Mishra Dhatu Nigam Ltd

NSE:MIDHANI

Earnings Call Analysis

Company targets 20% revenue growth amid changes

The company reported a revenue mix for December 2023 with 20% from superalloys, 9% from titanium alloys, 34% from maraging steel, 27% from special steels, and 10% from others, marking a noteworthy shift from the previous year. Increased FDI in the steel sector is expected to benefit the space industry and bring competition, leading to potential margin pressure. The EBITDA margin has decreased from 29% to 14.2%, attributed to higher proportions of superalloys and raw material pressures. For FY '25, aiming for a 20% EBITDA margin is considered good, as targeting higher margins might result in lost orders. The company is focusing on volume growth and is targeting a revenue increase of over 20% in the forthcoming period.

Revenue Breakdown and Market Dynamics

During the period ending December 2023, the company witnessed a dynamic shift in its product revenue mix. Superalloys, which previously contributed 8%, have now grown to represent 20% of total revenues. On the other hand, titanium alloys saw a decrease from 13% to 9%, while maraging steel's contribution significantly dropped from 55% to 34%. The change reflects strategic adjustments and responses to market demands. The company also expects the increased FDI (Foreign Direct Investment) in the steel sector to spur intense competition but also to offer tremendous growth opportunities as MIDHANI, a key supplier of raw materials in the space, consolidates its foothold. Despite the potential challenges, this strategic shift is anticipated to benefit the industry overall.

Margin Pressures and Future Projections

The executive acknowledged that the margin pressures observed, showcased by a decrease from 29% to 14.2%, are partially due to raw material price volatility linked to geopolitical forces, which impacts elements like nickel and cobalt. The current year is described as a transitional period for the company, focusing on product profile transformation. With a stabilized supply chain expected in the coming year, the emphasis shifts from margin percentages to volume growth. The company's strategy anticipates operating near a 20% EBITDA margin, considering this as a robust target, as higher margins could result in lost orders and opportunities in both international and domestic markets. This pragmatic approach aims to enhance absolute profits while acknowledging the evolving industry landscape.

Growth Outlook

Looking forward, the company has set an ambitious revenue growth target of over 20%. This outlook reflects the company's confidence in seizing upcoming opportunities and surviving the competitive environment prompted by the increase in FDI and private company development. With the defense industry and space sectors expected to expand 2x to 3x in the next five years, the company seems positioned to capitalize on these trends, further increasing its market presence and financial footprint.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to MIDHANI Limited's Q3 FY '24 Earnings Conference Call, hosted by ICICI Securities. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Amit Dixit from ICICI Securities. Thank you, and over to you, Mr. Dixit.

[Amit Dixit, analyst]

Thanks, Michelle. Good morning, everyone, and thanks for joining the call today. At the outset, I would like to thank the management for giving us an opportunity to host the call. From the management today, we have Dr. Sanjay Kumar Jha, CMD; and Mr. T Muthukumar, Director, Production and Marketing. Without much ado, I would invite Dr. Jha for opening remarks, post which we will open the floor for an interactive Q&A session.Over to you, sir.

[Sanjay Jha, executive]

Good morning to all the investors who have joined for this conference call. The quarter 3 results of MIDHANI as almost as a mixed type of performance. The first one, I'll like to mention about the positive aspect that VOP and the sales, the substantial growth in that side. But at the same time, we had some pressure on the profit that is PBT and PAT. There are various reasons for that, that we'll be talking as we progress with this call. But the one good thing is that we have many new achievements the company has received during this period, which includes on the front of, I say the product development and export to new -- all many new products we have developed and then also we have then the export also.And in this point also, I would like to mention here that in Aerospace, the order book also has improved substantially. And when I talk about the aerospace, it is going mainly for the high-end applications, which includes superalloys, titanium alloys and some of the very unique special grade steels also. And those things have a long-term potential, as I say, in the business of the company. Not only this will give the requirement of our national -- the fleet of aircraft, but also, we will be having a very good potential to enter with the -- in the supply chain of leading aerospace companies of the world. So that is the one part.And second part that to meet these -- the challenges which the company is facing for export like having the certification for Nadcap and many other parts that some of the like S-400 type of certification. So, we are working towards that. And there also there is a good progress. Recently, we have commissioned 2 unique facilities in our Hyderabad premises, which includes magnetic particle, the [indiscernible] testing and then it is also the magnetic particle, this is all required for testing of the finished components. So, this is required mainly for the aerospace components. And earlier also, as I mentioned about isothermal facility. So, we have achieved a very good progress in our endeavor to see that how we can do our -- improve our -- some of the areas like for making the aerospace materials.And also, another very important part is in our development of infrastructure or the equipment side is the modernization of our downstream facility where we have done a lot of progress in the bar and wire, our facility where the wire drawing, then finishing operations, then heat treatment. So that facility also has taken a very good change. I'll say very good growth is there. And from that segment, we are getting now the very good business. There is a substantial increase in our turnover. And I'm seeing that the potential will be almost -- if you see compared to the last financial year of '22-'23, and this financial year, it will be -- must be -- I'll say it will be multiple times, not only a percent growth, it may touch even the 10x also from the last to this year.So, this is the -- these are changes which we are very hopeful that things will be going in the fast track mode. And also, we have -- in this quarter, I think good amount of supply, the first time we have done for a consortium for making their -- the launch vehicle that PSLV, outside the domain of ISRO. So that consortium also we have -- recently, we got the order and that we are supplying very short time. In fact, earlier used to be a span of maybe 1 year, 1.5 years or 2 years. But this we are completing in 3 to 4 months. So that shows our capability in the area of our production because of addition of certain facilities in our company. Now these things are giving a lot of momentum in our -- in servicing this type of requirements effective there.I think this much only I can tell you and many other as we progress, I'll -- we can reply. And I'll ask people also to participate in this.

