Steelcast Ltd (STEELCAS) Q1 FY23 Earnings Concall Transcript

Steelcast Ltd  (NSE: STEELCAS) Q1 FY23 Earnings Concall dated Aug. 05, 2022

Corporate Participants:

Faraz Ahmed — Investor Relation Partner

Chetan Tamboli — Chairman and Managing Director

Analysts:

Ritesh Chedda — Lucky Investment Managers — Analyst

Prateek Chaudhary — Saamarthya Capital — Analyst

Ronak Vora — AUM Advisors — Analyst

Ishika — Niveshaay — Analyst

Rajesh Jain — NB investment — Analyst

Karthik — Suyash Advisors — Analyst

Arjun Yadav — Amity Investment Solutions — Analyst

Agastya Dave — CAO Capital — Analyst

Priyank Parekh — Nrups consultant — Analyst

Ashok Shah — LFC Securities — Analyst

Yogesh Bhatia — Sequent Ivestment — Analyst

Sarvesh Bodani — Steelcast Ltd — Analyst

Saket Kapoor — Kapoor and company — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q1 FY ’23 Earnings Conference Call of Steelcast Limited. As a reminder, all participant lines will be in the listen-only mode [Operator Instructions] I now hand the conference over to Mr. Faraz Ahmed from Orient capital Investor Relation partner. Thank you and over to you sir.

Faraz Ahmed — Investor Relation Partner

Thank you, Michelle. Thank you and welcome to the Q1 FY ’23 earnings conference call of Steelcast limited. Today on this call, we have Mr. Chetan Tamboli Chairman and Managing Director, Mr. Subhash Sharma Senior VP, Finance and Mr. Umesh Bhatt, Company Secretary. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations as of today and actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. A detailed Safe Harbor statement is given on Page number 2 of the company’s investor presentation, which has been uploaded on the stock exchange and the company’s website as well.

With this, I hand over the call to Mr. Chetan Tamboli for his opening remarks. Over to you sir.

Chetan Tamboli — Chairman and Managing Director

Good afternoon everyone on this call, a very warm welcome from Steelcast Limited. It gives me great pleasure that the company reported strong financial performance even during this challenging time. Despite the global issues, the inflationary conditions, we were able to grow in terms of volumes, revenues, revenues growth was around 150% year-on-year and PAT growth was about 167% over the same period last year.

Just to give you all the brief, we in business for steel castings since 1960. We started off with the partnership firm and then got converted into private limited company in 1972 and then a public limited company in 1994. The Company enjoys a premier positions in the steel casting industry and manufacture wide range of steel and alloy steel castings catering to diverse industrial sectors like cement, mining, earth moving, construction industry, industrial machinery, railroads, locomotive and the company enjoys long-standing relationship with globally renowned market clients exporting now to close to 15 countries. Original equipment sales are more than 99% and being a preferred steel casting player the company enjoys long term spending relationship with globally well reputed clients. The Company is now a two-star export house, successfully competing with other international players across the globe. The company’s product processes, safety standards, environmental friendly mechanism meets with global standards and certification speaking of volume of its capabilities. The key developments for the first quarter FY ’23. The revenue and profitability continue to get better and it’s been even further as the focus is very clear to reduce dependence on the base industries we have been catering all these years and on a particular — and focus is on diversification of end user industries. We plan to focus aggressively on the North American railroad industries, increase customer base, increase number of parts. Going ahead strong traction could be witnessed for our products with a healthy order book for the next few quarters.

The company has signed a long-term supply agreement with a large railroad OEM in USA to supply steel castings for the North American railroad industry as announced earlier. This new agreement will help us to de-risk the business by reducing industry concentration and further concentrate this position in the overseas market. The steel casts which are being supplied in this agreement are in advanced stage of development and will generate additional revenues for the year, around 75 crores to 80 crores in the coming one and half to two years time starting from FY23 third quarter onwards.

Thereafter annually we plan to do a sales of around 80 crores year-on-year. The company has obtained required approvals and also apply to recertification, which will be completed within the next three months’ time. This new agreement will help us to de-risk the business by reducing industry concentration and further consolidate our position in the overseas market. Considering company’s high quality standards and on-time deliveries, we are confident we have a long-term association with this customer. Furthermore, to support our plans to de-risk the business to reduce dependency on one or two sectors we envisaged to foray into new business segments like defence, grounding imaging tools, in addition to railroad, locomotives as explained before. In past few quarters, depending on earth moving and mining sector has reduced and revenue from other sectors have increased. The company has also aerospace certification from a German agency, which will help in exploiting German market. With this development, we anticipate share of revenue from mining work will decline in the coming two, three years time. The long-term supply agreements with large OEMs in North America would help us to establish our position in the railroad industry. We currently have exposure to core industrial sectors like earth moving, mining, mineral processing, locomotives, cement, transportation, steel etc and are positioned to benefix from CapEx/infra spend in India and other countries going forward. We also gone plan to install another five megawatt power plant. We have entered into a 25 year power purchase agreement through wind and solar hybrid power project to be set up in Gujarat region in captive consumption mode. We expect to receive power from the IP plants on or before March 31, ’23. There are about six other companies, which will be drawing power from the same hybrid power plants. The company has also plan to put up another exclusive 5 megawatt solar power plant with an investment of about INR. 22 crores, which would result in additional savings of INR.4.25 crores per year and we expect to gain from this plant also by on or before March 31, 2023.

