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Rajoo Engineers Ltd (RAJOOENG) Q4 FY22 Earnings Concall Transcript

Rajoo Engineers Ltd (NSE: RAJOOENG) Q4 FY22 Earnings Concall dated May. 17, 2022

Corporate Participants:

Khushboo Chandrakant Doshi — Managing Director

Sunil Jain — Executive Director

Prakash Daga — Vice President, Finance

Analysts:

Shivam Prasad — — Analyst

R. K. Laddha — Yash investment — Analyst

Ayush Agarwal — Mittal Analytics — Analyst

Hitesh Kumar — Axa Capital — Analyst

Darshan Zaveri — Crown Capital — Analyst

Akshay Kothari — Envision Capital — Analyst

Vipul Sanghvi — Systematix — Analyst

Neha Jain — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 and FY22 Earnings Conference Call of Rajoo Engineers Limited. This conference call may contain forward-looking statements about the Company, which are based on the beliefs opinions and expectations of the Company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.

[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mrs. Khushboo Chandrakant Doshi from Rajoo Engineers Limited.

Thank you, and over to you, ma’am.

Khushboo Chandrakant Doshi — Managing Director

Thank you. Good afternoon, everyone. I am Khushboo Chandrakant Doshi and joining with me Mr. Sunil Jain, our Executive Director; Mr. Jayantilal Zalavadia, our CFO; Mr. Prakash Daga, our Vice President Finance and Bridge IR, our Investor Relations team.

Warm welcome to all of you on this Rajoo Engineers Limited earning conference call for the fourth quarter and year ended March 31, 2022. I thank you for taking your time out and joining us today to discuss the financials and the business performance.

Before we get into the business and financial performance of the fourth quarter, I would like to share a brief insight about our company and the industry. If we talk about the recent development, a year ago. We hoped that we had seen the worst of the pandemic. But the second one was, let’s say, proved much more difficult than the first one. Communities, families and individuals have suffered a great deal and I know some of you and your personal losses too.

The peak of the second wave was very difficult period. But I am so proud of how our Group responded to it. We rose to the challenges and showed courage and selflessness with the Rajoo’s spirit. With our strong region, pegged by passion of R&D and commendable teamwork helped us to navigate the tough economic condition in prevailing them. Changes in consumer behavior considering the health and hygiene resulted into high demand of flexible packaging for packaged food. Takeaway e-commerce and pharma; good orders booking for blown film line, not only from the domestic market but also from the export market resulted into a win-win situation for all our stakeholders.

The recent Ukraine Russia war also had an impact on the global economy and commodity prices, availability of the material, which led to the inflation. Moreover, recent lockdowns in a key manufacturing and trade hub China has impacted supplies of our customers and this has also lead to a little muted demand in the fourth quarter.

The prices of major raw materials and fuel has been increasing continuously. Steel prices have gone up to 23%, aluminum prices has gone up to 35% compared to March ’21. Despite dynamic and challenging environment Rajoo has had a good performance. The Indian plastic industry produce a wide array of plastic including PPT, PET and PVC and many more but Rajoo – we at Rajoo deal with all four of them. So India’s demand for PET in the packaging of food and beverage has witnessed a further increased during the pandemic, boosted by the higher awareness of hygiene and enhanced procurement of disposable and packaged item for reducing the chances of virus infection.

While the prospect of India’s PVC market, the demand for PVC in the country is estimated to achieve a CAGR of over 6.81% during the 2025. Pipe grade PVC account for over 40% of the overall demand as it’s used in the production of water distribution and underground irrigation pipes. Now to give a brief background about the company. The company emerged as one of the leading plastic extrusion machinery manufacturer in India with nearly 35 years of excellence in extrusion in the industry.

It is the first extrusion company in India to be completely automated and has tapped into that technology to provide customers with the best services. Owing to our focused efforts, the company enjoys a premium market position in this segment. In line with our strategy, we continue to expand our global footprint with focus on market penetration and sustained investments in research and development to support the progress.

With representation in many countries across the world and customer in over 70-plus countries, our export has multiplied since debuting in the international market in 1990. Recently we underwent Extrusion Coating and laminating machine as the post extrusion process to substitute conventional aggressive laminating process for producing laminates for various packaging applications and also for the Raffia and paper.

Our brand reliability and position in the global market is further fortified through number of alliances in the industry such as with the Kohli Industries in India. MEAF Industries in Netherlands; Bausano & Figli from Italy and Wonderpack from India. It is an industry practice to build a machine with client specification to gain competitive advantage. However, at Rajoo, we have always been pioneer of change and innovation by identifying just the right technology and estimates, to add value to client’s business.

We are being appreciated by stalwart in the business for the appropriate technology, approach to constantly help customer’s business with customized solution rather than following the traditional approach.

Coming to our financial performance. In the quarter ended March 31, 2022, our Company achieved net revenue of INR59.93 crore, an increase of nearly 6.83% year-on-year. While domestic as well as export sales grew this quarter, revenue growth was marginal, mainly due to company’s focus on business sustainability considering the uncertainty around. Despite volatility and increase in raw material prices and higher logistic cost, we have managed to maintain EBITDA margin and improved PAT margin. The EBITDA stood at INR8.36 crore in Q4 FY22 as against INR6.04 crore in previous corresponding period, increase of 38.24% Y-o-Y. Improved operational efficiencies coupled with revised machine price offset the increase in raw material prices. Also the effect of volatility in international logistic cost have been managed to a large extent by accepting orders on FOB terms. EBITDA margin was at 13.94% as against 10.77% Y-o-Y increase of 317 bps.