[Operator]

Sir, should we open the floor for the Q&A session?

[Sanjay Jha, executive]

Yes, yes, you can.

[Operator]

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Khush Nahar from Electrum Portfolio Managers.

[Khush Nahar, analyst]

Sir, first question was on the raw material pricing. So, we have seen nickel prices coming a bit down. So, since our order book execution is around 2 years. So, what is the lag time that we keep? So, like when can we see the benefit of the falling RM in our numbers in terms of EBITDA margins?

[Sanjay Jha, executive]

You have rightly mentioned, this is a very valid point. First of all, we have -- all orders are not very long term for MIDHANI. Many orders we have to service within 3 to 4 months only. So, in the single quarter only, order will be coming, then we'll be supplying the material. So that impact, definitely, we're going to get the benefit in quarter 4. But it will not affect all the supplies because many things already we have committed. And whatever we have got probably which can make up and say that whatever we have lost because of -- because one I have taken the order, nickel price was something, in-between it has increased. So, we cannot say that we will not supply the required quantity, required order, we cannot say that I cannot service the order.So, these things are going to -- there'll be a mixed benefit because of this. But definitely, it is going to have the impact, something in the fourth quarter. But I'll say the effective way, it will start coming from the quarter 1 of next financial year. Because this financial year is already many melting and all we have already completed. So that will be -- the impact will be mainly felt in the first quarter of next financial year of the lower price of the nickel.

[Khush Nahar, analyst]

So, from quarter 1 of FY '25, we can see our EBITDA margins going back to the normal way?

[Sanjay Jha, executive]

Yes, definitely it will the impact.

[Khush Nahar, analyst]

Sir, and just one last question. So, one of our competitors, so they haven't seen such a big impact on their EBITDA margins in the last 3 quarters, like we have seen. So, is there any particular reason or how is it?

[Sanjay Jha, executive]

Can you -- if you can mention the -- their, first of all, you have to see their -- what is the product profile. Because just like that competitor, we cannot say, but what is the product profile. I'll tell you, I'm not -- I'll talk about that, but why I'm talking about in case of my case. If you see the total volume of production, the superalloy production have gone up substantially. Earlier, if you see it was 8% of our total volume. This time, it is 20%. So, this is almost 2.5 to 3x jump is there in the superalloy production. So that's why they have an impact. Probably my competitor may not having so much volume of superalloy. So that can be the reason for that.

[Khush Nahar, analyst]

And sir, just one last thing. The order book, what would be the split between fixed contract price and the variable? So, we have majorly fixed prices only whenever we're booking?

[Sanjay Jha, executive]

No, we are having the fixed price only. Variable price, I think nobody is giving as of now. We have fixed price only. Except earlier, we had some orders from the space, but that space already, we are almost getting completed.

[Operator]

The next question is from the line of Nilesh Jethani from BOI Mutual Fund. [Operator Instructions] As there is no response from the current participant, we move on to the next question, which is from the line of Amit Dixit from ICICI Securities.

[Amit Dixit, analyst]

A few questions from my side. The first one is the -- if you can break the revenue that we achieved this quarter between superalloys, titanium and specialty steel?

[Sanjay Jha, executive]

What you say?

[Amit Dixit, analyst]

Revenue breakup in this quarter between...

[Sanjay Jha, executive]

We had almost if you see 20% from superalloys, 9% from titanium alloys and 34% from maraging steel, 27% from special steels, 10% from others. This I'm talking about the total, up to -- period ended up to December 2023. And coming to that -- if you see compared to last year, same period last financial year for December 2022, superalloys was 8%, titanium alloys was 13%, then we had maraging steel, 55%, special steel, 18% and 6% others.

[Amit Dixit, analyst]

Sir, a more strategic level question. So recently, the government has come up with the increased FDI in steel sector. I just wanted to understand the implications for us, whether there will be increased competition in the space that might impact us? Or this also means that the endeavor of the government is to increase the ventures in space. And therefore, the market potential for us would also get significantly increased. How do you see it? Just wanted to get your thoughts on this?