Both these plants will need around 80%-90% of the total power requirement in the balance 20% requirement will be met through state electricity Board.

On the volume front, we will continue to increase as we add new clients and aim to increase orders from existing clients also. The capacity utilization in the first quarter of this year still around 53% compared to 29% in the corresponding quarter Q1 of FY 22.

Some of the the key financial updates, our revenue grew about 150% on year-on-year basis to about 116 crores on the back of strong order book from the customers across all industries. Domestic revenues stood at 43 crores, a growth of about 105% a year-on-year basis. Export revenue stood at 73 crore with the growth of 128% on a year-on-year basis. EBITDA grew by 108% on a year-on-basis to the INR24.1 crores for Q1 FY ’23. Our PAT has also grown by 167% to INR14.1 crores compared to INR5.3 crores in the corresponding period of Q1 FY’22. Volume growth, operational efficiencies, cost specialization efforts lead to an increase in overall profitability and also softening of input prices in the first quarter of the current financial year. Thank you very much and we look forward for any questions any one of you have. Thank you again.

Questions and Answers:

Operator

Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Ritesh Chedda from Lucky Investment Managers. Please go ahead, sir.

Ritesh Chedda — Lucky Investment Managers — Analyst

Thank you for the opportunity. Sir based on your quarter one performance and the visibility on the order backlog that you have in hand what kind of capacity utilization do you foresee for full year FY ’23, we have done about a shade less than 4,000 tons in volume in quarter one can we annualize this number based on visibility that you have or we should look at it otherwise, considering the lumpiness that is there in your business actually.

Chetan Tamboli — Chairman and Managing Director

Yes, the plan is that for the full year, we should have about 57% utilization on shipment basis we’ve done about 63% in the current quarter, but as we move out it should increase and we should end up the year is about 57%.

Ritesh Chedda — Lucky Investment Managers — Analyst

Thanks sir. On the steel price side after the rise in Q4 and then the softness, which we see so what kind of steel realization drop should we see in your revenue line or you would largely be flat on a Y-o-Y basis considering the current steel price?

Chetan Tamboli — Chairman and Managing Director

As I said in the first quarter. April, May, June, that gradually input cost whether it is steel, metallic, payroll or stand binders etc. They have softened. So effectively July 1, 2022, we may have some base price drop because of the benefit we would have from the lower input prices and as we have base price variation formula across all customers in all industries. So, these things will move now with a lag of a quarter. Have I answered your question?

Ritesh Chedda — Lucky Investment Managers — Analyst

No, I was actually looking at based on the price rise that we saw in the steel and the fall that we saw now between your’22 revenues and ’23 revenues will it be largely flattish steel price for your realization or drop in steel price.

Chetan Tamboli — Chairman and Managing Director

Our prices may drop 3%- 4% on a year-on-year basis, because of the softening of input prices, but as things are very volatile so we are not able to have visibility beyond the quarter, but by and large this is what I personally feel with all the geopolitical situation what we have we would have maybe drop of 3%-4%.

Ritesh Chedda — Lucky Investment Managers — Analyst

Okay. And sir, lastly on this railroad and locomotive side the two new customers when should it start contributing to revenue, does it being that your FY ’24 you will have this additional 75 crore business flowing through?

Chetan Tamboli — Chairman and Managing Director

We expect to recertify ourselves towards the end of October from the American Railroad Associations which is a senior body who certified companies who can supply to railroad products. So thereafter we will see some small volumes happening right FY ’23. The peak of 75- 80 crores I except this to happen in FY ’24 for the year 2024-2025 and together with one of the board customers where we are developing this railroad parts, so we should see this peaking in 2024-2025 about one year, nine months from now.

Ritesh Chedda — Lucky Investment Managers — Analyst

So do you have the visibility for this 57% utilization, which you mentioned for ’23, do you have the orders in hand or the supply schedules in hand.

Chetan Tamboli — Chairman and Managing Director

We have enough supply schedule on hand to claim that we will do 57% and we have a very, very strong visibility customers placed orders for about 2.5 to 3 months at the time but they keep asking us to keep capacity on reserve. On that basis we are pretty confident to have about 57% utilization for the whole year.

Ritesh Chedda — Lucky Investment Managers — Analyst

Okay. And sir. Lastly, this 11 crore power saving will be additional over and above the 21%, 22% margin that we already making right this power saving will come next year just to clarify.

Chetan Tamboli — Chairman and Managing Director

Absolutely both these plants will be commissioned on or before March 31, 2023, so theoretically we should start getting the savings effective in April 2023.

Ritesh Chedda — Lucky Investment Managers — Analyst

Perfect. Sir, thank you very much. And all the best to you, sir.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Prateek Chaudhary from Saamarthya Capital. Please go ahead.

