Elgi Equipments Ltd
NSE:ELGIEQUIP
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
515
764.9
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Elgi Equipments Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Elgi Equipment's Q1 FY '24 Results Conference Call hosted by Asian Market Securities Private Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, et cetera, either expressed or implied. Participants and requested to exercise caution while referring to such statements and remarks. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kamlesh Kotak from Asian Market Securities. Thank you, and over to you, sir.
Thanks, Nirav. Good evening, everyone. We welcome you all to the 1Q FY '24 Earnings Conference Call of Elgi Equipments Limited hosted by Asian Market Securities. We have with us today, Mr. Jairam Varadaraj, Managing Director, representing the company. I now request Mr. Jairam to take us through an overview of the quarterly result and then we shall begin the Q&A session. Over to you, sir. Thank you.
Thank you, Kamlesh. Good evening, ladies and gentlemen. I appreciate the time that you've taken to be with us on this call. I will take you through the quarter's performance in comparison to the previous year's same quarter, Q1 of last year. So today I will just do a reconciliation at an EBITDA level and explain to you where it went right and wrong. So considering the increase in sales and a marginal increase in contribution, we should have had an EBITDA of close to INR 1,100 million. Against that, we have about 860 million.Primary increase has been split actually between increase in employee cost and increase in our fixed overheads. I think to be alarmed about the increases have been in line with the inflation-based increases around the world as well as in India as far as employee costs are concerned. As far as fixed costs are concerned, there are certain onetime consultancy fees that we are incurring as part of some of the projects that we are running for improving productivity as well as reducing cost. So nothing to be alarmed about. So overall, I think we have been able to maintain our margins, profitability and others I'll come back and talk a little bit more on profits.Let me first look at sales. At a consolidated level, our sales have increased by 5% compared to the prior year. This has been a bit of a disappointment, but this is something, as a guidance we gave during the annual investor call, where we said we are going through some painful ERP integrating -- implementation and integration in North America. So we lost a good part of April and some part of May, but we came back in June. So as a consequence, we had a setback in North America, which actually was lower by almost 25% compared to the previous year. So other than that, so let me go back, as I normally do, starting from Australia. Australia grew not as much as we expected internally, but there is definite growth over the prior year. Southeast Asia was a little disappointing, but nevertheless, it grew compared to previous year. India had a growth of about 12% to 15%. Again, could have done better, but we are working on some of the programs. Europe had a significant growth of almost 50%. And our automotive equipment business grew by about 25%.So overall, the growth in revenue was good in Q1 except for a few opportunities for better growth in certain regions and except North America. From a gross split point of view, if I exclude North America, the good thing is our volume grew by 9% and our price realization was about 3.5%, 4%. So the good thing is that if you look at the prior year, there was a big correction in pricing in the market. And as a consequence, a big part of large steel growth came from price increase and rather than volume. This quarter, the volume has picked up, so which is a good sign overall, but we are gaining signs in real terms.So moving on to the mix of compressors. We are, by and large, the same at around 45%, 55% between India and the rest of the world, and we expect that that percentage will pretty much continue in the near future. So with this as a background, with North America coming back on stream, I would say that they are at around probably 90%, 95% of normalcy. Considering all that, we expect that we will grow our actual performance by about another 10% to 11%. For the second quarter, we will grow compared to the second quarter of previous year. So that is reasonable. We are reasonably confident that we will do that.On the other hand, I think EBITDA growth would be significantly better, considering that the sales coming in from North America. North America actually posted a loss because of the significant drop in revenue. So that's going to come up. So we are quite confident that our EBITDA for Q2 will be better than the previous year by a healthy margin, right? So that definitely better than Q1 of this year. So from a profitability point of view, overall, I think we have done a good job at a contribution level. We are leveled out our price increases that we did last year, which was commensurate with the cost increases that were there in all the metal commodities and freight and all that. All that has been leveled out. And right now, we are confident that we can continue this level of contribution margin at a gross profit level to sustain into the future.And for us, as a company, the last 1.5, 2 years was a challenging but also was