Profit after tax was INR7.1 lower in Q4, FY22 compared to INR3.35 crores in Q4 FY21, raising 111%. PAT margin was at 11.85% as against 5.98%; Y-o-Y increase of 587 bps. We adopted the option of lower income tax at 22% under the section of 115BAA of Income Tax Act for the FY22 which reduced the income tax provision for FY22. Basic EPS stood at INR1.15 in Q4 FY22 as compared to INR0.55 in Q4

Coming to the year-ended financial performance; the revenue from operations in FY22 is INR172.30 crore as against INR152.25 crore in FY21, a Y-o-Y increase of 13.17% due to healthy order book and converting them to sales in both domestic and export market. EBITDA, excluding other incomes, stood at INR20.97 crore in FY22 as against INR18.74 crore in FY21, an increase of 11.91% Y-o-Y. EBIDTA Margin was at 12.17%, a decrease of 14 bps Y-o-Y due to volatile raw material costs, logistics cost and travelling cost resulting into a pressure on the margins for FY22.

Profit after Tax was INR14.80 crore in FY22 compared to INR10.41 crore in FY21, Y-o-Y increase of 42.21% while PAT Margin was at 8.59%, an increase of 176 bps Y-o-Y. Basic EPS stood at INR2.40 in FY22 as compared to INR1.69 in FY21.

So with this brief, I thank you very much and invite you to ask any questions that you may have. Thank you.

Questions and Answers:

Operator

Thank you very much ma’am. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Shivam Prasad [Phonetic], an Individual Investor. Please go ahead.

Shivam Prasad — — Analyst

Hello, am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes sir.

Shivam Prasad — — Analyst

Can you just highlight the market share that you are having on the industry basis?

Khushboo Chandrakant Doshi — Managing Director

Okay. If we have to talk about the market share, the product basket is not similar of all the other market compared against. But if we talk about the blown film line from the last three years, we are having the majority market shares as compared to other two market companies?

Shivam Prasad — — Analyst

Can you just specify the number in the blown film line, like majority, I don’t — can you just specify any number, any percentage?

Khushboo Chandrakant Doshi — Managing Director

In terms of number of machine, you are asking sir?

Shivam Prasad — — Analyst

No, no, the percentage of market share in the blown film lines?

Khushboo Chandrakant Doshi — Managing Director

Sir, we — if you are aware about the industry, majority three players are in the market and you can share that we are the highest one and second highest in other two. And if we talk about the numbers we hold, around 40% of the market share in blown film segment.

Shivam Prasad — — Analyst

40%? And what are the names of other two, can you just specify if possible, from your end?

Khushboo Chandrakant Doshi — Managing Director

Those are the — all are public listed company and of course Windsor Machines and Quadra Extrusion Technology. But our product range are different. Only one product is similar.

Shivam Prasad — — Analyst

Okay. And can you just — a one line question. Can you just highlight the percentage of cost price increase that you have been able to pass onto the customers this quarter, or this year, this fiscal year, sorry?

Khushboo Chandrakant Doshi — Managing Director

Okay. So we could pass on almost 8% to 9% additional cost to the customer this year. But of course these are not on the orders which are being committed, because we have come up with the new pricing and that’s how we have passed on.

Shivam Prasad — — Analyst

So, now from the coming quarter, the fully — the full price increase, will you be able to pass on partial only?

Khushboo Chandrakant Doshi — Managing Director

From coming quarter in order booking, we will be able to. But of course, we have our pending orders which we’re going to execute at the old prices.

Shivam Prasad — — Analyst

Okay. And can I — I can see that your sales have crossed the numbers of March 2018 very well. So can you just highlight what’s the percentage rise in sales in terms of price increase or volume increase? Is it the price growth or volume growth?

Khushboo Chandrakant Doshi — Managing Director

No. it is a good question. It is volume growth. If we talk about number of machines in FY20, it was 17,000 [Phonetic]. Okay, so FY18 you’re benchmarking, so it was more of around 100 plus machines and this year it has increased because of the volume of the product. So this year we have supplied 117 machines.

Shivam Prasad — — Analyst

117. And can you just tell me the number of machines of FY21 also in which you’re having INR150 crores of revenue?

Khushboo Chandrakant Doshi — Managing Director

FY21 it was 107.

Shivam Prasad — — Analyst

It was 107. Okay. And as I can see that you are not able to reach to the EBITDA or to the operating profit margin percentage of FY18 till now as you have been able to increase the volume. So when can I — when can you reach back to the 15% margin mark?

Khushboo Chandrakant Doshi — Managing Director

Okay. We are working on that and probably this year FY23 we will able to see that. What is happening, we are able to pass on the increased price to the customer. But by the time we pass on, the increment will be again from the market. So, considering the uncertainty around and the pricing of raw material, it’s so volatile, and of course the supply chain is also a big issue has resulted into this. But we feel that in FY23, we will have good old numbers back.

Shivam Prasad — — Analyst

Okay. And can you just specify, from which sectors are you getting the maximum, like you’ve got the maximum volume growth this year?

Khushboo Chandrakant Doshi — Managing Director

Yeah. So, basically it’s a flexible packaging industry.