Prateek Chaudhary — Saamarthya Capital — Analyst

Sir, you talked about utilization, what sort of number, would you have for FY ’24 and your visibility or confidence regarding this?

Chetan Tamboli — Chairman and Managing Director

Okay. As of now, we have indications from all the customers for FY ’23, ’24 l barring unforeseen circumstances and the new geopolitical situation emerging in China and Taiwan barring all debt we should do anyway from 70% to 75% in the next financial year.

Prateek Chaudhary — Saamarthya Capital — Analyst

Okay. Thank you, sir.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ronak Vora from AUM Advisors. Please go ahead.

Ronak Vora — AUM Advisors — Analyst

Sir with steel prices softening our EBITDA currently, which is INR45, INR46 per kg do you see it going down in case the steel prices correct?

Chetan Tamboli — Chairman and Managing Director

I think this number should be transferred either way, whether the prices go up or go down or sale prices go up and down, we should be around this level.

Ronak Vora — AUM Advisors — Analyst

So in case saying the current steel price goes down by say 20% to 30% we will make INR45 EBITDA per kg is my understanding correct?

Chetan Tamboli — Chairman and Managing Director

Yes. Theoretically yes, we should be able to do the state.

Ronak Vora — AUM Advisors — Analyst

Okay, sir. On my second question currently what is our inventory days as of June on the raw material end?

Chetan Tamboli — Chairman and Managing Director

Our raw material inventories will be close to about 40 days and if you see overall inventories in Fy’22 all types of inventory it was about 143 days or so.

Ronak Vora — AUM Advisors — Analyst

Okay. And sir, how much of this inventory would be at high-cost and we do have to take an inventory write-down going ahead in case prices soften?

Chetan Tamboli — Chairman and Managing Director

A very negligible part because see 44 days would also have all the crore spares and those three items also, but for the top class items the inventory would be much lower than 30 days time. So we should be in line with the current prices.

Ronak Vora — AUM Advisors — Analyst

Okay, sir my third question on the order book in the last quarter you said it was around 200 odd crores where are in terms of order book as of the June quarter?

Chetan Tamboli — Chairman and Managing Director

We should be in excess of 300 crores as of now, but these numbers keep fluctuating month-on-month basis, but if we have to do sales on an annualized number of Q1 is about 460, 465 crores, so at any point of time, we would have about 300 crores of order book.

Ronak Vora — AUM Advisors — Analyst

Okay. And sir, this year, are we sure that will be able to surpass the 400 crores of top line this quarter in this year?

Chetan Tamboli — Chairman and Managing Director

Sir,if you’ve done in 115 crores in the first quarter, theoretically that number should be 460.

Ronak Vora — AUM Advisors — Analyst

No, no. What I mean to say is because in Q2 and Q3 is generally a soft quarter for us and then you everything gets picked up in Q4 again for us. So that is why I just want to understand?

Chetan Tamboli — Chairman and Managing Director

We have a very strong visibility for Q2, Q3 so I would say that we should shortly cross the annual rate of 115 crores for the FY’23.

Ronak Vora — AUM Advisors — Analyst

Okay. And sir, I had one last question. We are setting up the 5 megawatt power plant and you said there will be a savings of around 11 crores. So can you just help me understand how?

Chetan Tamboli — Chairman and Managing Director

See our power cost is INR8 kg, we would be buying this a substantially lower price, so whatever generation happens in both sides of our power plant te hybrid as well as exclusive solar and whatever generation happens we buy it at a substantially lower price, so the generation into the saving which will make it about 10.5-11 crores.

Ronak Vora — AUM Advisors — Analyst

Okay. So will it happen in FY ’23 itself or in 2024?

Chetan Tamboli — Chairman and Managing Director

I just said little while back that both these plants we expect to commission this on or before March 31, 2023. So we should start getting savings from April 2023.

Ronak Vora — AUM Advisors — Analyst

Okay. Thanks sir.

Operator

I would request you to will be on the queue for follow-up questions, please. [Operator Instructions] The next question is from the line of

Ishika from Niveshaay. Please go ahead.

Ishika — Niveshaay — Analyst

Okay. [Speech Overlap].

Operator

I cannot hear you. I would request you to use your handset to ask your question. Thank you.

Ishika — Niveshaay — Analyst

Yes. Hello.

Operator

Please proceed.

Ishika — Niveshaay — Analyst

Yes. So my first question is, since we are diversifying into other industries as well like locomotives and railroad I wanted to understand what is actually helping us to get those orders and we can be direct competitors into this industries as an in locomotive, railroad or even in mining we can direct competitors?

Chetan Tamboli — Chairman and Managing Director

Each of these end-user industries and within the end user industry there are lot of players so in terms of competition, we will be competing with different companies, whether it’s located in Brazil, United States, maybe China or some East European company. So it’s really difficult to really find out exactly and even within customers in terms of number of parts we will be competing with many player so very difficult to answer these question who is this competition is and how are we compared to them because most of these players are closely held.

