Feb. Gunneswara Rao CFO said the major orders have come in from Bloom Energy and Aerospace Rafael. Rafael has started giving new order for export and there are repeat orders as well. MTAR is expecting further orders from Rafael. Of the INR120 crore, INR70 crore odd will be clean energy and the rest will be other customers.

• Santosh Yellapu from Asian Market Securities asked about the inventories and receivables outstanding at the end of 3Q22 and cash generated from operations for the nine months. Gunneswara Rao CFO said the inventory was INR156 crore and debtors INR100 crores. Cash was negative INR32 crore, because EBITDA was INR67 crores and other expense minus INR10 crores. Therefore, operations EBITDA is INR57 crores, whereas the working capital INR89 crores is increased.

• Santosh Yellapu from Asian Market Securities asked about debt and cash outstanding on the books. Gunneswara Rao CFO said that cash and cash equivalents and investments are about INR170 crores. Debt total is around INR80 crores, both term loans and working capital.