Power Mech Projects Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from Power Mech Projects Limited (POWERMECH) Q1 FY23 Earnings Concall

Management Update:

• POWERMECH said it reported by far its best 1Q performance since inception with an income growth of 19% in 1Q23.

Q&A Highlights:

• Abhishekh from HDFC AMC asked about FGD orders, how the revenue will be booked in ’24-’25. Jami Satish CFO replied that INR6,163 crores will be spread over next 30 months and first year a 10% revenue can be expected. So in ’23 and ’24, out this, at least 40-50% should get converted, a vision of INR4,500-5,000 crores.

• Abhishekh from HDFC AMC also asked about the retention money agreed on in FGD orders. Jami Satish CFO answered that it’s around 10% at the end of the completion.

• Abhishekh from HDFC AMC enquired about operating margins and when an improvement is expected. Jami Satish CFO said that many of the projects on JV basis are getting completed in another 6-12 months. After that POWERMECH will be better qualified to bid on a standalone basis which would improve operating margins.

• Pritesh Chheda of Lucky Investment asked if FGD orders are one-offs and what’s the future without it. SK Kodandaramaiah Director replied that today the company is getting to Infrastructure, O&M and railways, which is a big area. Also, POWERMECH said mining is going to offer lot of opportunities in future.

• Rohit Natarajan with Antique Stock Broking enquired about L1 orders of about INR1,500 crore and what these orders are. SK Kodandaramaiah Director said that in these there are about seven FGD orders, Banglore metro for about INR450 crores, railway electrification INR88 crores, and O&M job in Nigeria of about INR94 crores.

• Vivek Hinduja asked about the recent IT department raids on premises of company and promoters. SK Kodandaramaiah Director replied that the matter is going on and it might take some more time. However, this won’t impact operations and the company’s financials.

• Dixit Doshi with Whitestone Financial enquired about the FGD order of INR6,100 crore, if it includes INR1,000 crore of O&M. SK Kodandaramaiah Director replied that it excludes that amount. The INR1,000 crore order is yet to be received and it’s a follow up opportunity to FGD after the commissioning.

• Dixit Doshi with Whitestone Financial also asked about of Coal India project, from when the revenue will start flowing in. SK Kodandaramaiah Director answered that the revenue will start to flow in from 4Q FY24 onwards.

• Dixit Doshi with Whitestone Financial enquired about the current gross and net debt, and retention money on balance sheet. Jami Satish CFO replied that today the company is close to INR419 crore and net is INR340 crore, which is expected to come down. Retention money is around INR315 crores on balance sheet.

• Faisal Hawa from H.G Hawa asked that on the orders recently taken, what’s the ROCE and ROE targets. Jami Satish CFO answered that these are purely cash contracts and in terms of margins it will range 11% plus. And ultimately ROE should cross 18-19% plus blended.