Schneider Electric Infrastructure Limited Q4 FY23 Earnings Conference Call Insights

Key highlights from Schneider Electric Infrastructure Limited (SCHNEIDER) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:19:00] Amar Maurya from AlfAccurate asked about the closing order book for 4Q. Mayank Holani CFO replied that order backlog at the end of March ’23 was about INR10,735 million, while in Dec. ’22 it was INR8,179 million.

• [00:19:39] Amar Maurya from AlfAccurate enquired about the YoY revenue growth for transaction services and systems and sales and order booking breakup. Mayank Holani CFO said that in order booking, the full year breakup is about 48% equipment, 10% project, 27% transaction and 15% services.

• [00:24:18] Dhavan Shah from AlfAccurate asked to share the difference in GM improvement due to easing of RM cost and improvement in product mix, and if it’s sustainable for FY24. Mayank Holani CFO replied that the GM percentage varies QonQ due to the nature of the PTO business, which is based on individual projects with varying requirements. The GM percentage for 4Q22 was 36%, but this is not representative of future quarters.

• [00:28:19] Viraj Mithani from Jupiter Financial asked if SCHNEIDER is shifting towards an ecostructure platform and changing its vision from a product company to a full solution company. Sanjay Sudhakaran CEO replied that there is no strategy to defocus on products, which remain at the center. Software, such as ecostructure, pulls in products and provides stickiness between the customer and the organization through the overall experience.

• [00:33:32] Apoorva Bahadur from Goldman Sachs enquired about an update on the RDSS scheme. Sanjay Sudhakaran CEO said that the opportunity size cannot be quantified due to numerous reasons, but investments are gradually coming in despite challenges such as COVID and regulatory approvals.

• [00:34:57] Apoorva Bahadur from Goldman Sachs asked about the export revenue for FY23 and it’s outlook for long term. Mayank Holani CFO said that export sales was 1,985 million for FY23. Last year it was 2,397 million. Export business is expected to increase from current operations and a new factory in Kolkata, leading to additional export business from FY24 and FY25.

• [00:37:38] Raj Rishi enquired how big is the railway opportunity for the company’s products in the next 2-3 years. Sanjay Sudhakaran CEO said opportunities on the railway side include urban transportation such as metros with scope for products like air and gas insulated switch gears, SCADA and software, and Vande Bharat trains where SCHNEIDER supply locomotive breakers from its Kolkata factory as a preferred supplier.

• [00:39:52] Manish Goyal from ThinkWise asked if the INR38 crore capex was spent on the new facility in Kolkata or to increase capacity at an existing facility. Mayank Holani CFO said that capex for the new factory was negligible and mainly towards machinery replacement and safety refurbishment, such as the firefighting system, in the existing setup.

• [00:43:36] Manish Goyal at ThinkWise queried if the increase in inventory is due to a delay in dispatches or building up inventory for future dispatches with good orders. Mayank Holani CFO said that there is no inventory build-up for raw materials or significant delay in projects, but rather usual finished goods and WIP to meet demand for the current and early part of the next quarter, which should normalize.

• [00:49:59] Nikhil Jain from Galaxy International asked about the key sectors in the order book and which sectors are emerging as important with power down to 40%. Sanjay Sudhakaran CEO replied that SCHNEIDER’s focus segments include mobility, transportation, emerging segments like semicon, minerals, mining and metals, and buildings and industrial now form a substantial part of company’s portfolio.

• [00:50:56] Sanjaya Satapathy from Ampersand Capital enquired about the reason for the difference between the reported 10-11% order growth and 15% backlog growth. Mayank Holani CFO replied that the 15% backlog growth is from the same period last year and is not solely derived from order growth, but also sales numbers. Sometimes opportunities or fixed orders can shift between years and impact growth.