Shivam Prasad — — Analyst

From the flexible packaging industry?

Khushboo Chandrakant Doshi — Managing Director

Yes.

Shivam Prasad — — Analyst

Okay. And do you see this as a pent-up demand or do you see it as more of a long-term thing, you’re projecting?

Khushboo Chandrakant Doshi — Managing Director

No, we are seeing this now as a long-term thing because we are now not only focusing on Indian market, but world is the market. And considering the pandemic around this has — and demand has surged quite more than the expectation and we feel that it will continue for the next two years as well.

Shivam Prasad — — Analyst

Okay. Can you just give me a ballpark figure of how much revenue are you expecting in FY23 and how much is the percentage of exports will be from that?

Khushboo Chandrakant Doshi — Managing Director

Currently, we are having export of 49% and we feel that we would continue with the same numbers as far as domestic is concerned. But export if we talk about the percentages, we would be reaching towards 60%. That is the target for the next year.

Shivam Prasad — — Analyst

Any guidance for the — any guidance for the number of machines that we will be selling in FY23 and any capex plans?

Khushboo Chandrakant Doshi — Managing Director

No capex plan and if we talk about the number of machines, we are not focusing on more number of machines. But we are more focusing on the technical — advanced machines with the technological advancement and so it may not have much relevance with the number of machines. But it has a relevance with the total revenue.

Shivam Prasad — — Analyst

And one last question that, what’s your — like what’s the competition are you facing from the unorganized sector like apart from the organized players like you three are the organized players in this industry, what percentage of the market share did unorganized players were?

Khushboo Chandrakant Doshi — Managing Director

Yeah, there are many unorganized player who supplies five machines or a ten machines in a year or something like that. And we face challenges, while we deal with less technical product. But otherwise, when it comes to our technology, we don’t face any issues with those small players.

Shivam Prasad — — Analyst

Okay. And is this, are these small players bothering you in export market also?

Khushboo Chandrakant Doshi — Managing Director

Yeah, of course for those low-value product or less technical product.

Shivam Prasad — — Analyst

Okay, and any relief from the China side?

Khushboo Chandrakant Doshi — Managing Director

We were anyway not facing any issue from China, because for the blown film extrusion there was not much import from China in this segment as far as India is concerned. But of course at a global level, yeah, China was there in a competition but now there is a relief I can tell.

Shivam Prasad — — Analyst

What role on Board is Rajoo bhai playing now, can you give any guidance on that?

Khushboo Chandrakant Doshi — Managing Director

Yes, sir. He is the Chairman of the Company.

Shivam Prasad — — Analyst

Okay. Okay, thank you so much.

Operator

Thank you. The next question is from the line of R. K. Laddha from Yash investment. Please go ahead.

R. K. Laddha — Yash investment — Analyst

Thank you for giving me the opportunity. Good — hello, am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes sir. Yes sir.

R. K. Laddha — Yash investment — Analyst

First of all, I congratulate the team Rajoo and the efforts of the team taken to improve the EBIT level and profitability. And then, and then my only one query is. I am reading that this new joint venture of Bausano from Italy, is it plastic pipe manufacturing machine or are you going to manufacture pipes?

Khushboo Chandrakant Doshi — Managing Director

No sir, it is — again, it’s not a new joint venture. It’s the joint venture happened in 2001 and we are manufacturing machine under that joint venture which basically cater to a PVC market.

R. K. Laddha — Yash investment — Analyst

Okay, it is — yes, okay. And it means, we are not going in the actual plastic pipe manufacturing. Okay?

Khushboo Chandrakant Doshi — Managing Director

No, no, no. Sir, our core strength is machinery manufacturing and we would be sticking to that only.

R. K. Laddha — Yash investment — Analyst

Okay, and — okay, and all the best for the team. Rajoo. This is from my side. Okay.

Khushboo Chandrakant Doshi — Managing Director

Thank you. Thank you very much sir.

Operator

Thank you. The next question is from the line of Ayush Agarwal from Mittal Analytics. Please go ahead.

Ayush Agarwal — Mittal Analytics — Analyst

Good afternoon ma’am. Am I audio?

Operator

Sir, your audio is bit muffled, if you can take the phone off speaker or change the mode of…

Ayush Agarwal — Mittal Analytics — Analyst

Am I audible now?

Operator

Yeah, this is better. Please proceed.

Ayush Agarwal — Mittal Analytics — Analyst

Alright. Good afternoon ma’am and thank you for the opportunity and congratulations on a wonderful set of numbers. I am new to the company, so my questions will be a little basic to start with. First, I would like to understand the cyclicality in the business that we have seen between 2010 to 2021, our numbers used to range between INR70 crores, INR80 crores and then they jumped to INR100 crore and then in 2018 we did around INR150-odd-crores and now we have crossed that threshold in 2022. So if you can help me understand how the nature of the industry and how the journey of Rajoo was during this period?

Also, this a three-fold question, if you can also help me understand, what I also see is that our gross margins have improved drastically in the last 10-12 years, we used to have 30% kind of gross margins, which has now gone up to 35%, 40%. So, if you can help me understand with these two questions first and then I’ll make you another question?

Khushboo Chandrakant Doshi — Managing Director

Okay. So, since you’re new to the company. Let me brief you about the company. Company started 35 years ago, and it was like a first generation, whatever opportunity comes we never said no and we used to take it. That’s how the entire journey started. And when you talk about 2010 and now; in 2010, we were manufacturing sheet extrusion system and thermoformer as well. And that was — that was the product which we are holding a kind of monopoly for three, four years.