Ishika — Niveshaay — Analyst

What is actually helping us in getting the orders of locomotives, like the order we have received from US so what actually helped us getting that order?

Chetan Tamboli — Chairman and Managing Director

See one is the kind of facilities we have there may not be many players like us. Like I would imagine if not more than six, seven players have a complete integrated facilities like we have, a, b, we have been supplying to this host of OEMs across the world. So there is a good reference for the company in terms of qualities and delivery and if anybody looks at India wants to source from India then within India we would be the top one, two, three players, so and plus our sales team also is very aggressive in impending customers and trying to see what their needs are and what our capabilities are. So all these factors put together we are able to penetrate in this advanced market.

Ishika — Niveshaay — Analyst

Okay. Although the second question is, as you mentioned that our current order book is around 300 crores, so in how much period It will be executed.

Chetan Tamboli — Chairman and Managing Director

Please repeat your questions.

Ishika — Niveshaay — Analyst

Yes. Our current order book execution cycle, sir. This 300 crore right now. So on basis of revenues we compute it must be around 1 year.

Chetan Tamboli — Chairman and Managing Director

No, as I said, if you could do sales of the annualized number of first quarter and if you have 300 crores it would be something five, six months.

Ishika — Niveshaay — Analyst

Okay, thank you. That’s all.

Chetan Tamboli — Chairman and Managing Director

I also want to add that other than the facilities and the quality I think in India there will be only two players who have certification from the US railroad who can supply casting to US for North American railroad. So there is one player and we might be the second one in India, so that’s another factor why these customers from all the way to India.

Ishika — Niveshaay — Analyst

Sir, can we know that other players as well as the name of that player?.

Chetan Tamboli — Chairman and Managing Director

I’m not very sure but could be Texmaco.

Ishika — Niveshaay — Analyst

Okay. Thank you sir.

Operator

Thank you. The next question is from the line of Rajesh Jain from NB Investments. Please go ahead.

Rajesh Jain — NB investment — Analyst

Good afternoon, sir. Congratulation on a very good set of numbers. I have two questions, the first one is regarding the margins for the current financial year. Since you have mentioned most of the input prices of either remained stable or softening down and there is a lag in passing on the prices. This drop in prices to the customers. And in addition to that higher capacity utilization is it fair to assume that the margins for FY ’23 would it be better than FY’22?

Chetan Tamboli — Chairman and Managing Director

It would be better because we did utilization of 49% in FY ’22 and we will do 57 now in FY ’23. So with the increase in operating leverage we should do better.

Rajesh Jain — NB investment — Analyst

Okay, sir. Now that we have given for 57% utilization we may reach around 460. So that means with the current capacity, we can go up to 800 plus crores top line from the existing facilities.

Chetan Tamboli — Chairman and Managing Director

Yes, on the current sales prices and the input prices the full capacity we should be able to do 800 crores plus.

Rajesh Jain — NB investment — Analyst

Okay, sir. My last question is in the recent quarter concalls from Caterpillar due to lockdown in China and some other factors. They have given minus 5% drop in their locomotive sales throughout the year. So since we are one of the major supplier to them. Have they indicated any drop in their requirement for the remaining three quarters?

Chetan Tamboli — Chairman and Managing Director

Their order book is slightly softening, but in our case, we should be able to perform on the first on the Q1 numbers.

Rajesh Jain — NB investment — Analyst

So you mean to say there downward projections is not going to affect us for the current financial year.

Chetan Tamboli — Chairman and Managing Director

I would put it the other way had their volume has not gone down. We would have done much better than the first quarter annualized number is because of their opening order book we at current level.

Rajesh Jain — NB investment — Analyst

Okay. But for FY ’24 you’ve already given something around 60% to 75% capacity utilization, is it based on better order from them or it is still under slightly lesser than what you had plan in mind.

Chetan Tamboli — Chairman and Managing Director

Its a combination of several factors. 1), these are indications from our existing customers. 2), We have an ongoing drive of developing new parts, which as and when they developed it convert into additional sales. 3), Approval from the US Railroad Association for supplying to the U.S railroad.4) The new industries we are entering they would also get converted those parts also would get converted into serial supply, so these are all, a combination of various factors and indication from all our customers on that basis this is the plan.

Rajesh Jain — NB investment — Analyst

Okay, sir. Thank you very much and wish you all the best.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Karthik from Suyash Advisors. Please go ahead, sir.

Karthik — Suyash Advisors — Analyst

Sir, very good afternoon. One question you referred to the defence and aerospace sector in the initial comments that you made. What is the current state of readiness with regard to the defence sector. Any details you can share.

Chetan Tamboli — Chairman and Managing Director

As we have said earlier we are developing some parts for defence, only this is the progress is slow. But we should do more of defence maybe in the next financial year, but we are not able to really predict what could be those volumes are with all the bureaucracy see so the prediction is extremely difficult, but we should do little more than what we be doing.

Karthik — Suyash Advisors — Analyst

Right. And you referred to a German aerospace customer. Did I hear that correct. Sir.

