Adani Enterprises Ltd

NSE:ADANIENT

Earnings Call Analysis

Guidance on Production, CapEx, and Projects

The company anticipates that the Mining and Development Operations (MDO) will reach 35 to 37 million tonnes this year. The solar segment continues to grow, with the current quarter seeing 630 megawatts, and this figure is expected to rise alongside the plant's utilization rates. In terms of capital expenditure, around INR 5,350 crore has been invested across eight airports, and the target for the second half is to reach a total CapEx of about INR 11,000 crores for the year. Coal trading volumes for the year are forecasted to be between 70 million to 80 million tonnes, keeping in mind market demand dynamics.

Indications of Growth and Profitability

The AEL earnings call paints a picture of a company actively investing in its future, as demonstrated by the fact that incubating businesses contributed to 48% of overall EBITDA, signaling the company's growth journey and achievement of successive milestones. The overall financial performance reflects substantial growth, with consolidated total income up to INR 48,876 crores and a 43% increase in EBITDA to INR 5,874 crores. Notably, profit before tax increased significantly by 50% to INR 1,958 crores.

Incubating Business Performance

The incubating businesses of AEL, key for the company's future, are showing robust operational performances with total income rising over 100% to INR 10,608 crores and EBITDA surging by the same magnitude. The consolidated profit before tax for these entities saw an impressive jump over 22-fold, highlighting their potential as significant contributors to AEL's profitability.

Key Sector Highlights and Advancements

Several sectors within AEL saw noteworthy activities. Adani New Industries is progressing on the commitment of a 10-gigawatt integrated manufacturing ecosystem, with the schedule in place for the commissioning of a 2-gigawatt wafer plant by the end of the financial year. The solar module manufacturing plant has commenced commercial operations and is positioned for series production for global markets.

Adani Airport Holdings and Adani Digital Infrastructure Developments

Passenger movement through Adani Airport Holdings’ portfolio increased by 29%, lining up with an annual estimation of 85 million passengers with half yearly movement at 42.7 million. This sector introduced Digi Yatra at five airports and is pacing well to complete Navi Mumbai Airport by the end of the 2024 calendar year. Furthermore, Mumbai Airport achieved significant accolades for customer experience and commitment to energy efficiency and sustainability.

Mining and Road Services Performance

In terms of mining services, AEL's MDO projects delivered as per schedule with half-year EBITDA at INR 485 crores coming from 18.8 million metric tonnes of volume. Commercial mining is also performing as anticipated, while road projects made noteworthy progress with four out of ten achieving over 50% completion.

Capital Expenditure and Future Investment Strategies

The data center business is following through with its CapEx plans, with around $0.50 billion spent to date on developments. This is in line with guidance and reflects AEL's commitment to investing in key strategic areas for future growth.

Guidance for Future Expectations

The coal trading volume is projected to be between 70 million to 80 million tons for FY '24, subject to customer requirements. The Mining Developer and Operator (MDO) guidance for the year is anticipated to generate 35-37 million tonnes. The investment in green hydrogen infrastructure is expected to be profitable at each module stage, underpinning a strategy to establish an integrated hydrogen ecosystem with competitive costs.

Earnings Call Transcript 2024-Q2

[Operator]

Good evening, ladies and gentlemen. I'm [ Felicia ], Moderator for the conference call. Welcome to Adani Enterprises Limited Q2 FY '24 Earnings Conference Call. [Operator Instructions] Please note, this conference is recorded.

I would now like to hand over the floor to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

[Mohit Kumar, analyst]

Thank you, [ Felicia ]. On behalf of ICICI Securities, we welcome you to Q2 FY '24 Earnings call for Adani Enterprises Limited.

We are pleased to host the senior management team of Adani Enterprises today. We have with us Mr. Vinay Parkash, Director, Adani Enterprises and CEO, Natural Resources; Mr. Robbie Singh, CFO; Mr. Saurabh Shah, Finance Controller; and Mr. Manan Vakharia from Investor Relations.

We will start the call with opening remarks, post which we'll move to Q&A. Thank you, and over to you, sir.

[Jugeshinder Singh, executive]

Mohit, Thank you very much. Welcome all to the earnings call for half year results '24 results of AEL. AEL incubation portfolio comprises assets spread across Energy & Utility, Transport & Logistics and primary industries. In digital infrastructure, incubating assets include ADANI DIGITAL LAB and Adani business services.

AEL's established business portfolio is supported by primary industry vertical comprising Mining Services, commercial mining and under advanced stage of completion, the copper smelter. Half year '24 results are powered by the emergence of core infra incubating businesses, which have contributed 48% of the overall EBITDA. This reflects the incubating business growth journey and successive milestones.