[Sanjay Jha, executive]

Yes. FDI in space is definitely going to give a lot of advantage for the space industry per se. And in the space MIDHANI is, I think, one of the major supplier of raw materials. Because the raw material supplier for the space goes from MIDHANI is already established. But then, in fact, as you have many other players also are coming for the -- they are also developing the materials. They are also seeing the potential. So, it will not only because of FDI, even for other investments also in the space, there is going to be a good market, but also at the same time, we'll have the potential, means like challenge also so that there will be competition in the market.So MIDHANI, we have to be also -- we have to also be part of that as -- we have to take the challenge and get the orders. But definitely, it is going to benefit the industry. But the margin which we expect from the space sector, margin, there is a pressure on the margin will be there because moment you are going for this competitive bidding and all, whatever margin we operate today is probably that margin, we have to cut down and see that we can grab the order.

[Amit Dixit, analyst]

On this one and just -- I mean, tagging along with the earlier participant's question, if we look at our EBITDA margin, it has gone down, I mean, quarter-by-quarter. I mean, in Q4, we had this margin of 29% and now it is down to 14.2%. While some of it might be attributable to your higher proportion of superalloys and lower proportion of titanium. Just wanted to understand that for going ahead in FY '25, let us say when things would be a little bit normalized, what kind of margin and what kind of revenue growth can we build in?

[Sanjay Jha, executive]

Both -- see, you have rightly pointed out that because of raw material only you see every -- see last quarter also, we have seen quarter 2 also, quarter 3 also. So there is a pressure because of the raw material price. Sometimes the nickel will be affected, sometimes the [ right model ] be affecting, sometimes cobalt will have the pressure. So, these things are going to be there in the market as we -- today, if the nickel is down, it may go up again because we do not know what is the geopolitical situation because it is governed by that only. So, there is a chance, fair chance that again, it may -- there may be some spike, there may be some further. Downward trend, I'm not expecting for the raw material. There will be an increase only as we progress. This is one aspect.Second part from the MIDHANI because we are -- this year, we have totally transformed the product profile. And this transformation I think is a transition year for MIDHANI. And the next year, when we are entering in that, further our proportion of superalloys is going to increase in our supply chain. There is no doubt. And once it is there, but we are going to stabilize it now. I think this year is some sort of a transition stabilization. Next year, definitely, we'll come back to the -- our original one, but original one, whatever we had earlier margin of more than 25%. That sort I'm not expecting. I'll be saying that if you are able to reach 20%, 20%-plus or 20% -- within 20%, it will be very good for company. And I also feel that we should also operate in that level. Because if you are aiming for 25%, 30%, then you have -- you'll be losing a lot of orders coming from the international market or domestic market. That is not good for the company because having installed so much capacity, so much product and volume and all, we should try to increase our volume. And that way, in absolute terms, your profit will increase. But the percentage terms, it may remain on the lower side. So that part we have to balance and I am seeing that there's opportunities there in the next few years. So, many things are lined up where I see these things will be coming in that way.Even for the domestic requirement also today, everybody is aware that what is international price. So, once we go for the domestic negotiation also and price also, they will compare and then based on that only, they will give you the orders. So, it is like that type of situation. It is not earlier that it is not -- something is not known. And now because of the a lot of private companies also are coming and as you have rightly, initially somebody was saying that FDI. So, the investment is coming in a big way because people see that defense industry, space is going to pick up 2x, 3x in the next 5 years. So, everywhere, defense also is going to increase. Everywhere it increased. So definitely, people are going for increasing their capacity, they are going to acquire the technology. They are going to get the investment. So, this is -- now the next 4, 5 years, I have seen a lot of capacity addition will come in India. So, not only for the main market, for interventional market also, the sector where we are operating. That's my perception.

[Amit Dixit, analyst]

And what kind of revenue growth can we pencil in sir?

[Sanjay Jha, executive]

Revenue growth, we are targeting 20%-plus, 20%-plus we will be targeting.

[Operator]

We'll take the next question from the line of Prabir from Ratnabali.

[Prabir Adhikary, analyst]

Sir, my question is regarding the CapEx and customer advances. Like in the last 5 years, accumulated CapEx was roughly around, say, INR 800 crores. Sir, is there any link that you'll use your customer advances for the CapEx?

[Sanjay Jha, executive]

Last word, I cannot follow.

[Prabir Adhikary, analyst]

I'm asking that is there any part of customer advances you use for building your CapEx?

[Sanjay Jha, executive]

Customer funded. You are talking about the customer funded product.

[Prabir Adhikary, analyst]

Customer advances.

[Sanjay Jha, executive]

Advances. Advances by customer is not coming now. It's very -- some few cases it will be based on the project but that's very miniscule numbers. It was not the earlier one, which used to get there. So that advances are...