Chetan Tamboli — Chairman and Managing Director

No, what we have said is because of the certification our access to the defence, there should be lot easier compared to others. And also the success of the prototype we will supply hopefully towards end of the year. So we should be well placed compared to others and with this 57%. What we are planning utilization in the current year is excluding the defense would be which might do this year and next year.

Karthik — Suyash Advisors — Analyst

Thank you so much, sir.

Thank you.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Arjun Yadav from Amity Investment Solutions. Please go ahead.

Arjun Yadav — Amity Investment Solutions — Analyst

Yes, thanks for this opportunity. In one of our previous calls, you did mention that we are like 25%, 30% lesser than our immediate competitor and today we see this whole China Plus One intensifying given the ecosystem around us. Don’t you see that we could be reaching the 70%, 80% capacity utilization much sooner than what do you think because we are the cheapest players in the arena?

Chetan Tamboli — Chairman and Managing Director

There could be a possibility that we would reach 90% much earlier than what we are envisaging. But it’s always good to not to or projectable ourselves and be conservative because the more aggressive you are in turn also hurt your margins. So it’s better to go step-by-step and then increase the capacity. For example, we can fill the capacity tomorrow. But that may not be in the best interest of all the stakeholders.

Arjun Yadav — Amity Investment Solutions — Analyst

No, I have my question was on building capacity. I was just thinking so allow me to understand this, sir. If you are the cheapest player. Why is it tough to scale up the capacity in the next one or two quarters. Why do we have to wait for two years to get to the peak capacity, I mean maybe I’m missing some major part of your business model. Could you please explain why is it tougher to because we are the cheapest players making products what we are doing?

Chetan Tamboli — Chairman and Managing Director

We may not be the cheapest. I would like correct there. But whatever I have said before that’s compared to Western Europe and North American companies our competition. We may be 20%-25%,-30% lower. This line the development and the lead times are very high when you start developing parts from the request for quote to start supplying in bulk form, it take anywhere from 10 to 12 months time. So, it is an ongoing process and these kind of companies really the growth is more stable than growing leaps and bounds.

Arjun Yadav — Amity Investment Solutions — Analyst

Okay thanks for that. One last question, you did say that our competitors are from China and other parts of the world. Could you tell us who are like you face some time back that we have 4 lakhs, 5 lakhs tons of market size and we are like 3%, 4% of it. So your next CapEx would come after two your sense is that what it is or you planning anything earlier?

Chetan Tamboli — Chairman and Managing Director

See to put up our Greenfield facilities it takes about two years time. So we will each about 95% in ’25,’26 so may be end of the current fiscal year we would start deciding on when to really kick-start this so there also a lot of uncertainties around the world. One has to be very cautious for us to be very pragmatic in deciding this so will take a call end of the financial year and see when we will start this.

Arjun Yadav — Amity Investment Solutions — Analyst

Okay. Sir, one last question, your domestic side, has it grown proportionately to the way have grown internationally this quarter or has it been any less and how do you see it growing in the next one year.

Chetan Tamboli — Chairman and Managing Director

I think the growth is the proportion more or less same but I’ll give you the exact numbers in the domestic market compared to Q1 2022 to Q1, 2023 the exports, just 1% difference 60 corresponding quarter 61 now and the same way for domestic 40 and 39, so the growth is proportionate.

Arjun Yadav — Amity Investment Solutions — Analyst

Sequentially. I mean for the last quarter.

Chetan Tamboli — Chairman and Managing Director

Yes, more or less same.

Arjun Yadav — Amity Investment Solutions — Analyst

Okay. Thank you.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Okay. The next question is from the line of Agastya Dave from CAO Capital. Please go ahead.

Agastya Dave — CAO Capital — Analyst

Hello, am I audible.

Chetan Tamboli — Chairman and Managing Director

Yes. Yes.

Agastya Dave — CAO Capital — Analyst

Thank you very much for the opportunity. Sir. Congratulations you delivered exactly on your guidance probably slightly better that. So I must congratulate you on execution. Sir. I had a question on the costing side. So in terms of some of the cost that have been incurred by all the manufacturing companies, for example, freight and higher power costs. How does pricing or costing in your particular case work out. So the higher freight that you are probably paying for your exports are you able to recover everything as of now from your customers. have you built that entirely in your costing, or is there a component of energy prices or higher freight, which you could not recover?

Chetan Tamboli — Chairman and Managing Director

Yes. One is for your information all our export sales Ex-Works basis. So it’s the customer who can be and take their products. So in spite of very high ocean freight last two, two-and-half years we have not been impacted at all. And as far as the input prices are concerned, we have an ongoing base price variation formula so if the input price goes up we get the sales price increase, it goes down, we give price reductions, so we are pretty much insulated from this suudden cost increases and things like that. So to answer your question again is all exports our exports so we do not factor in any..

Agastya Dave — CAO Capital — Analyst

Sir, would that cover any fluctuations in the currency, as well are your contracts only. For example, if you are supplying to any European countries or OEMs are you pricing the contract in dollars or euro is there FX component where you are open and which is not covered under..