The consolidated total income for the half year was at INR 48,876 crores. EBITDA increased by 43% to INR 5,874 crores and in line with the increased EBITDA, consolidated profit before tax increased by 50% to INR 1,958 crores. Incubating businesses continue to record robust operational performances. With total income rising over 100% to INR 10,608 crores. Consequently, EBITDA increased by over 100% to INR 2,824 crores and the consolidated profit before tax of the incubating businesses jumped over 22x.

In Adani New Industries, our commitment of having 10 gigawatt of integrated manufacturing ecosystem is well underway. I'm pleased to inform you that than Adani New Industry could produce the first wafer produced in India. The 2 gigawatt of ingot/wafer plant is within schedule to be commissioned by the end of this financial year.

Solar Module manufacturing plant, MSEL, has received commercial operations certificate from SECI. India's largest capacity onshore wind turbine generator 5.2 megawatt each machine is now listed in revised list of Models and Manufacturers. With this listing, Wind Manufacturing division ANIL has now started commercial operations. ANIL has also received Wind Guard certification, which has affirmed our production standards. This allows us to start series production for global markets.

In Adani Airport Holdings, our portfolio is performing along expected lines, and the half yearly passenger movement grew 29% and is tracking 85 million passengers a year, with a half yearly movement at 42.7 million.

Digi Yatra was introduced at 5 airports: Mumbai, Ahmedabad, Lucknow, Guwahati and Jaipur. In this quarter, we also added 2 new international airlines to our portfolio and 9 new international routes were connected. Arrival & Departure Immigration block in Terminal 2 of Ahmedabad Airport is completed.

Additionally, Mumbai Airport has completed its pre-embarkation security check Phase 2 expansion program. Further, Domestic Cargo Terminal operationalized at Jaipur Airport. And as an update, Navi Mumbai Airport is well on schedule to be completed at end of calendar year 2024.

Road portfolio during this quarter, 4 of our 10 road projects have achieved over 50% completion and are right on schedule. ESG is a big part of AEL's journey and our philosophy embeds this into the fundamental investment planning and the other significant CapEx that goes into our incubating businesses is reflective of this.

In line with the ESG framework, our businesses have received recognition for environmental and social impact. For example, Mumbai Airport achieved Level 4 customer experience accreditation, which is third airport globally, and first in India.

Further, the Energy Engineers and Managers awarded Ahmedabad and Jaipur Airport with gold and silver, respectively, for facility and for commitment to energy efficiency and sustainability.

Now I hand over to my colleague, Vinay, to run through Mining Services, Resource Management and Commercial Mining. Vinay, over to you.

[Vinay Goel, executive]

Thanks, Robbie. Good afternoon to all. First, the Mining Services. AEL is the pioneer of MDO concept in India, which is mining developer and operator concept with an integrated business model that expands across developing mine as well as the entire upstream and downstream activities. It provides a full service range right from seeking various approvals, land acquisition, R&R, developing required infrastructure, mining, beneficiation and transportation to designated consumption plant, which is TPS.

The company's MDO for 8 coal blocks and 1 iron ore blocks. These projects are located in the states of Chhattisgarh, MP and Orissa. The company has serviced its contract and the quantities delivered during the quarter were as per the schedule given by the customer.

During the half year, the revenue from mining services was at INR 1,098 crores and EBITDA at INR 485 crores. For Iron business, Integrated Resources Sales Management business, we have continued to develop business relationship and diversified customer across various end user industries. We remain #1 player in India and endeavor to maintain this leadership position going forward.

The volume in quarter 2 FY '24 stood at 18.8 million metric tonne. EBITDA for the half year was at INR 2,063 on account of improved relation on year-on-year basis.

As far as the Commercial Mining is concerned, the commercial mine in Australia, the production has increased by 68% to 5.4 million metric tonne, and the shipment increased by 70% to 5.1 million metric tonne. The company is having 7 domestic commercial mine block, and these block projects are in the states of Maharashtra, Chhattisgarh, Madhya Pradesh, Jharkhand and Orissa. Thank you.

[Jugeshinder Singh, executive]

We open for questions.

[Operator]

[Operator Instructions] First question comes from Bharat Jain from ICICI Securities.

[Bharat Jain, analyst]

My first question is on solar. So sir, what is the capacity of solar manufacturing? And is the 4 gigawatt operating.

[Jugeshinder Singh, executive]

Yes. And the current capacity is approximately 4.5.

[Bharat Jain, analyst]

Sir, how much have we exported during the quarter?