a good experience because we were able to do a discovery of pricing in the market for a brand called Elgi, not in India as well as outside. We realized that was stable and that we were able to get some of it back. So we expect this positive trend to continue. As far as the cash flow is concerned, quarter 1, we did have a positive cash flow. We started with about INR 600 million as the net [indiscernible] as of in March, and we closed with INR 800 million. So we've been able to generate close to about INR 200 million of cash, which is positive. This is not something that we are happy about. I mean, there is still room for us to be able to reduce inventory and receivables. So we should be able to continue to improve our working capital situation with better control over receivables and inventory especially.So that's basically the summary of our performance. As far as CapEx is concerned, as always, our desire to spend is far greater in our capacity and capability to spend. We have probably spent about INR 115 million in the first quarter. So we don't expect anything significant to happen. From a business point of view, there are indications of some slowing down in Europe, some slowing down in Europe and Australia. And India seems to be indicating of some lethargy and finalization, hesitancy and investments, so we'll have to wait and see whether it's an Elgi-specific response or the general market response, we'll wait and see.We are also architecting, finalizing some programs to put some special initiatives in the market in India. We'll talk more about it in the upcoming quarters when we have finalized it. So that's basically a summary of our performance in Q1. We're happy to take your questions. Thank you.
[Operator Instructions] The first question is from the line of Harshit Patel from Equirus Securities, please go ahead.
Sir, my first question is a bit of a clarification, when you mentioned a volume growth of 9% Y-o-Y and a pricing growth of 3.5% to 4%, is this at India level, right?
No, this is at a consolidated level without North America. North America, like I said, was lower than last year. So that kind of distorts the performance in Q1. So to give a clearer picture of steady-state performance, I looked at, I removed North America.
Understood, sir. So sir, what will be the breakup of this 12% to 15% of India growth similarly in volume and pricing caps?
It's very similar.
Okay. My second question is on the pricing of our compressors, let's say, North America and Europe, let's say, hypothetically [indiscernible] lubricated oil-free screw compressor here in India, let's say X rupees, what would be the similar pricing in U.S. or the European market? I understand that it would vary on the market dynamics, our position in that particular market and so on and so forth. But just as a broad indicator, any ballpark [indiscernible] could be?
I can't give a specific number because the scope of the product itself is different. What we sell in India is different in scope compared to what we sell in Europe and compared to what we sell in the U.S. because of local requirements, statutory things, the product itself is not strictly comparable. It is only the overall architecture of the product and the manufacturing philosophy they're all constant. But the design is different. The cost structures are different. So it's very difficult to answer that question.
Understood. Sir, just lastly, on the European expansion plan. Are we on track to post a little bit of profit or breakeven? Or is there any change in that particular scenario?
Our plan is not to break even this year. Our plan is to break even at '24, ‘25, we are on track to make that happen.
Next question is from the line of Suraj from Asian Markets Securities.
I just want to understand how the Indian market is planning out in terms of demand across the key categories like industrial, infra quarter, et cetera?
On the industrial side, there are specific verticals that are continuing to have a good [indiscernible]. The conversion velocities seem to have slowed down a bit. So that's what I said, whether it's a problem for Elgi or whether it is peculiar to our customers or is it a general market thing, we will know in a month or 2. As far as the portable compressors are concerned, which is really going into a lot of infrastructure work like roads and dams and airports and general construction that has a very strong opportunity for us. Water well seems to be making some very preliminary indications of requirements, but it's very early days. It could just flatten out. We don't know whether it's a sustainable thing.
So another on demand outlook on international market like Middle East, Europe, North America and Australia, can you brief me on this?
So like I explained when I was talking about sales, Australia, there is a definite slowing down. We have grown, but we have not grown to what we thought we are going to grow, and that is not because we have lost share it is because overall, the market is a little sluggish. The same thing seems to be in Europe as well. North America is not showing any sign of any slowing down. The drop in our North America business had nothing to do with the market. It was more our internal ability to execute, which we are picking up and we are bringing it back to normal. So overall, I would say if market is there, it's growing, but nowhere near what we thought it's going to grow.
