ISGEC
Heavy Engineering hosted a conference call on May 30, 2022. In the conference
call the company was represented by Aditya Puri, Managing Director.
Key
takeaways of the call
Consolidated
Order inflow is Rs 1442 crore in Q4FY22 and in FY22 it was Rs 5608 (vs 4863
crore in fy21).
Order
book as end of March 31, 2022 was Rs 7322 crore (vs 6765 crore in fy21 end).
Order
book position is satisfactory and of which about 23% is products business. Export
orders were about 15%.
Hitachi
JV – Order inflow in Q4FY22 is RS 70 crore and for FY22 it was RS 520 crore
(against Rs 250 crore in FY21).
Choosy
in picking up new orders given volatility in commodity prices.
Reduction
in profits due to increase in prices of commodities for fixed price contracts
impacting both Manufacturing and EPC segments.
Time and cost overruns in EPC projects with
high civil construction portion and impact of Covid related disruptions coupled
with shortage of skilled manpower.
Lower
profitability of EPC will continue for some more quarter.
Products
business drives its Orders from diverse sector such as oil & gas, petrochemicals,
fertilisers, automobiles, castings, soda ash plant, hydro/steam turbines etc.
Today
PSU order book is 39% of the total order book. PSU orders have price variation
clause. But all of them are high working capital intensive and cash flow is
linked to milestone completion. PSU order book share to come down to 20% (which
is the usual level normally) with flow in of export orders. Due to covid the
exports order flow dried and the share of PSU orders gone up.
Most
of PSU projects will get completed by end of this fiscal. The company was
forced to go slower as clients delayed in giving approvals. The
cost at the sites are mounting. So the company is choosy in picking orders and
are picking.
Railway
order book – It has come down as the company has completed some orders on hand
and selective in taking fresh orders.
Growth
will be about 5% for FY23.
The
100 kmpd ethanol plant at Saraswati Sugars that was recently commissioned in
Q3Fy22 is operating at full capacity. Since
the plant is using B Heavy to produce Ethanol, about 70% of the incremental
revenue will come at the cost of sugar revenue.
Outlook
on FGD segment – the market is there for fgd with private and public sector.
But the order flow is lumpy.
Have
good quantum of sugar stock and profitability will improve with sugar price
rise.
Got
some enquiries for Philippines plant. Expect the valuation of the plant will
increase once the plant is completed and its operations are demonstrated. Expect
to complete the plant by June 2023. The company has given the Philippines plant
a loan of Rs 50 crore. Further a loan of 180 crore will be taken up
by that company in their book from Philippines bank. At the time of takeover
the loan in the Philippines company was about USD 36 mln and the company will
rise USD 24 million (equal to Rs 180 crore) now.
Profitability
lower in EPC (adversely impacted by steep rise in material cost i.e. nickel,
copper, steel and alluminum) as well as that in sugar and mfg.
Export
enquiry has also picked up
Lower
Sales and profit for sugar segment due to less quantity of sugar sold as it did
not export sugar in this financial year.
No
subsidy for sugar exports this fiscal so sugar exports were largely from plant
that is in coastal states of Maharashtra and Karnataka. Further the exports are
largely raw sugars and going largely to Afghan, Srilanka and Indonesia. The
company produces raw sugar only in end of the season. So away from coast and
non raw sugar production and absence of subsidy made sugar exports lower.
Export
restricted to 100 mln tonnes of sugar. Expect good sugar exports from India.
Automobile
demand in North America is improving and thus the automobile end use demand
will be better than last year.
Fixed
price contract is 60%.
Total
capex is Rs 56 crore in FY22.
Consolidated
profits are impacted due to interest and other expenses on Ethanol plant under
construction in Philippines.
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