[Prabir Adhikary, analyst]

No sir, my question is, have you used your customer advances to build CapEx?

[Sanjay Jha, executive]

Yes. Not now. Earlier, we have done this.

[Unknown Executive]

Actually this, INR 800 crores, which he was talking, mainly that customer -- it is funded by customer.

[Operator]

Excuse me, sir, you are not audible. Can you please repeat that?

[Sanjay Jha, executive]

I think you wanted to know that in INR 800 crores of commissioning, what -- how much customer has it, has given the money.

[Prabir Adhikary, analyst]

Yes.

[Sanjay Jha, executive]

Yes, it was -- I think one of the -- only one I will mention here, we have got. That was around INR 400-plus crores we have got from the customer. That is only for the white plate mill, which already we have commissioned. But for all other CapEx, it is from our own resources only. We have taken the CapEx loan, we have also done for our internal source of fund generation from there only.

[Prabir Adhikary, analyst]

Sir, my next question is related to competitive landscape. In terms of capability, how do you see you are there in -- right now in India compared to others as FDI is also coming? So, this competition is expected to grow rapidly. So, I just want to understand the capability of the companies that are there, which is in the same domain that you are now?

[Sanjay Jha, executive]

Yes. This is a very good question, but the answer is very elaborate. So, I'll try to make it very brief. See, first of all, you have told about the -- some others, means other player in this area where MIDHANI is working. It's true that we are getting competition within the country and not only within country, earlier also we used to get from the outside also. Today, I'll say the many places not only India, we are getting competition from the outside. In fact, if you see the many supplies are coming from the abroad today also, where we are operating. So, it is not only the India and from the abroad also, it is there. So, competition has not come today only I'll say. It's coming from the beginning.Now, only thing that you are getting some other players so that quantity and volume levels for us will be distributed. That problem is coming now. Otherwise, competition is there from the earlier also. Now because of this type of competition, naturally, you cannot run, you cannot get orders with a bigger margin. It has to be on the -- from optimum level. So that -- based on that only we are getting. But capability where MIDHANI is having excellent capability. We are -- our technology, our domain of working, so much diversity, so much product profile. No other company is having. Probably you can compare in the world also, if you see the type of product profile we are having at single -- by a single company, you will not find, maybe 1 and 2 will be there across the world. So that way, we are very much equipped and if something is down, something will be up, if another thing is down. So, we have many things where we can take our like company growth based on the market potential.So, we are not having any dearth of that type of capability-wise. But yes, in industry where we are operating and any industry per se, the R&D, innovation and then developing the new product is the order of the day. So that part also, we are very much in the line, lot of -- if you see this year itself, I was just showing that 4, 5 alloys, we have developed, we have exported, and I am expecting that there will be a regular supply for that. And similarly for immunization also, 2 grades I have developed for our nuclear program, which already we have given to the BARC for evaluation. So, these things are very good potential for the company for the future. So, MIDHANI is not working for today.If you see on my development, I'll make the development for 3 years, 4 years after. So probably whatever today I'm developing, I'll get the advantage of four, five years. This is a culture, the way the company has functioned. So, we never sigh away that okay, today only if I'm investing next month only I should get the results, many cases we are getting also. But my development is not focus only on the immediate outcome, immediate revenue. So this type of work we are keeping companies putting in good prospects. So you will find that, that will be going on.

[Prabir Adhikary, analyst]

Sir, my next question is related to nickel and titanium. As most of these are imported materials, so it's very volatile in nature. So, is there anything that is going on to supply these materials from domestic sources? I'm asking this because India has a good capacity -- good reserve for -- in titanium. So, is there anything that is going on?

[Sanjay Jha, executive]

Yes, titanium, India is having the good results, but we are not able to make the sponge, because of the investment or technology and economy of scale, there are a number of factors. But now considering the global scenario, now it has been decided that we should enhance our titanium production capability. So, there is some work is going on for that, MIDHANI also is part of that team. And recently, you also might have seen that [ BARC ] announced that they are going to invest some INR 26,000 crores in titanium and all. So, bearing that, I'm not keeping those things, they will be doing some activity there. But whatever facility today, we are already making this sponge in country. We are going to enhance it. So right now, the capacity is very less. Hardly, we are meeting the -- almost 10% to 15% of our requirement. So, if we can increase the capacity by 4 to 5x, we can get the entire requirement from there only.And regarding nickel. Nickel already you know that nickel resource is not there in the country, but some move is there to acquire some mines, some facility elsewhere. It is not -- this work is not in our domain because this is being done by, I think, the Ministry of Mines, they are trying to do something on this titanium -- on this nickel mining and nickel production. So that will come maybe afterwards. But titanium, we are conscious, we are trying to take some action on that. But so is the case for other raw materials also for a strategic in nature for the defense requirement. There also some activity has started. And at the appropriate time, we'll inform you that what is the outcome of that type of activities.