Chetan Tamboli — Chairman and Managing Director

For example all our European sales are in Euros and the other countries are in US dollars. Right. So whether the rupee appreciation or depreciate we get compensated from the customer.

Agastya Dave — CAO Capital — Analyst

With the one quarter lag probably?

Chetan Tamboli — Chairman and Managing Director

With the one quarter lag, yes

Agastya Dave — CAO Capital — Analyst

Excellent Sir. Second question was also on costing as we ramp up now the ramp ups that we are going to see are going to be substantial and this is something that I’ve asked you before just for reputation sake. As we go from early 50s to mid 70 levels. What components of fixed cost would we need to increase to keep pace with the production. Is there any, for example, are you going to hire more people, are you, is there any other thing that will ramp up proportionate to the sales which we are as of now not seeing because you have been operating on sub 50% utilization levels?

Chetan Tamboli — Chairman and Managing Director

See one of the major cost is just part of the fixed cost is people cost. So there will be addition of people as we move forward and rest of the fixed cost is pretty much it would be fixed out of the fixed cost there will be a margins increase in people cost.

Agastya Dave — CAO Capital — Analyst

Great. Sir. One final clarification, you mentioned in one of the in-reply to one other questions that some clients were seeing softer order book, sir. I missed, which set of clients are seeing softer order book. Can you please repeat that.

Chetan Tamboli — Chairman and Managing Director

I think somebody on the call, asked that when they attended the call from Caterpillar. Caterpillar announced that there was softening of their order book. So we have the supply chain will also see a lower number. This has been factored in the current financial year. And so it’s after the softening we have performed in this first quarter. So beyond this, we don’t see any softening coming for at least the current financial year.

Arjun Yadav — Amity Investment Solutions — Analyst

All the best. Sir, thank you very much for holding the conference call.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Priyank Parekh from Nrups consultant LLP. Please go ahead.

Priyank Parekh — Nrups consultant — Analyst

Hello Chetan Bhai. Good afternoon. Yes., Chetan Bhai can you insight on the customer concentration, like how much contribution is coming from our top five or top 10 customers.

Chetan Tamboli — Chairman and Managing Director

Yes. I think, there will top 15 will be about 65% of sales.

Priyank Parekh — Nrups consultant — Analyst

So 15 and any impact on top five?

Chetan Tamboli — Chairman and Managing Director

Top five maybe around 35%-40%.

Priyank Parekh — Nrups consultant — Analyst

Okay, good. That’s it from me.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Ashok Shah from LFC Securities, please go ahead.

Ashok Shah — LFC Securities — Analyst

Thanks for taking my question. After many, many years we are on a growth footing and in a profitable way. So we had the first time in history maybe in history declared that will be done in the first quarter. So what’s the plan for the distribution of dividend and profits. Are there any changes here management looking at?

Chetan Tamboli — Chairman and Managing Director

Yes. From last 15 years if you see our numbers we have our policy of distributing 20% of profit after tax. We have been continuously believe that, as I’ve said over last two 15 years so that policy will surely continue b) What we’ve talked in the both meeting yesterday that we have to give at the end of the year why do not start giving every quarter because one reason is we have long-term debt free company liquidity is pretty good, cash accruals are very good, receivables are under control. So why don’t we do this as a step towards making the company more investors. So with this background we have decided to do this on a quarterly basis barring unforeseen circumstances.

Ashok Shah — LFC Securities — Analyst

So we can expect a dividend every quarter.

Chetan Tamboli — Chairman and Managing Director

I hope so and you should pray every morning that we do this every quarter.

Ashok Shah — LFC Securities — Analyst

So kind of you. The investors are waiting for the dividend over last time the painful pain we have faced over last 10 years. maybe, maybe it is very difficult space we had gone through. Sir. Second question is at present, every time over the last 20 years, 25 years. Whenever we have expanded and the market has gone one in recession and we get to had to some pain after expansion. So currently with our capacity, I think we can reach around 33,000 tons, approximately if I am correct, so,33,000 capacity, what could be your turnover when we reach in future?

Chetan Tamboli — Chairman and Managing Director

To answer your questions. I think you’re right that whenever in the past you’ve expanded capacities there has been a downturn. So we are extremely cautious in deciding increasing capacities whatever we are investing now is mainly for balancing and debottlenecking the operation that is the reason when people keep asking questions when do we want to expand. So we are very cautious on this. So, we would decide somewhere around March 23 whether we should start capacity expansion (a), (b) I did say on this call that on the current input price and steel prices at full capacity, we should be 800 crore plus.

Ashok Shah — LFC Securities — Analyst

Okay, sir. Thank you. That’s all from my end and best wishes for the next year and the future year. Thank you.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

The next question is from the line of Ronak Vora from AUM Advisors. Please go ahead. Sir.

Ronak Vora — AUM Advisors — Analyst

Hi Sir, are we still in partnership with AIA for the manufacturing?

Chetan Tamboli — Chairman and Managing Director

No, no, we had these AIA contracts in 2014 or 2015 for a very short while we don’t do any work for them as of now.