And then from 2011 onwards, the government started talking about the ban, this plastic ban and ban on the single-use and all that. Even today that is going on, but fortunately we could substitute that product and the major chunk — major chunk of revenue was coming from that product. We have shipment to the blown film line and other products to de-risk the entire business and get the sustainability in the business.

One important thing which we have done is, we have, in 2013, we started our internal — in-house panel division and that was a kind of a breakthrough for the company because slowly we started getting the hold on actual crux of the technology and automation. And as a result of you know seven, eight years of experience in 2020 when pandemic came, when everybody was talking about a touch less integration, our product was well equipped with that and without visiting the customer side, our engineers, our software and our programing team has installed the machine in various countries, from India.

So this overall journey has really helped us to reach where we are today. And if you talk about the technology differences, the main differences now are all machines are equipped with Industry 4.0 and that helps us to reach our product anywhere without having the personnel support. We are now able to support all our customer across the globe online and that is something which is helping customers as well in saving the cost because cost of traveling has gone up like anything. So this is one of the area which has contributed a lot.

Ayush Agarwal — Mittal Analytics — Analyst

Right, that was really helpful. And I mean the numbers are out there to see, but you know the company has transformed indeed and I didn’t know about that the. So, thanks for the explanation. My next question is, I missed the number on exports. So export is 60% of our revenues, did I hear that right?

Khushboo Chandrakant Doshi — Managing Director

That is what we are planning for the year. This year, it is 49%.

Ayush Agarwal — Mittal Analytics — Analyst

Okay. Okay, so 49% is exports and where are we exporting these machinery to, can you — if you can, you know help me understand?

Khushboo Chandrakant Doshi — Managing Director

In just a minute. Mr. Jain, would you like to take this?

Sunil Jain — Executive Director

Yeah. Hello, am I audible?

Ayush Agarwal — Mittal Analytics — Analyst

Yes sir.

Sunil Jain — Executive Director

Yeah. See, Africa continues to be a strong market for us. Currently 50% of our exports are going to Africa. Then Asia is about 10% and also and neighboring countries is about 40%, about 40%.

Ayush Agarwal — Mittal Analytics — Analyst

Right. So Africa is predominant in our exports last year?

Sunil Jain — Executive Director

Yes. Because there are lot of Indians in Africa who continue to support their home country.

Ayush Agarwal — Mittal Analytics — Analyst

Right. Right, okay. My next question is on our balance sheet, which has you know fixed asset which has majorly remained the same over the last three, four, five years. So what kind of machinery can we churn out from the existing capacity, if you can throw some light on that and what is the peak capacity that can — that we can do from the existing facility? Hello. Am I audible? Hello.

Operator

Yes sir, you’re audible.

Sunil Jain — Executive Director

Hello, is Mrs. Doshi there? Is she online?

Operator

Yes, she is connected. Ma’am, if you can hear us please to respond. Seems like we have lost the connection for…

Sunil Jain — Executive Director

Okay, let me answer that question. This is Sunil Jain See in machinery industry, capacity is quite a misnomer because there’s a lot of outsourcing which is done. Everything is not manufactured in-house. So it’s very easy for us to ramp up capacity based on the market demand. Just to add, we can easily do about INR200 crores from the existing facility. And even if we wanted to ramp it up, it is — and based in Rajkot which is a very strong engineering hub, a lot of equipment and assemblies can be outsourced. Does that answer your question?

Ayush Agarwal — Mittal Analytics — Analyst

Yes, that does that. That was helpful sir. Related to this question only, so in the 117 number that madam had shared on the machinery that we did in FY22; out of that, how much was blown film? Blown film number you’re handling?

Sunil Jain — Executive Director

Blown film would be…

Khushboo Chandrakant Doshi — Managing Director

Total, if you talk about the percentage, sir, it would be 90% basis blown film and the rest of the machine is just the sheet extrusion systems and thermoformer.

Ayush Agarwal — Mittal Analytics — Analyst

All right. All right, so these various applications that I see on our website and also on our presentation, we are yet to enter into them. So some progress on that or how are we approaching these different sectors?

Khushboo Chandrakant Doshi — Managing Director

The application you have shown on our website, we are catering to all those applications. So you know we have a blown film line for tarpaulin as well. You can have a blown film line for milk packaging as well. So it’s a different kind of a blown film. But we are catering to all.

Ayush Agarwal — Mittal Analytics — Analyst

All right. Understood. So what would be the dominant top three, four applications that we cater to currently? One of them would be [Speech overlap] I’m asking in all those applications that we list what would you know be the distribution between them like among flexible packaging, agriculture, infrastructure, automobile. So if you can share that number.

Khushboo Chandrakant Doshi — Managing Director

Roughly, you can say that 70% of the blown film goes for the flexible packaging and the rest for infrastructure. And in the agriculture part share, the — very less amount of share in that.

Ayush Agarwal — Mittal Analytics — Analyst

All right. Alright, understood. That’s it from my side for now. I’ll come back in the queue and thank you for sufficiently answering my questions.

Khushboo Chandrakant Doshi — Managing Director

Thank you, sir.

Operator

Thank you. The next question is from the line of Hitesh Kumar from Axa Capital. Please go ahead.