[Jugeshinder Singh, executive]

Quarter-to-quarter, we can give you overall -- the target export numbers, module sales, export was approximately, just one sec -- the exports were in terms of megawatt. We exported 792 megawatt worth of modules in this quarter.

[Bharat Jain, analyst]

Okay, sir. Sir, and what geographies are in the exporting?

[Jugeshinder Singh, executive]

Mostly U.S.

[Bharat Jain, analyst]

Okay. mostly U.S. understood. Sir, and on wind, what is the plan for wind manufacturing capacity?

[Jugeshinder Singh, executive]

The wind manufacturing...

[Bharat Jain, analyst]

Will it be majorly used for captive?

[Jugeshinder Singh, executive]

No, no, it will be also be available for export as well, but initially, majority of our capacity, but -- and the starting capacity will be 1.5 gigawatts.

[Bharat Jain, analyst]

Okay, sir. Sir, and are we planning to produce 2, 3 megawatt turbines?

[Jugeshinder Singh, executive]

That will depend. But initially, we'll focus on the 5 megawatt, but we'll have the capacity to produce 3 megawatts as well.

[Bharat Jain, analyst]

Okay, sir. Understood. And sir, can you give us the total CapEx on the 3 data centers?

[Jugeshinder Singh, executive]

Yes. So the data center business, CapEx incurred till date is approximately, we expect to have about $0.50 billion, about INR 4,390 odd crores. And broadly in line with our earlier guidance given earlier in the year, the next year and year after that, also continuing along similar lens.

[Operator]

[Operator Instructions] Next question comes from Nirav from Geecee Holdings.

[Nirav Shah, analyst]

Sir, in the Mining business, I'm seeing that you've removed Bailadila mine from the iron ore service contract. So is that officially -- while that mine had always had problems, but so is it officially no of contract?

[Vinay Goel, executive]

Yes. So Barilla is officially out of our list now. They are not going ahead with that contract.

[Nirav Shah, analyst]

Got it. And on the solar module sales, I mean, on the margins front, we have done phenomenally well, and congratulations on that. You've done some 33% margins. But at the same time, our realizations are largely flattish on a per megawatt basis. So I'm assuming that we have benefited, we would have benefited from the following module prices. Can you just shed some light on that?

[Jugeshinder Singh, executive]

Yes, yes. That's true. Although overall, the -- the growth -- it did benefit from the benefit -- it benefited contractually, we expect the margins to be retained. But overall, because of sales, once they stabilize the full production stabilize, only a certain basic percentage will be sold. It's not like we will -- that sales will continue to grow because the capacity initially will be 4.5 gigawatts.

[Nirav Shah, analyst]

Okay. And our export mix was almost 2/3 during the quarter. So when this mix changes again or normalizes, we still expect the margins to hold on to the current levels?

[Jugeshinder Singh, executive]

The export margins will hold. The nonexport margins will be -- depending upon the underlying contract and the buyer the other margins will be different from the export margins.

[Nirav Shah, analyst]

Got it. And sir, on the Australian operations, if you can just share the EBITDA numbers for this quarter and first half.

[Vinay Goel, executive]

So Nirav, the EBITDA numbers for commercial mining are already there in the segment results. If you can just look at it, the PAT numbers are already there. On EBITDA number, we can give you separately on a separately -- on a call on this.

[Nirav Shah, analyst]

Yes. That is fine. That is fine. Perfect. And on the -- lastly, on the MDO guidance, I mean, if we can just share any light because of what are we expecting to do this year?

[Vinay Goel, executive]

Yes. So MDO, we should be closer to 35 million to 37 million tonnes this year.

[Operator]

[Operator Instructions] Next question comes from Prateek k Kumar from Jefferies.

[Prateek Kumar, analyst]

Congrats for good results and commissioning of new facilities and new energy ecosystem. My first question is on Solar segment. So until the point we are not exporting. So still the point we are not commissioning a green hydrogen [ grants]. So this quarterly run rate of solar modules can go to like how much like 1 gigawatt quarterly with the number which is 630 megawatts in this quarter, can it like sort of continue to move up by better exports or higher domestic sales as well?

[Jugeshinder Singh, executive]

That number will continue to move up in line with the utilization rate of the underlying plant. But I think the bigger thing there is that we don't want to convey an unrealistic assumption in the market that the sales longer term, the sales are a bigger objective here. The longer term, it is objective that we have in the medium term is to build the integrated hydrogen ecosystem.

And what this highlights though Prateek in the meantime is that as green hydrogen ecosystem is modular as we are doing as a business case, each stage, it is cash flow positive. And therefore, this excess cash flow will continue to be deployed into the green hydrogen ecosystem and preventing -- it just shows you the overall strategy that we have adopted of each individual module of the green harden ecosystem being profitable in its own right.