[Prabir Adhikary, analyst]

I have a last question. Sir, can you please help us by saying your 3 to 5 years' potential order pipeline?

[Sanjay Jha, executive]

Order pipeline, 3 to 5 years. I can talk about today's condition. And I'm just -- I'm not forecasting for next 3 years, 5 years. But I'll just give you the overall defense, the way the defense is operating or space. Defense, we have one thing that for LCA has picked up. LCA is going to be the good numbers. Missile requirements have gone up. Missile export is picking up. Also, we have the LCA also. So, we'll have that type of potential in the future. But currently, we are operating with around 1,750 and so. But we'll be -- we are very -- many orders are there in the pipeline. So once it gets materialized, we'll inform you. Indigenization is the major thrust now by the ministry also. So, a lot of things have planned accordingly.

[Operator]

We'll take the next question from the line of Dipen Vakil from InCred Equities.

[Dipen Vakil, analyst]

Sir, earlier, you mentioned that you are currently in the transformation of the product profile for your company. So, can you talk us a little bit more about your upcoming products and the use case as to where you're targeting the use case to come from?

[Sanjay Jha, executive]

Just some background noise is there. I'll request you to repeat further once more that question.

[Dipen Vakil, analyst]

Yes. So basically, what I was asking is that you mentioned that currently, your product profile is in a transformational stage. So, can you tell us about your new upcoming products in the near future, like in, say, next 1 year or so? And your targeted use case as to where do you see this product being utilized better in the space division, aircraft division, engine manufacturing division, where do you see the thrust coming from?

[Sanjay Jha, executive]

This is also a very important one. See, what I am seeing today, the MIDHANI's potential and where there is a scarcity of raw materials is in the aerospace. And when I say in the aerospace, I say mainly about the aero engines. And aero engines not only for our aerospace requirement, even for the energy sector also for making some turbines for energy power sector and also in the high end of the oil and gas. So, these 2 areas, the requirement of superalloys, that is for nickel-based alloy is there, extensive requirement is there. And there only I see the potential where nickel-based alloys, titanium alloys and also the cobalt-based superalloys, then some of the special steels also like maraging steel, and we have some precipitation hardened steel.Because steel is vibrant, but I am talking -- when I talk about the steel, we are all talking about the high end steels only and some of the superalloys where we have the -- iron is dominant. So that area, I see there's a lot of potential. Many discussions and all we have done and we are also trying to see that how we can enter in the domestic aerospace because if you see today, many aerospace manufacturing company like Tata Advance Systems and other companies, Safran and also the Pratt & Whitney, they are basically buying the -- raw material is coming from the outside. Then they process here and then they will export it or use in the -- our domestic requirements. So that is -- I think that area is a very potential one. We are -- and they are also interested because now they are getting in difficulty in getting the raw material from outside. So, we are trying to fill that gap and we are trying to best of our ability that quantity wise. So that area we are working extensively. I think this will be the future for MIDHANI, and you will see in our next financial year also, that type of supplies will be more and more.

[Dipen Vakil, analyst]

Sir, any CapEx plans like where are we in the CapEx plans with having defense corridors? Are we setting up new facilities? And how do you see it going ahead?

[Sanjay Jha, executive]

Yes. Defense corridor people are there, but my vision for my company is to serve that material requirement to defense corridor. See, normally, MIDHANI type of company to multiply it in the defense corridor, the gestation time is very high, like turnaround time is, lot of you have to invest a lot of money and then you require the next 4, 5 years. So that much CapEx is getting a block for so much years may not be advantage for the company. Rather than that in this complex itself, we can enhance our capacity in a very short time. So that's we are doing regularly here. This year also, we are investing around INR 80 crores CapEx and significant plan for the next year also. And maybe it can increase also depending on the further some of the equipments, which we are planning to buy.So that is one area which we have many things like earlier also I have told. We have a plan for additive manufacturing for metal powder. It's a very unique business, but that equipment is not -- we are not allowed to get because of certain now restrictions coming from the European countries. And another part is that we are also trying to have one 8,000-tonne compacting press. So there also, we are finding that again, it has to come from European country only. So, these are the challenges we are facing now. So, the CapEx is on that level. But in small, small CapEx also, we have many things we have like our bar and wire drawing facility we have modernized fully. And it is still on a lot of equipments are yet to come. So that will be one area where our business is going to increase drastically a lot of requirement. We also have one bar and draw, very old plant so that we are trying to see that we can set up the new one for that. In fact, our sheet rolling also, the cold rolling facility also is very old. So, many things are there for the modernization than some of the revamping of the additional facility. So, these things are in the form of the CapEx. How much we can take it, how much we can invest, that depends on our resource generations and all. But it is a regular affair. We have to put the CapEx to enhance our productivity now.