Hitesh Kumar — Axa Capital — Analyst

Hi, thanks for the opportunity. Ma’am, could you just explain how important is AMC in our business and what is the kind of revenues that we get from these maintenance and supply of spare parts?

Khushboo Chandrakant Doshi — Managing Director

Generally supply of spare parts hold the 10% of the revenue. And AMC, honestly speaking, people are still not — market is still not ready to go for the AMC and they would like to have the case to case basis availability of services from Rajoo’s side, because these are the huge machines so whosoever buys, they have their own maintenance department. So they keep a stock of everything. They have the technical staff to reduce the break — maintenance time and all that. So they, I mean very few prefer the AMCs otherwise people have their own team to deal with that. And when they cannot, they directly connect with us and we help them out.

Hitesh Kumar — Axa Capital — Analyst

So in the overseas market, for all the installations that we have done, how do we cater to the need for supply of spare parts or how do we offer them support or any technical support if need be?

Khushboo Chandrakant Doshi — Managing Director

Majority market we cater to, we have a good base of agents there. So we also have — we also encourage our agents to have technical person. During the pandemic, we train them online and now a good set of people are in the international market as well who represent Rajoo and they help us in installation, commissioning and even after sales service.

Hitesh Kumar — Axa Capital — Analyst

Got it, got it. So most of the sales overseas are also routed through these agents or if I may call them your distributors in different geographies? Is the sales happening through them?

Khushboo Chandrakant Doshi — Managing Director

Right.

Hitesh Kumar — Axa Capital — Analyst

Okay. And what is the lifespan of these machineries and how — what is the replacement cycle in them ma’am?

Khushboo Chandrakant Doshi — Managing Director

Okay. So company is focused more on getting the repeat order or when the customer is at expansion rather than repeatability because the machine’s life is not less than 20 years. So we more focus that the customer keeps expanding and then they go for repeat orders.

Hitesh Kumar — Axa Capital — Analyst

Right. But FIBC, if I have to understand this flexible packaging, that’s a fairly established market globally, right. So now the kind of uptick that we’re seeing and if you are telling that you have a very dominant market share how is the end market growing? And you just made a mention that it’s packaging which is your predominant end user industry to which you cater to. So how is this end market growing and probably, what is the kind of growth that we can look forward to…?

Khushboo Chandrakant Doshi — Managing Director

It is growing exponentially [Phonetic]. But currently, if you talk about the today — the today’s market challenge is the unavailability of the plastic resins, which is the lead material for them to process. So though — and the extreme level of volatility in the pricing, which we have never witnessed in the history. So this is the bottleneck happening for our customer. And of course when they are supplying to the MNCs like HUL or a P&G and all those things, this all — you will not get the price rise immediately. So those are the contract which one has to execute which hampers the bottleneck provide till the raw material prices gets settled down or stabilized latter and then it can further grow.

Hitesh Kumar — Axa Capital — Analyst

Got it. And just the last question from my side. Ma’am, which are the other areas that are we looking to diversify into in terms of our product profile? And if you can probably give some more color to it if something is in the near term?

Khushboo Chandrakant Doshi — Managing Director

Correct. Sir, for the further growth and de-risking the business from one frame of revenue, we are now developing sheet extrusion system again, which is our core product itself, but for the different application. So now we are targeting the renewable sector where the sheet extrusion system can produce the EVA sheet which goes into the solar panel. So this is what we are targeting and we are probably executing the first order in next to next quarter.

Hitesh Kumar — Axa Capital — Analyst

Okay, and any immediate competitors we have in this space?

Khushboo Chandrakant Doshi — Managing Director

No, the only competitor was China and yeah no competitor in India.

Hitesh Kumar — Axa Capital — Analyst

Okay. Okay, interesting. Sure ma’am, I’ll come back in the queue. Thank you.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Darshan Zaveri [Phonetic] from Crown Capital. Please go ahead.

Darshan Zaveri — Crown Capital — Analyst

Hi, am I audible?

Operator

Sir, if you can take the phone off speaker, please.

Darshan Zaveri — Crown Capital — Analyst

Yes, just a second, sorry. Hi, is the voice much better.

Operator

Yes, sir. Please proceed.

Khushboo Chandrakant Doshi — Managing Director

Yeah much better.

Darshan Zaveri — Crown Capital — Analyst

Yeah, congratulations on a good set of numbers. I’m also a bit new to the company. So my questions might be a bit basic, sorry for that. I just wanted to know what kind of growth and revenue are we targeting over the next few years? That was my first question. And the second question is that, as you mentioned that we have some old orders that were at old prices, so how much differential margins can we expect from old orders and new orders and what would be the order book mix in terms of new prices and old prices? Those are my questions. Thank you so much.

Khushboo Chandrakant Doshi — Managing Director

Okay. So if we talk about the old orders and new orders and the pricing; see the pricing policy we revised in April ’22. So whatever orders we have is with the last year prices and the new prices will come into to the effect — of COVID has come into the effect, but the order cycle is long since it is capital goods. So the final outcome will be visible in second and third quarter with the new prices.

Darshan Zaveri — Crown Capital — Analyst

Okay. Thank you, ma’am. And what about the revenue growth?

Khushboo Chandrakant Doshi — Managing Director

Sir, we are targeting revenue growth of 15% to 20% for the FY23.