So nothing is subsidizing anything. And I think that's a bigger message here that as we add the green electron module of the green hydrogen, it will -- itself also be profitable. Then we add the hydrogen electrolyzer chain, it -- itself will be profitable. As we then add the green hydrogen green product chain, which is ammonia, methanol and urea. That itself will be profitable. And what this highlights is that the profitability of each module, adding up to an extremely competitive hydrogen price, which will compete effectively with the import cost of LNG in India.

[Prateek Kumar, analyst]

All right. And sir, when are we like now looking at commissioning like pilot plant is still like FY '27, right? That was the last message.

[Jugeshinder Singh, executive]

Yes. Yes. FY '27. Yes. We're on schedule, pre-engineering work at the site, all of that is going on, site geotech studies, everything is going on.

[Prateek Kumar, analyst]

Okay. And I mean, obviously, it is next still 2 years away, 2, 2.5 years away. So from next quarter, we should also expect like sales from wind unit and the policy recon unit.

[Jugeshinder Singh, executive]

Yes, absolutely. Absolutely.

[Prateek Kumar, analyst]

And what could be the margins in this segment?

[Jugeshinder Singh, executive]

No. We'll come that once we -- once the sales strategy of the turbines are established in terms of pure domestic and global. We'll update the numbers towards -- as part of our annual results.

[Prateek Kumar, analyst]

Okay. And regarding some of the new projects which you are looking at like copper and coal to PVC. So what is the stage of these projects at this point. We're looking at financial closure for coal to be busy.

[Jugeshinder Singh, executive]

Financial closure of coal to PVC, this financial year and then copper is schedule to be in the first calendar quarter next year. So last quarter of this financial year as scheduled. So there's no change in any of that.

[Prateek Kumar, analyst]

Okay. And one question on your like segmental bookkeeping question. Segmental, what is the road segment EBITDA for the quarter?

[Jugeshinder Singh, executive]

EBITDA, we'll give you. Segment results are there filed on the road. Road half year ended is INR 530 crores.

[Vinay Goel, executive]

PBIT.

[Jugeshinder Singh, executive]

PBIT.

[Prateek Kumar, analyst]

Right. Sure. So I'll take it offline. And what is the full year guidance for the coal trading volumes now? We've seen like some decline, obviously, in line with the market trends. But what is the full year guidance for the coal trading volumes FY '24?

[Jugeshinder Singh, executive]

Vinay?

[Vinay Goel, executive]

Yes. It all depends on whatever requirement comes, but considering that we are running -- going at the 18 million to 20 million per quarter should be somewhere between 70 million to 80 million. But again, consider that we are a service industry, it all depends as how the demand and supply -- demand comes out of our customers.

[Prateek Kumar, analyst]

And the MDO guidance which you gave was more like production guidance, right, not dispatch guidance.

[Vinay Goel, executive]

So in MDO, whatever is the production mostly it gets dispatched because our inventory on first day of financial year and the end of the financial year always remains plus minus 0.1 million here and there. Because these all are long-term contract signed by -- for their own mine itself. So they lift everything which we mine.

[Operator]

We have a follow-up question from Bharat Jain from ICICI Securities.

[Bharat Jain, analyst]

Can you tell us about the status of the Navi Mumbai airport?

[Jugeshinder Singh, executive]

It's almost just about 45% complete, on schedule to be completed last quarter, calendar quarter 2024 as advised in the Annual Result Meet, AGM. So exactly -- going exactly as per schedule.

[Bharat Jain, analyst]

Understood. And then what is the CapEx incurred on the 6 airports in H1?

[Jugeshinder Singh, executive]

Our total CapEx that year total CapEx that we have incurred on the airports is approximately say, about INR 5,350 crore for the -- all the airports -- 8 airports.

[Bharat Jain, analyst]

Okay. Sir, and what would be our target for H2?

[Jugeshinder Singh, executive]

Approximately, it is going on as per -- it's currently middle of the schedule. So it will be -- we don't want to -- we want to give -- overall our target about INR 11,000 crores CapEx.

[Operator]

[Operator Instructions] There are no further questions. Now I hand over the floor to management for closing comments.

[Jugeshinder Singh, executive]

I just want to thank ICICI Securities for the call and for the questions. If anything else, you can please reach out to Manan for any clarifications. -- anybody if you have. The presentation -- detailed presentation will be up on the website already. So that should be available. It will have a lot more detail as well. So once again, thank you, everyone. And if there's anything further, please reach out to Manan.

[Operator]

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.