Sterling and Wilson Renewable Energy Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Sterling and Wilson Renewable Energy Ltd (SWSOLAR) Q4 FY24 Earnings Concall

• Order Book
  • Total order inflows of ~ INR 6,023 crores (~ 3.3 GW) in FY24, up 37% YoY.
  • Domestic orders at INR 4,854 crores, up ~10% YoY.
  • Won first international orders after 3 years in Spain and Italy.
  • Unexecuted order book at INR 8,084 crores, 85% domestic orders.
  • Bid pipeline reduced from 40 GW to 30 GW in focus markets.
  • 30 GW pipeline expected to be floated out this year without delay.
• Outlook
  • Active order pipeline of 25 GW in India and 5 GW internationally for FY25.
  • Working on finalizing Nigeria MoU, expecting closure soon.
  • Expect FY25 order bookings to be higher than FY24.
  • O&M portfolio grew to 7.6 GW, expected to improve in coming quarters.
  • Order inflow guidance of around INR 8,000 crores for FY25.
  • Gross margins to be maintained at historic levels for domestic and international projects.
  • Interest cost expected between INR 30-35 crores on term debt of around INR 328 crores.
  • Overheads not expected to rise significantly from current financial year levels.
• Delayed Orders
  • Around 3 GW worth of domestic orders pushed from Q4 FY24 to Q1 FY25.
  • Primarily repeat customers and PSU orders.
  • Expected closure by end April or early May 2023.
• Order Book Conversion
  • Expect INR 6,000-7,000 crore revenue from current unexecuted order book of INR 8,084 crore.
  • For new orders of INR 8,000 crore guidance, expect 25-30% revenue conversion in FY25.
  • Excludes potential Reliance and Nigeria orders.
• Commodity Price Impact
  • No major impact as current prices factored in bid pricing.
  • Orders placed immediately after winning, protecting from future price fluctuations.
  • No major recalibration expected for future bids.
• O&M Business Growth
  • Portfolio at 7.6 GW currently, expected to grow significantly.
  • Large domestic EPC orders have compulsory 3-year O&M component.
  • 4 GW Khavda order to directly add to O&M portfolio.
  • Plans to enter wind O&M segment as well.
• Manpower/Attrition
  • Has robust leadership pipeline and strong execution/engineering teams.
  • Well-placed mechanisms to supplement manpower for growth projections.
  • No concerns on attrition or personnel being hired away by competitors.
• Growth Vision
  • Expects 15-20% CAGR revenue growth over next 3-4 years conservatively.
  • Guidance excludes potential upside from Reliance and Nigeria orders.
  • Will maintain asset-light, negative working capital model without equity dilution.
• Battery Storage Business
  • Already has in-house capabilities to execute battery storage projects.
  • Has executed similar projects in Africa previously.
  • Expects battery storage market in India to grow significantly.
  • Well-positioned to address this market across technologies and geographies.
• Hybrid Projects
  • Currently no specific number for hybrid projects in 30 GW pipeline.
  • Part of pipeline, but developers still finalizing wind/battery mix configurations.
  • Expects hybrid project portfolio to grow in coming years.
• Wind EPC Business
  • Open to taking up wind EPC projects, but without land risk.
  • Will only bid for projects where land is provided by customer/developer.
  • Will evaluate PSU wind tenders based on competitiveness and risk profile.
• Legal Cases/Receivables:
  • Around INR 900 crore receivables tied up in litigation cases.
  • Cases coming up for hearings in Q2, Q3, Q4 of current year.
  • Taken legal opinions, well-positioned favorably in these cases.
  • No provisions made currently based on expert legal views.
• Nigeria Order
  • Delay not due to Nigerian currency (Naira) depreciation.
  • Contract tagged in USD, so no impact of Naira movement.
  • Delay due to bureaucratic changes after NTPC merged with Ministry of Power.
  • Contract negotiations with NTPC finalized recently.
  • Order expected to be finalized very soon, possibly by Q2.