Darshan Zaveri — Crown Capital — Analyst

Okay, that’s great ma’am. And sorry, one more question on, how much time do we take from manufacturing the machine and delivering orders, the turnaround for a machine, the number of days or something?

Khushboo Chandrakant Doshi — Managing Director

Right. It of course depends on the size of the machine, but average turnaround time is five months and if the machine is with a lot more technology and lot more components from the import, then it takes seven to eight months. But on an average, it is five to six months is the typical lead time.

Darshan Zaveri — Crown Capital — Analyst

Okay. Okay, thank you, ma’am. That’s it from my side. Congratulations on the good set of numbers, and all the best for the future.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Thank you. Next question is from the line of Akshay Kothari from Envision Capital. Please go ahead.

Akshay Kothari — Envision Capital — Analyst

Yeah. Thanks for taking my question. Ma’am I am also new to the company, so pardon me for any basic questions. Would there be any impact of EPR norms on our customers and subsequently on us or it would be a positive impact or can you give a sense of that?

Khushboo Chandrakant Doshi — Managing Director

Good question. This is Mr. Jain’s favorite question Mr. Jain, would you help me with this?

Sunil Jain — Executive Director

Sure. The EPR is today, for whatever reason, machinery manufacturers and raw material manufacturers are not loaded with that burden. We look at it very positively from an environment point of view and the EPR is fully subsided. The industry is going to grow and some products which are being banned and once they come under the processes, it’s good to EPR, they if we find it easier to expand the product range. So we see it quite positively that is going to help in the progress of industry. Does that answer your question?

Akshay Kothari — Envision Capital — Analyst

Yeah. So we are going to expand the product base, so we won’t require any additional capex or something like that?

Sunil Jain — Executive Director

You see, the way the machines are configured from a configuration point of view, we are very flexible. For example, a blown film line can cater to the flexible packaging industry as well as the agricultural industry, infrastructure industry. Similarly sheet extrusion systems can cater to the disposable containers segment. And as Mrs. Doshi rightly mentioned also for the solar EVA encapsulate. So there is basically up-gradation or modification in technology, which helps to increase the product range from the particular issue.

Akshay Kothari — Envision Capital — Analyst

Okay. Okay, I understand that. And is there some order book, which you have or how is it?

Sunil Jain — Executive Director

Currently, we have an order book of about INR75 crores outstanding orders. And this year — in fact, this quarter has seen a good inflow of orders. So as it stands today, it’s INR75 crores.

Akshay Kothari — Envision Capital — Analyst

Okay, that’s great. And I just heard about that solar panel opportunity as well. So, how much percentage of solar panel does India produced on its own? Like I think majority of it is imported from China, so we won’t be supply — I think we won’t be supplying to Chinese manufacturers, we will be supplying only to Indian manufacturers, right?

Sunil Jain — Executive Director

See, as a machinery manufacturer, it doesn’t bother where we supply it in the world. But to answer your question, you may be aware that lot of anti-dumping duties have come in on solar equipment coming from China. So the industry in India is bound to grow, whether it’d be in terms of solar panels per se or even the inputs to the solar panel.

Akshay Kothari — Envision Capital — Analyst

Okay. Okay. And would semiconductor shortages impact us in any way?

Sunil Jain — Executive Director

They are already impacting because there is a huge shortage of drives and electronic components and that is increasing our lead times.

Akshay Kothari — Envision Capital — Analyst

Okay. So how much have the lead times been increased due to the shortages and by when are they expected to normalize?

Sunil Jain — Executive Director

See, as far as when you expect to normalize, I think it should take another one year because there is lot of Indian manufacturing capacity also coming up under the PLI for semiconductors and chips. So it should take another one year and our lead times have increased by about 1.5 to two months because of the shortages.

Akshay Kothari — Envision Capital — Analyst

Okay, thank you. And one of the other extrusion players has forayed into this I think battery — something related to battery. So is it related to our business somehow? Any synergies or is it like they have done it as a part of their capital allocation?

Sunil Jain — Executive Director

It’s a totally different segment.

Akshay Kothari — Envision Capital — Analyst

Okay, understand. Thanks for answering my questions and all the best. Thank you.

Sunil Jain — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Vipul Sanghvi from Systematix. Please go ahead.

Vipul Sanghvi — Systematix — Analyst

Yeah, hi. Good afternoon. Ma’am I just wanted to check with you that our Q4 exit margins, EBITDA margins are close to 14%. So as we go out into FY23 first-half assuming that the legacy orders will continue till that, is it safe to assume that we’ll be able to maintain that close to 14% on EBITDA level?

Khushboo Chandrakant Doshi — Managing Director

Yeah. See, the last quarter generally, historically if we talk about all Q4s, the margin and the revenue both increase in the last quarter. So that happens. But for the Q1 of this month, I mean it will remain — it may not be the same, because, again, we are executing the things at the old prices. And of course the listing gets lower as far as domestic market is concerned in Q1. So this is the historical traits. And we feel that, of course we’re going to try to maintain it, but it may not get maintained.

Vipul Sanghvi — Systematix — Analyst

Understood. But what you are hinting at is, if I look at the full year FY23, we should be in the vicinity of…

Khushboo Chandrakant Doshi — Managing Director

Then it will be — yeah, yeah, yeah, for sure. For sure.

Vipul Sanghvi — Systematix — Analyst

All right. All right. Thanks a lot.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Neha Jain [Phonetic] an Individual Investor. Please go ahead.

