Pennar Industries Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Pennar Industries Limited (PENIND) Q3 FY22 Earnings Concall

Q&A Highlights:

• Jai of ValueQuest asked about the order book visibility going forward. Krishna Prasad CFO said that the order book business is currently in PEB and in U.S. businesses. For both these business verticals, PENIND projects continued increase in order book. The U.S. business is currently at about $42 million on an order book balance, open order book basis. So this will continue and it may also increase.

• Jai of ValueQuest also asked about the reason margins not seeing any pressure due to commodity price increase. Krishna Prasad JS CFO replied that on average, PENIND has a 1.5 month gap, or as high as 3 months from a price increase being recorded in the market and for the company to be able to see it, which is helping PENIND a little bit.

• Vikram Suryavanshi of Phillip Capital enquired how big will be solar segment for PENIND going forward. Aditya Rao MD said that solar and the energy industry sector would be very important for the company and are continuing to add capacity currently at about 100 mw and will ramp it up to 500 mw soon.

• Aditya Sen with RoboCapital asked about the update on ERW plant in Chennai that was supposed to become PBT positive by Q3. Aditya Rao MD answered that it’s not good news; it’s a mixed bag. PENIND had problems because of the Omicron variant and the surge in cases and commissioning the plant on time. PENIND is now projecting 1Q23 as when it will reach PBT positive.

• Aditya Sen with RoboCapital also asked if the company is back to its pre-COVID capacity utilization levels. Aditya Rao MD said that across verticals, yes and no. In the PEB vertical, no. In the tubes vertical, PENIND is almost there. And in some others, the company is vastly in excess of where it is, like in the U.S. plant and the hydraulics capacity. So it’s a mixed bag. But overall, PENIND is at about 50%, and have to reach 70%.

• Dilip asked about the US business update. Aditya Rao MD replied that the US order book is scaling up quickly and has more than tripled in the last one year. In the next financial year, very conservatively, the company can say it’s going to do about $50 million. Therefore, one can count on double-digit growth for the U.S. businesses.

• Dilip also asked about the reason that other income for 3Q22 has gone up by around INR8.5-9 crores sequentially. Shrikant Bhakkad VP Finance said that other income basically contains of the subcontract and the process charges, which occupies the majority of the expense, that approx. increased by INR 4 crores. The primary reason for increase was on account of changing the freight mix where the company had shipped earlier, job work charges and erection expenses increased and the erection related revenue also increase.