Ronak Vora — AUM Advisors — Analyst

Okay. No problem.

Chetan Tamboli — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ishika from Niveshaay. Please go ahead.

Ishika — Niveshaay — Analyst

Hello. Sir, just one question. What are the targeting the revenue mix as in right now that have 52%-53% revenue from mining. So what is our target revenue mix in terms of mining, earthmoving and locomotives and railroads?

Chetan Tamboli — Chairman and Managing Director

We have a very strong plan on how we derisk our sales from mining, earthmoving and construction equipment industry. Just to give you one perspective in 2013 mining was 84%, currently, it is 25% and likely to go to 23% FY ’26. So it’s all the industries wherever we were 10 years ago. There has been a gradual shift and we are working very, very aggressively on reducing depends on the base industry.

So with the addition of new industries like railways, ground engaging tools, locomotives, so derisking is an ongoing process, and we are substantially better than what we were a few years ago.

Ishika — Niveshaay — Analyst

Sir. But even mining or our earthmoving segment has increased. So I guess that has actually been set of mining and earthmoving both are cyclical, right. So, it has actually not in a way derisk ourselves. So just wanted to understand this both together like mining and earthmoving how much the new mix we can have in FY ’25, ’26 also?

Chetan Tamboli — Chairman and Managing Director

From 84%-85% the combinations between mining and earthmoving about 60% and other industries like construction, railroads will be above 15% each. So, and then the other five, six industries will be the balance number.

Ishika — Niveshaay — Analyst

Thank you so much. This will be by the end of?

Chetan Tamboli — Chairman and Managing Director

FY ’26.

Ishika — Niveshaay — Analyst

Thank you so much.

Operator

Thank you. The next question is from the line of Yogesh Bhatia from Sequent Investments. Please go ahead.

Yogesh Bhatia — Sequent Ivestment — Analyst

Yes, Congratulations on a very good quarter.

Operator

Mr. Bhatia your audio is too low. Could you please increase your volume.

Yogesh Bhatia — Sequent Ivestment — Analyst

Yes, hello.

Operator

This is much better. Please proceed, Sir.

Yogesh Bhatia — Sequent Ivestment — Analyst

So, congratulations on a very good quarter. Thank you. Just one question basically if given the power plants starting and assuming other things like freight and metal in all remaining constant. What kind of margins are we targeting for the current year and maybe next year with better utilization.

Chetan Tamboli — Chairman and Managing Director

See our first goal is we should be consistent with the better margins in all four quarter, for the next year we will have this additional savings from our power plus with increased output so the operating leverage is to kick in so we should do better than this year.

Yogesh Bhatia — Sequent Ivestment — Analyst

So any thought process, maybe 200, 300 basis points or something like that?

Chetan Tamboli — Chairman and Managing Director

I think for the present is just the beginning of the year. I can only say now that we do better. Now in terms of quantitative details is difficult to really predict various uncertainties around the world. What we’re seeing so but it should be better than this year.

Yogesh Bhatia — Sequent Ivestment — Analyst

Okay, sir. Thank you, sir and all the best.

Chetan Tamboli — Chairman and Managing Director

Thank you, sir.

Yogesh Bhatia — Sequent Ivestment — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Sarvesh Bodani an Individual Investor. Please go ahead.

Sarvesh Bodani — Steelcast Ltd — Analyst

Yes, sir. Hi, sir. Congrats on the great set of results in Q1. In the last call you had mentioned that while there is no seasonality in the business on a quarterly basis. You’ll see a rising trend so like you do it better than Q1 and Q3 better than Q2 and so on. So do you see that in this financial year as well?

Chetan Tamboli — Chairman and Managing Director

We have been surely hope to do better than the Q1 numbers. Because generally as the year moves the numbers tend to improve, but then there are some year whereas the second and third quarter are slightly dampened, but in the current scenario we should be consistent in line with the first quarter and maybe slightly better second, third, fourth quarter.

Sarvesh Bodani — Steelcast Ltd — Analyst

On the EBITDA margins again so if I look at your numbers for FY ’21 when you were doing only 25% capacity utilization, you were doing around 20% EBITDA margins. And now that we are at 50% plus like we have doubled capacity utilization still around 21%. So why are we not able to see the big benefit of operating leverage or is it because of, so if you could explain this.

Chetan Tamboli — Chairman and Managing Director

Yes. First of all FY ’22 was not 25% utilization of 49%.

Sarvesh Bodani — Steelcast Ltd — Analyst

No, no, sir. 2021.

Chetan Tamboli — Chairman and Managing Director

Yes. FY ’21 was 24%.

Sarvesh Bodani — Steelcast Ltd — Analyst

Right. And still you did around 20% EBITDA margins for the full financial year. Right. And now you are around 53% capacity utilization and we are still around 21% EBITDA. So, don’t you think that the operating leverage should have pushed it a bit further or if you could explain why we have not been able to get a larger advantage.