Neha Jain — — Analyst

Hi, congratulations and thank you for taking my question. Firstly, I would like to know that what are our targets that we have set for revenue and margins for the next couple of years, say about three to five years.

Khushboo Chandrakant Doshi — Managing Director

Ma’am, we are targeting to have the steady growth of 15% to 20% year-on-year.

Neha Jain — — Analyst

Okay. And as for the margins are concerned?

Khushboo Chandrakant Doshi — Managing Director

Of course, when we are targeting to grow with the steadiness, with the objective of margin to be improved. And for that, of course, more efforts are being put in in R&D and the product is being enhanced in due course of time.

Neha Jain — — Analyst

So, like do we have any products in pipeline that will come up in next couple of years or the products that are ongoing as of now, we plan to increase sales of those?

Khushboo Chandrakant Doshi — Managing Director

Yes, of course. We are going to go with the product which we are catering into currently. And of course with the new product which we already talked about EVA sheet extrusion system for the solar. So that would be a new product. And the current product, of course, with the blown film line we are able to do a good job. And apart from that, we have also launched last year extrusion coating and lamination line for the Raffia industry. That’s where also we are seeing a good potential.

Neha Jain — — Analyst

So how much revenue do we expect to generate from the new products?

Khushboo Chandrakant Doshi — Managing Director

Ma’am, in this kind of a capital goods, one and two years will not give you much of a revenue, it will give you a revenue in the later years, mainly because this kind of a new product development, it takes six months to get developed and then another six months to validate it commercially and we at Rajoo believe that we should not dump the product without validation in the market. So, of course for this year, you will see a limited revenue out of this solar products. But of course for coming years, we feel that the sector is booming and it can get us a good revenue.

Neha Jain — — Analyst

Okay. And my last question is related to the land that was purchased in 2017-’18. So when are we expecting the production to start over there.

Khushboo Chandrakant Doshi — Managing Director

Ma’am we are thinking that in — this unit is capable of reaching INR200 crores. So if we target that for this year and it happen, then we will plan for the new land to come in.

Neha Jain — — Analyst

Okay. So, only once we reach INR200 crores we’ll then have the new land in place right?

Khushboo Chandrakant Doshi — Managing Director

Correct, correct.

Neha Jain — — Analyst

Okay, so, what is the capacity utilization of the current plant?

Khushboo Chandrakant Doshi — Managing Director

It’s around 80%.

Neha Jain — — Analyst

Okay. Thank you so much and good luck for the future.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ayush Agarwal from Mittal Analytics. Please go ahead.

Ayush Agarwal — Mittal Analytics — Analyst

Hi, am I audible?

Operator

Yes sir.

Khushboo Chandrakant Doshi — Managing Director

Yeah, hi.

Ayush Agarwal — Mittal Analytics — Analyst

Thanks for the opportunity. My question is on the export side this time since this is a major chunk of the revenue as well. So I would like to understand, so, right now our exports contribution is roughly around 50%. What was it five years ago and how have you developed the export market and what has been the journey there like and how has business done on the export side?

Khushboo Chandrakant Doshi — Managing Director

Okay. So they export five years ago, if we talk about, we were having a presence in around 40, 45 countries, but today we are having a presence in 70 plus countries. We have a good network of agents and along with the agents, we also realized that in a capital goods the after-sales services are very crucial, and so now we have a good network of people in the export market as well who can service our machine even after warranty and support the customer, so…

Ayush Agarwal — Mittal Analytics — Analyst

Alright. And what was export as a percentage of our revenues five years ago, if you have that number?

Khushboo Chandrakant Doshi — Managing Director

It was around 40% [Speech Overlap] I won’t have this number steady, but yeah, that is, we have always played with 30, 35%, 40%. This year, we have reached almost 50% and the next year target is to increase it by 10% more.

Ayush Agarwal — Mittal Analytics — Analyst

Right. Alright, so in the export market, how is customer queries raised or are our agents help us set the orders. So how does the supply chain works there?

Khushboo Chandrakant Doshi — Managing Director

No, it’s like a very direct sales kind of the things. We supply directly to our customers. And of course, there is an agent who gets the commission and when they do a service to our customers, of course they going to invoice to us.

Ayush Agarwal — Mittal Analytics — Analyst

All right. So we pay the commission to the agent for getting the business to us, is that fair?

Khushboo Chandrakant Doshi — Managing Director

Correct.

Ayush Agarwal — Mittal Analytics — Analyst

All right. Understood.

Khushboo Chandrakant Doshi — Managing Director

But it’s mainly B2B kind of a sale, direct sales.

Ayush Agarwal — Mittal Analytics — Analyst

Okay, understood. Also on this solar film/sheet [Phonetic] business. So are there any manufacturers currently in India or are we are supplying this machinery outside?

Khushboo Chandrakant Doshi — Managing Director

No, no, we are supplying, we are developing this machine for Indian and there are approximately 10, 12 lines have came from China, which has their own issues. And of course China is not able to provide any kind of aftermarket services to the customer as we all know. So that lead to an opportunity for us. Even during the pandemic, we installed and helped few of the Indian processors whosoever got the machine from China and — so that is how it is. The current market size, if you talk about the numbers of machine, it is 10 to 12 machine installed and not running at the full capacity due to various issues in the machine as well. So that’s why we see a lot of opportunity for us.