Next question is from the line of Manish Goyal from [indiscernible] Wealth Managers.
Sir, like just trying to clarify, you mentioned that India has grown 12% to 15%. So when I look at the stand-alone numbers, Y-o-Y is a decline of 2%. So I believe this includes exports from India. So when you mentioned that India is 12% to 15% growth, that is you're referring to excluding exports.
It is only India sales, which doesn't include sales to subsidiaries and direct exports that are done in the stand-alone books.
Okay, because, sir, if I probably even probably dwell further than on a sequential basis, it has declined 12%. So is it that our direct exports are also probably slowed down and maybe because U.S. is undergoing ERP implementation, then exposed to U.S. subsidiaries would also have come down. So how should we read into it, sir?
No, Like I said, this the first in the annual thing, we said we are going to rain in our working capital, and this is part of the program. So a big chunk of our earlier stand-alone sales was going to subsidiaries. And that was going at the pace which was dictated earlier when the lead times for shipments are very high and uncertainties are there. So we had kind of bulked up on inventory, and we were continuing to bulk up based on longer lead time. But once the lead time stabilized, we really have throttled it. We're continuing to throw to the sales to bring it back to normal levels or the inventory. So you will continue to see that in the second quarter as well.
Okay. Sure, sir. And one more clarification, as you were giving your opening remarks, on Europe market, did you mention Europe saw 50% growth? Just maybe if you can...
Almost 50%.
Okay. And now we expect that probably some signs of slowdown in Europe and Australia.
Yes.
And also, you did mention, sir, that you plan to break even in FY '24, '25 and despite the strong sales growth. So it that we probably have taken a call to invest more than what earlier we would have anticipated and then continues to…
Manish, our growth was like a hockey stick, the plan. So initial periods of our entire strategic plan for Europe had lower percentages of growth in the earlier years and a steep increase in the growth in the subsequent years. And what we are seeing now is part of that hockey stick and we are carefully watching it and seeing how do we ensure that things stay on the rail.
And you also mentioned that in Q1, North American sales were down 25%. That is you're referring to Y-o-Y or the sequential numbers?
Yes. Year-on-year.
Next question is from the line of R. Govindraj, individual investor, please go ahead.
Sir, my question is regarding this onetime [indiscernible] and consolidation fee. How much of that [indiscernible], sir?
Sorry, you have to repeat your question and let [indiscernible].
Regarding this one time consolidation fee. What are the quantum [indiscernible] sir?
I don't have a number in front of me, I can't give you the exact...
Second is regarding the [indiscernible], the exchange savings [indiscernible] mentioned that [indiscernible] compressors, so does it mean that [indiscernible] 2 or 3 compressors?
Mr. Govindraj, you have to speak a little slowly as well as your voice is very garbled. I'm not able to make out what you're saying.
Regarding [indiscernible].
Can I request you to speak through the handset. And if you can keep the handset a little away from your mouth [indiscernible] coming from line when you speak.
Sir, regarding the Siemens order, around 1,200 [indiscernible] have been driven, but one step contributes 2 main compressors or 3 main compressors sir?
Two.
Okay. And are they suffering [indiscernible] Vande Bharat trains, sir?
Yes.
Okay. And how many compressors going for each set of Vande Bharat train, sir?
That depends on the number of train sets in a train, right? So Vande Bharat is more like a EMU. It's not like Siemens locomotive, electrical multiple units. So it depends.
And set for 4 carts contributing in multiple software. So each work cart has a compressor?
There will be 1 per multiple unit.
And how much of the wage cost increase due to this [indiscernible] about the wages employee cost, sir? How much was increased, sir?
It was between 8% to 10%.
Okay, sir. And how are [indiscernible] raw material costs [indiscernible]?
Pretty stable.
Next question is from the line of Harshit Patel from Equirus Securities, please go ahead.