Chetan Tamboli — Chairman and Managing Director

Really I don’t have an answer as of now why the EBITDA margins are not improving, but I think that compared to fast we are doing far better.

Sarvesh Bodani — Steelcast Ltd — Analyst

All right. So going ahead you see expanding even from base, assuming that we continue to get good capacity utilization.

Chetan Tamboli — Chairman and Managing Director

See the operating leverage will probably help, but there are also cost ratios of increase the wages the session. The other manufacturing expenses which have not covered part of the sales price variation formula.

Operator

Mr. Bodani I would request to take this question offline with the management, we have other participants waiting in the queue. Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor and company — Analyst

Namaste sir and thank you for the opportunity. As mentioned, our current utilization levels 57%. So, on a progressing basis what are we looking at depending on the data available from the OEM, what should be the average utilization level for the year as a whole. Can you give a statistics?

Chetan Tamboli — Chairman and Managing Director

In the first quarter of FY ’23 we did about 53%, but for the whole year FY ’23, we plan to do about 57%- 58%.

Saket Kapoor — Kapoor and company — Analyst

Okay. And when we look at players like Gainewell who are generally operating as dealers to Caterpillar. They are themselves having orderr book of about 3,000 crores in the mainly in the underground mining business segment. So what portion of the business are we getting to afford to Caterpillar and there must be a minute visibility for at least three to four years. Since they are having order book of in excess of 3,000 crores?

Chetan Tamboli — Chairman and Managing Director

Which company, you said I didn’t get it.

Saket Kapoor — Kapoor and company — Analyst

Sir, I’m talking about I was reading the report on from India rating on gain Gainwell Cosmosales, they are one of the dealers to Caterpillar. They operate the dealership business of Caterpillar construction and earthmoving equipment and in their order book in this report I read about Gainwell having an order book of in excess of INR30,000 crores catering to the underground mining segment. So that will be routed through the Caterpillar only so they must be having visibility of at least two to three years down the line. So I was just trying to get a sense from you what kind of business we have percentage of business we are doing to Caterpillar and what is the figures from them going ahead?

Chetan Tamboli — Chairman and Managing Director

First of all, I have no idea about the 3,000 crore order book very fixed through these are for equipment now. These equipment cost INR1.5-2 crores right. And what we do is a small part of this equipment. (a) So they would have four models us for three, four months time. But they do share visibility of forward 15, 18 months. So like we don’t have this kind of a models for the full year and now this 3,000 crores would be, we need to really go deep dive into this that, what is this company annual sales and 3000 crore will work out what, how many years of orders, but even from my knowledge of our customers’ sales no dealer who they have any firm visibility beyond four, five months this is my knowledge.

Saket Kapoor — Kapoor and company — Analyst

Okay. I stand correct there sir. I will also read it.

Chetan Tamboli — Chairman and Managing Director

And please enlighten also if there anything for us to learn from you, please let us know.

Saket Kapoor — Kapoor and company — Analyst

Sir, I can share that report to the IR team and that will be sent you as well.

Chetan Tamboli — Chairman and Managing Director

Sure. Thank you.

Saket Kapoor — Kapoor and company — Analyst

If we look at the casting part it appears and it is that you are in the these segment, whereas other players catching to the MHCVs and the tractors and all what is the key differentiators we chose the segments. So having capacity utilization that was a 57%, can we also look to cater the other segment of MHCVs tractors, off-road vehicles, and railway, so if you could throw some more light why specifically in these earthmoving equipment only?

Chetan Tamboli — Chairman and Managing Director

Okay. I’ll explain the movement you shift your focus to tractor industry or or light commercial vehicles.. They all have castings, but they are all iron casting.

Okay. It is not wise to manufacture iron and steel is the same manufacturing facilities. The the tractor industry and the light commercial vehicles. I’m talking about auto companies this is highly, highly competitive, and I don’t think any supplier would be having EBITDA beyond the 13%-14%. So with this reason we have never ventured out in making iron casting goods stick to steel castings and among all these type of casting we believe that we know steel casting is well compared to other types of casting.

Saket Kapoor — Kapoor and company — Analyst

So there is a huge differentiation is in both.

Chetan Tamboli — Chairman and Managing Director

Yes, please.

Saket Kapoor — Kapoor and company — Analyst

Thank you, sir and I will share this report sir. And getting tested the IR.

Chetan Tamboli — Chairman and Managing Director

Thank you very much.

Saket Kapoor — Kapoor and company — Analyst

And thank you for us.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Chetan Tamboli for closing comments.

Chetan Tamboli — Chairman and Managing Director

First of all, on behalf of Steelcast thank you very much for spending your valuable time and attending this call. It’s really helps the management in learning more when you ask different type of questions and you may not know, but we learned a lot from the questions being asked by all the stakeholders. Sir, please continue doing this, we’d be very happy to being as transparent as possible. And I want to add one more point which I miss in the initial period that our company has bought one notch up financial rating from from CARE from BBB stable to BBB plus positive. So happy to share this and look forward to connecting with everyone again. Thank you.

Operator

Thank you. On behalf of Steelcast Limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.