Key highlights from Skipper Ltd (India) (SKIPPER) Q4 FY24 Earnings Concall
- Revenue Growth
- Revenue reached Rs. 1,153 crores, up 76% year-over-year.
- Engineering revenue hit all-time high of Rs. 707 crores, up 41%.
- Polymer revenue stood at Rs. 103 crores.
- Infrastructure segment revenue soared to Rs. 349 crores, up 3,034%.
- Engineering exports contributed Rs. 198.7 crores, 28% of engineering segment revenue.
- Executed around Rs. 1000 crores revenue from BSNL order in FY24.
- Segment Performance
- Engineering EBITDA margin at 11.6%, reflecting better quality contracts and international business expansion.
- Polymer and infrastructure segments benefited from fixed cost rationalization over larger revenue base.
- Polymer sales volume increased by 30% to ~32,000 tons.
- Profitability Improvement
- Consolidated EBITDA increased to Rs. 108.6 crores with 9.4% margin.
- PBT surged to Rs. 128.5 crores, up 157%.
- PAT reached Rs. 81.7 crores, up 129%.
- Finance cost as a percentage of sales improved to 4.7% from 5.2%.
- Net working capital cycle improved to 88 days from 131 days.
- Order Book
- Total order inflow of Rs. 1,141 crores in Q4.
- Year-to-date order inflow of Rs. 4,286 crores, highest in company history.
- Current order book at all-time high of Rs. 6,215 crores, diversified across sectors.
- Order book to engineering and infra-segment sales ratio of 2.2x FY24 sales, providing 2-3 years revenue visibility.
- Domestic orders at 87% (53% TND, 34% non-TND), exports at 13%.
- Win rate around 25-30% on blended basis, varies across markets.
- Outlook
- Vibrant domestic T&D environment aligns with company’s focus on transmission sector growth.
- Government’s focus on renewable grid infrastructure and electrification bodes well.
- Diversification into telecom, railway electrification, water EPC, and drip irrigation strengthens revenue stream.
- Tender pipeline at all-time high of Rs. 16,730 crores, reflecting strong domestic and international opportunities.
- Advanced negotiations for securing sizable international and domestic contracts.
- Expected revenue of around Rs. 700 crores from BSNL order in FY25.
- Around 70% capacity utilization in Engineering Products segment, scope for more revenue from existing capacity.
- Enhanced capacity benefits expected towards end of FY25 after capex.
- Targeting interest cost of 4-4.5% of revenue for FY25.
- At Rs. 5000 crore revenue, EBITDA margin target of 10.5%.
- Margins
- Company delivered consistent EBITDA margins of 9.7% annually, even with higher revenue base.
- Gross profit margin fell from 36% to 22% annually, but cost of goods sold metric is not appropriate for evaluating performance.
- Cost of materials, labor, and other project expenses should be considered together.
- Higher revenue base to drive better PBT margins through lower finance and depreciation costs.
- Finance cost targeted at 4.4-4.5% of revenue in FY25, down from 4.7% in FY24.
- Working Capital
- Working capital days reduced from 131 to 88 days.
- Company aims to maintain working capital days between 90-100 going forward.
- Capacity Expansion
- Current capacity is 3 lakh tons, expanding to 3.75 lakh tons by end of FY24.
- Further expansion planned for next fiscal year based on demand outlook.
- Some capacity addition will be operational by Q3/Q4 FY24, full capacity from FY25.
- Expansion funded through internal accruals and long-term borrowings.
- Order Pipeline
- Robust domestic order inflow expected due to government’s infrastructure push.
- International order pipeline appears larger due to longer finalization time.
- Expected order mix for FY24: 75% domestic, 25% exports.
- Telecom Demand
- Telecom contributes 30% of order book.
- Expecting good demand growth in telecom tower space.
- Vodafone and BSNL to drive network expansion after lack of investments.
- Chinese Market Shift
- Customers adopting ‘China plus one’ strategy, moving supply chains away from China.
- Gradual shift towards Indian suppliers, benefiting companies like Skipper.
- Strong engineering capabilities an advantage for Skipper in this transition.
- Sector Diversification
- Currently focused on power transmission and telecom sectors.
- Open to exploring opportunities in other sectors as they arise.
- Sufficient growth opportunities within existing focus areas.
- Capex and Funding
- Capex of around Rs. 200 crores expected this year.
- To be funded through a mix of internal accruals and long-term debt.
- Blended cost of funds currently around 9%.
- Efforts underway to reduce finance costs through operational efficiencies and credit rating upgrades.