[Operator]

The next question is from the line of Parimal Mithani from Credential Investments.

[Parimal Mithani, analyst]

Can you hear me?

[Operator]

Mr. Mithani, yes sir.

[Parimal Mithani, analyst]

Sir, just I wanted to clarify -- your clarification that you guided for 20% growth going forward with improved margins. What makes you so confident about it, sir, if you can let us know?

[Sanjay Jha, executive]

You are talking about the confidence level?

[Parimal Mithani, analyst]

You're guiding for 20% growth for going forward. And what gives you that optimism like going ahead, sir?

[Sanjay Jha, executive]

So, additional facility we have added that you might -- if you are following MIDHANI, then you might have seen there a lot of additional new facilities have come. So definitely, we are going to get the output coming from that. So, more titanium, superalloys, will be focused in that space. That will come from there only. Our melting downstream facilities, lot of things are there.

[Operator]

The next question is from the line of Malay Sameer from Breakthroughs in Stock Market.

[Malay Sameer, analyst]

I just heard you say that MIDHANI is a unique company with large size and amongst the best in the world. Can you quantify 2 areas where you feel that your advantage, competitive advantage is way, way ahead of the competition, including the world competition?

[Sanjay Jha, executive]

The first part is -- you want only the 2 areas. So, we have a very strong R&D and technological base. This is the one part we are having. And the second part is that we have a very committed workforce. So, I think these 2 factors only are responsible for this.

[Malay Sameer, analyst]

Sir, this R&D is indigenous or have you sourced it from somewhere? Or is it an area which does not allow others to progress quickly?

[Sanjay Jha, executive]

I cannot tell you that others are not getting the advantage, but I'll say that whatever we are having that I can tell you. Our R&D is based on the very long standing. We have not started today. The foundation of MIDHANI only if you see in 1973 when the company was established, it came out from the DMRL, that is Defense Metallurgical Research Laboratory located next to MIDHANI. Our boundary wall itself we were sharing with the DMRL, which is the [ audio ] lab. In addition to that, MIDHANI also is having a very good support for the ISRO, because ISRO when they started developing the materials in their initial stage, their entire R&D team has worked here. And based on that, so many developments took place.In addition to that, nuclear side, I'll say. Nuclear side also, if you see today PFBR, that is in Prototype Fast Breeder Reactor in Kalpakkam, the entire material development program was carried out in MIDHANI and it was supplied to them. So like that, we have the history where like missile DRDO cluster, we are in the missile cluster. Missile cluster, if you see, Agni, Prithvi, then Astra, then Nag, Helina, Rudram, all missiles development started with the MIDHANI material only. So, when the volume is increasing for those type of requirements, definitely, we have our share and our business potential also is increasing. So, it is not based on only 1 day, so it is almost over a period of time. So that is -- I think I'll say one of our biggest strength. So while working, we are also getting the support from these labs, which I have mentioned.But the core team is MIDHANI. Equipment is MIDHANI. Our team is innovative. We have our -- you have the equipment development facility. We can also modify equipment as per the customer requirement. We can make the equipment as per the customer requirement. So, there are many things which company is inherent in our thing, which probably we are different from the other competitor, which they have started now only. Probably, they will also build up.

[Unknown Executive]

So, MIDHANI has developed over the period, more than 1,000 types of alloys for various applications, okay. So that is the base. Now whatever the new alloys it is required, from that base, people are so confident and knowledgeable and they can develop any alloy for any application. So that is what the biggest strength of MIDHANI, which no other people will have. They will have only over the period, but this is the base, which has started after R&D institution, and it is under -- there is a base, that is the major strength of MIDHANI.

[Sanjay Jha, executive]

That's what I told in one of my presentations some, the laboratory that our turnaround time is getting success rate of MIDHANI alloy development is almost 100%. Give us any composition, any alloys, MIDHANI can manufacture in the one-go only. So this is our -- the strength which MIDHANI is having.

[Malay Sameer, analyst]

So that's very encouraging. My last question is that for further technological developments, are you getting support, continued support for any new inventions in R&D that they may have, which will speed up the process of your development too? Or are you just self-dependent in progress in technology from here on?

[Sanjay Jha, executive]

No, no, technology cannot be end. See today, we are developing material for AMCA. AMCA, the new program, in defense, it has come. So AMCA is pioneered by DRDO. We are with a DRDO, GTRE, DMRL. We are working with the aero engine requirements for [indiscernible] and all. So, it is -- and some of the static programs for Indian Navy, all the things are going on. Now also, I was trying to see some of the technological development, we are getting some TOT also is going -- coming. So, we have a very wide, wide range. And many things are almost like a strategic in nature. The strategic one we are having that part is totally different.

[Operator]

We'll take the next question from the line of Amit Dikshit from ICICI Securities.

[Amit Dixit, analyst]

Maybe I will slip in a few. The first one is that there was a impressive order inflow in this quarter of INR 513 crore. Is it possible to break it up into different subsegments, platforms, et cetera?