Ayush Agarwal — Mittal Analytics — Analyst

Right, understood. Understood and thanks for that. My last question is, you know on our opportunity size, if you look at our business, I think 50% is domestic. I mean that domestic you say that, we roughly have 40% kind of market share. So we are already a significant player and of course, this is not a consumable type of thing. You mentioned that it has a long life. So, new capacity needs to be built for us to sell our machines, so how are we derisking that part of our business that you know that our opportunity size, also keeps increasing, because once when the capacities don’t come online by the flexible type manufacturers, our business in paper hedge. So is the management doing something on that and to de-risk the business for a somewhat sustainable growth and not see any lumpiness going ahead?

Khushboo Chandrakant Doshi — Managing Director

Sorry, sir. I didn’t get the question properly. If you can repeat it.

Ayush Agarwal — Mittal Analytics — Analyst

Sure. So what I’m trying to understand is that since machine sales are — will happen only when our end customers push capacity, right, because these are very long life. And right now, majority of our exposure is towards flexible packaging industry. So how are we de-risking that part so that we have some more sustainable growth going ahead and there is a little lumpy — there’s not a lot of lumpiness that we have seen over here?

Khushboo Chandrakant Doshi — Managing Director

Mr. Jain, would you be able to take it?

Sunil Jain — Executive Director

Yeah, sure. See, as I’ve mentioned before the machines which we are making, with slightly tweaking the machines, it can cater to various applications. That’s number one. Number two is flexible packaging market itself is growing at about 13% to 15% every year, which means the current manufacturers need to continue to expand and that brings in the good market potential for us, number one — number two.

Number three is what is happening is, some very old machines let’s say 15 or 20 years old machines which are energy guzzlers, they are getting replaced. So, people are looking for more productive machines which consume less energy and get more output levels. So, if you — to answer your question about B2C, we are expanding the application point of view, from these type of machines. As I mentioned before, blown film lines can be used in flexible packaging, it can also be used in infrastructure applications. Similarly the sheet extrusion lines can also be used in different applications. So we are diversifying the portfolio of applications and that helps us de-risk ourselves from purely the flexible packaging. Does that answer your question?

Ayush Agarwal — Mittal Analytics — Analyst

Yes. This was so helpful. And a follow-up on this would be that if you can share some qualitative developments that must have taken place in the last two, three years. Like you have shared that probably the tweaking of some machines, you can get into infra. So some other examples or you know some qualitative angle to this [Indecipherable]?

Sunil Jain — Executive Director

As I said to you, for example, if you go back 10 years, blown film lines used to be the capacity of 150 or 200 cases Kgs hour. Today, people are replacing couple of machines and they are going in for 400, 500 or 700 Kgs per hour. Earlier the width used to be 1,500 mm; now people are talking about three meter lines. So that kind of a shift is taking place because we also need to understand in the plastics industry, besides the volume price, the other major cost is energy, and that’s where — and polymer is something which you have really no control over. So people are going in for more energy efficient machines.

Ayush Agarwal — Mittal Analytics — Analyst

And are we working towards that? Are we able to cater to our customers on that?

Sunil Jain — Executive Director

Well, absolutely, I mean that’s our winning point as compared to competition not only from India and even some overseas.

Ayush Agarwal — Mittal Analytics — Analyst

Yeah. That’s it from my side right now sir. And thank you for your answers.

Sunil Jain — Executive Director

You’re welcome.

Operator

Thank you. Next question is from the line of Shivam Prasad, an Individual Investor. Please go ahead.

Shivam Prasad — — Analyst

Hello. Yeah, thanks for the opportunity again. Can you just highlight the inventory that we’re holding for the current fiscal year?

Khushboo Chandrakant Doshi — Managing Director

Prakash bhai, would you take that?

Prakash Daga — Vice President, Finance

Hello, yeah, am I audible?

Shivam Prasad — — Analyst

Yeah, you’re audible.

Prakash Daga — Vice President, Finance

Yeah, we are holding the inventory at — 111 days inventory.

Shivam Prasad — — Analyst

Okay. And sir, why is the number — why is the number higher like from last — in FY18 and before that you were used to hold around 70 to 75 days, but why is the number so much now, any specific reason for that?

Prakash Daga — Vice President, Finance

Yeah, see the reason for increase in inventories basically there’s disruption in supply chain, which has happened over the last 12 or 15 months, so the lead time of the procurement has extensive increased. Secondly, the range of machines where we are catering to the market. If you talk about the figures before five years, the range of machines and today’s range of machines is quite different. So inventory for all this — manufacturing of all these machines, we need to keep the parts enough. So there are very high lead time of certain customized equipment which are supposed to be assembled in the call sheet [Phonetic]. So considering altogether, the inventory holding has gone higher compared to the figures which were before five years

Shivam Prasad — — Analyst

Okay, sir. Thank you so much.

Operator

Thank you. As there are no further questions. I would now like to hand the conference over to Mrs. Khushboo Chandrakant Doshi for closing comments. Over to you, ma’am.

Khushboo Chandrakant Doshi — Managing Director

Thank you, everyone. I would like to thank all of you for taking the time out and attending this call. I’m also thankful to each member of our Rajoo Engineered family as well as our client, creditors, banks, financial institutions and all our stakeholders. For any further question or information, please get in touch with our Investor Relations team, Bridge IR, and you can reach out to us as well. Thank you very much.

Operator

[Operator Closing Remarks]

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