Sir, just a follow-up from the previous participant question. Could you indicate what is the quantum of that order from Siemens? And what would be the execution time line? I think it would be the same as the Siemens execution for those 12,000 SP locals, right?
Yes. So the quantum of the value of the business is about INR 1,900 crores, split between equipment and long-term service agreement. The service agreement is over a 35-year period, the supply of compressors is over a 12-year period.
Okay. And what would be the split of this INR 900 crores between these 2 elements, equipment and service?
We will announce that once we get the final order from Siemens, at that point we will make this close [indiscernible].
Next question is from the line of Navin Vijay from NS Capital.
Good evening, sir, in your opening remarks, you mentioned some slabs in the order conversions domestically. Could you give some more color on that? I mean, in which sectors particularly or something of that sort, sir?
I don't think there's anything specific to any sector. Like I said, it's across the sector. Across all sectors, we are seeing inquiry levels are still quite strong. It is just a speed of conversion seems to be a little slow. So I can't blame it on or pinpoint to any specific sector. Of course, there are some sectors like textiles, which are weak and a bit weak for almost a year.
Understood. Given that a few economies are entering into a recession technically, and then we are also seeing some slowdown here. Does that alter your growth projections? Or do you want to stay intact at least for this quarter, sir?
Definitely, it will affect our internal budgets that we have, which I really don't want to talk about, but we will have a challenge getting our budgets done. But we're working on multiple options. We still have 7 to 8 months to work on alternate options. As far as percentage growth is concerned, we were expecting to grow double digit, but probably it will come down to a high single digit.
That's what this fiscal sir? That's what this year we are saying, sir?
Yes, for the year.
And my last question is, over the long term, sir, where do you see the new trust areas coming? Where are you working on apart from the steady-state business that we are carrying on also?
There is no steady state for us because we've been on our strategy to grow the business globally. We have identified key markets that we want to focus on, which is Australia, Indonesia, Thailand, India, Europe and America and we've identified the products that we want to work on. So those are the strategic trust areas of market size is huge. Our presence in these markets is small. And that is really what we want to focus on.
Next question is from the line of Kamlesh Kotak from Asian Market Securities. Please go ahead.
Sir, just wanted to understand some more of opportunity for us, do we also have some more opportunity across [indiscernible] freight part of it because there seems to be a lot of investment of the planning now. So it will be of [indiscernible]?
So our presence in the metro segment in our country is very small, right? And the reason is not because we don't have a product or a product is not capable of functioning in it. It's primarily because metro tenders are global tenders and almost all of them are won by global electrical multiple unit railway unit manufacturers. And they have their suppliers and whether it is in Europe or the U.S. or Japan or Korea, they have their own suppliers, which are homologated for their supply. Now we have really not gone out to these OEMs to get our compressors homologated into their units. But with the entry of the private locomotive manufacturers in India, we see an opportunity to get compressors homologated even for the electrical multiple units. But it's very early days to talk anything specific about this coverage, but the opportunity could be quite significant.
And on the freight side, sir?
On the freight side, we are quite strong. We have trade in passenger intercity, freight intercity passenger trades were very strong. At the moment, bulk of almost 90% of the production of locomotives are by government-owned locomotive manufacturers but with the entry of companies like Siemens and Alstom with whom we have good relationship with even when the switch happens from government manufactured locos to privately made locals, we will continue to have our presence there.
Next question is from the line of Navin Vijay from MS Capital, please go ahead.
Just a small query on the replacement cycle for the railway sir, how does it differ from the previous low cost to the EMOUs? Is it the same like every 4 to 5 years? Or is it varying now, sir?
None of the railway is 4 to 5 years, I mean they typically compressors last about 15 years, but there is a lot of maintenance and service and overhaul that happens during that 15-year cycle.
[Operator Instructions] As there are no further questions, I will now end the conference. Over to the management for closing comments. Anyone would like to make any closing comments?
No. Thank you. I appreciate, as always, the patience and time that all of you have taken. So I look forward to a better second quarter, and I look forward to speaking with you at the end of that. Thank you.
Thank you very much. On behalf of Asian Market Securities Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.