[Sanjay Jha, executive]

Last quarter, I think the main one was aerospace, that is from HAL. We have got around INR 370 crores order. That is for aerospace. And other one is coming from -- we have also got from the DRDO that is from the GTRE, then also we have received from the DAE, so Atomic Energy. So, some of this mixed order is there. But they are all very unique one, highly special one, I'll say. And many others have the first of its kind. And if we are able to deliver it on time, we'll have a recurring requirement and not only for MIDHANI, it is also pride for the nation because aerospace order which we received from HAL is very much required for our indigenization of our -- some of the fleets of Air Force.

[Amit Dixit, analyst]

Sir, what is the order regarding? I mean, if you can explain a bit about it?

[Sanjay Jha, executive]

This is I'll say for aerospace requirement.

[Amit Dixit, analyst]

Are there any other orders that we can expect in Q4? I know there is just 1 month left, but are we -- have we -- I mean, how much order we have booked so far in Q4? And what do we expect until March?

[Sanjay Jha, executive]

Q4, INR 250 crores.

[Amit Dixit, analyst]

So far. Okay.

[Sanjay Jha, executive]

But there's a potential that will get maybe coming from the spillover from next year.

[Amit Dixit, analyst]

Coming to the Rohtak armor factory and white plate mill. So, how much revenue we have booked from these 2 facilities in the last quarter? Or even if you mention the 9 months, I mean that would be fine.

[Sanjay Jha, executive]

In case of white plate mill, order booking is how much -- this financial year. From their order booking the plates which we have, in fact, backlog was there for ISRO. So that we have completed extensively for this year from our plate mill. That was almost plates, we have made supplies 12, 130 -- so around 150 plus 50 -- around INR 200 crores, INR 250 crores from white placement.

[Amit Dixit, analyst]

And armor factory, sir?

[Sanjay Jha, executive]

Armor, we have the backlog of the orders only that only we are executing. First order in this financial year, so far, we have got very few, maybe around INR 10 crores, INR 15 crores only, INR 10 crores around. But we have the backlog of the orders that we are coming now. And one order is there, which is already for negotiation, it is there. So that has not come so far. It will come maybe in a couple of months.

[Amit Dixit, analyst]

So at one point in time, sir, you mentioned that the revenue booking can be almost INR 500 crores annually from both of these facilities individually. So, where we are, I mean, in terms of run rate? And do you...

[Sanjay Jha, executive]

Which I already have told that this part, almost we have done around INR 200 crores on white plate mill and for armor, booking, we have not taken the booking in fact, there are some orders were pending, but since we are not having that capability to have issued those things, we are not taken. But it is -- this year, you'll be almost coming in that domain only, current financial year.

[Amit Dixit, analyst]

Sir, you hinted it in the last answer, but just would like to extend it a bit more. In naval platforms, in particular, we are seeing a lot of gates I mean being built, submarines. So naval platform, at least the execution part is going on significantly well. And there are a few other orders on the anvil. So, what kind of share we see or what kind of share we see from naval platforms? And how is it going to increase in the future?

[Sanjay Jha, executive]

Actually, once you talk about the naval, naval has -- submarines, there are 2 types. One submarine, which is coming from the -- like France and all is going to -- is coming directly that everything is technology is coming and they are assembling by Mazagaon Dock. But another submarine which is strategic in nature by Indian Navy, which is a strategic platform. But there only we are working. But that submarine order quantity and all, we are not supposed to put in the public domain. But we have -- I'd say that good potential is there and they are also cyclic in nature. Once this one fleet is over, maybe go for the second one. But that program also has picked up. And that is the reason why in our revenues, we are talking about the defense, the defense is covering a very good percentage from -- coming from the strategic platforms.

[Amit Dixit, analyst]

The next question is, there was a thought about and when we visited the factory, we saw that there was -- you had good plans to increase titanium capacity. I just wanted to understand where we are there and what kind of capacity increment we can expect over the next 2 years?

[Sanjay Jha, executive]

Titanium, our order book has gone up substantially. Only thing is that there's a problem in the sponge supply. And the plant, which you have seen that also has already initial trial already we have collected with the steel. And now with the titanium also, we have taken few melts. We are waiting for the sponge supply, which we have to import from the Kazakhstan. So that once the sponge is coming, we'll start the melting also from that furnace. But furnace is almost ready for taking the melting. And once the furnace is started, it will have advantage of processing the titanium, and we can process up to 1,000 tonnes titanium we can process. MIDHANI can go to that level.

[Amit Dixit, analyst]

Up to 1,000 tonnes and this -- okay, this is contingent on, of course, the orders and everything else?

[Sanjay Jha, executive]

Today, orders in titanium is not the issue. We are not able to execute the order because of the constraint in the supply of the sponge. So, I see that market will have a good potential in the future. Next year, we will get the good advantage of this.

[Amit Dixit, analyst]

Sir, one last question I have that is a data keeping question only. If you could just let us know the contract assets and customer advances as on December-end?

[Sanjay Jha, executive]

Contracts means, which contract?

[Amit Dixit, analyst]

Contract assets.

[Sanjay Jha, executive]

I didn't follow -- contracts, our orders are not like a contract. We are getting the purchase order and it is that order we are getting regularly that numbers will be running in the -- many numbers will be there in our book. Some order will be of maybe INR 5 crores, some will be INR 1 crores, some will be INR 20 crores. So that said, that only the bulk one I'm informing to the -- as per our SEBI guidelines, which is for HAL order, we have already communicated to you. And maybe one another-- earlier to that, we got from L&T that also we have communicated for ISO audit issue requirements. But the other things are coming in also some of the defense order, like more than INR 100 crores that we are communicating. But we get the many state orders.

[Amit Dixit, analyst]

And sir, one last one, when we visited our factory, there was a thing that there are a lot of components within the engine that we can indigenize and looking at the order and potential inflow for HAL, particularly for LCA Mark 1A [Technical Difficulty] what kind of value-add do we -- I mean, let us say, the engine cost is x, so how much is our share in that at this point in time? And how much we are targeting, let us say, in the next 4 to 5 years?

[Sanjay Jha, executive]

And that's why I told in my opening remarks also. Transformation of MIDHANI is there this year. Why I have told because many alloys we are developing targeting the aero engine only and in case of aero engine, there will be extensive certification, extensive testing, extensive valuation. So, we are passing through that phase. In that process, many equipments of latest -- state-of-the-art equipments already we have commissioned and doing a lot of testing and all. In addition to that, for aerospace requirement, as you talked about the HAL, HAL is not making the aero engine today, only they're doing the overhauling. In overhauling of the aero engine, already, they are doing overhauling only for the Adour, that is for the Jaguar Aircraft. So for that, we have a regular supply now. For all Adour engine requirements, MIDHANI is supplying the critical components going to Adour engine which we are giving.And also for LCA now it is coming from the GE. Now GE engine, once after this MoU, if the GE starts setting up the manufacturing in India, we are trying to see that how maximum alloys we can make within the country only. So far, the commitment has not come from them that they are going to take the alloys from India, depending on the indigenization content. But there is a move from our side that before they come here, whatever alloys they are using, we are supplying to their own like U.S. that the GE U.S. we are giving some alloys now. And they are also trying to get the getting certification by certain S-400 laboratories and all. So, we are in this process. So that when they come in India, they should not say that, okay, Indian alloys or Indian industry is not capable. So, on that side, we are working extensively. It will be useful in the future.But on the Indian side, for LCA, India, still we have to wait for some time till the GE starts working. But for our own indigenization program of Kaveri dry engine, already we have supplied a lot of material. MIDHANI material has been used now, those engines have been tested. They are working well. So, that side is moving well on the side.

[Operator]

Thank you very much. Ladies and gentlemen, due to paucity of time, that was the last question for today. I would now like to hand the conference over to Mr. Amit Dixit for his closing comments. Over to you, sir.

[Amit Dixit, analyst]

Yes. Thanks, everyone, for attending the call this morning. And I would also like to thank the management for very patiently explaining towards the outlook and the prospects. I would like to invite Dr. Jha for closing remarks. Over to you, sir.

[Sanjay Jha, executive]

Yes, I see that today -- first of all, thank you all for giving support to MIDHANI. And you know that we are a very multi-product type of company. So, many ups and downs will come in between when we start taking the new step new forward. But you might have seen that our turnaround time also is very less. Because of that potential only we are able to survive. So many alloys, which we have developed and exported to the different companies this year and also our indigenization of our Indian requirement has come in a very short time. So, I really compliment my entire MIDHANI team. My Director of Production also is sitting in front of me, all my marketing person, finance persons and company secretary.So because of entire MIDHANI team, wonderful job people are doing here. Only thing is that the competition, there is a fear always in the mind of the people that how we are able to survive in the future. What will be the [ future ] of the company. This -- some fault is required also. Without that pressure, you cannot perform. Without pressure, if you become complacent, then you cannot perform. So, I see in the positive aspects that whatever we have the competition and once people like you give the input and you ask the challenging questions and then once you try to answer, we'll see that from which place we are having the weakness. And we'll try to see that how we can increase our -- solve those type of things. But overall, we are moving towards a better future not only for the company, country as a whole, and we should feel that proud. MIDHANI also will be the -- in fact, this is the one area which MIDHANI is there for materials. If the India takes the lead in that material side, then only we can say that we'll become Vishwaguru or developed country. So, material is the core, I'll say. And we are addressing the core issue for the country. So that type of feeling we are having once we are working today. Thank you.

[Operator]

Thank you, members of the management. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.