Power Mech Projects hosted a conference call on Nov 15, 2022. In the conference call the company was represented by S Kodandaramaiah, Director Business Development  and Jami Satish, CFO. 

Key takeaways of the conference call

For Q2FY23 the revenue mix in terms of geography was 87% domestic and 13% international.  In-terms of power and non power it was 63% from power and 37% non power.    

Order book (excluding MOD order of Rs 9294 crore executed over 25 years) as end of Oct 2022 stood at   Rs 14782 crore. 

Order inflow in Q1FY23 was Rs 775 crore and YTD was Rs 7445 crore.   Further the company is L1 for orders worth Rs 960 crore. So the company is confident of achieving its order inflow target of Rs 10000 crore for current fiscal. 

Of YTD order inflow about 61.6% is power sector orders and 38.4% is non power.  Similarly of the YTD order inflow about 86.8% is erection orders, 10.1% is civil & other works and 2.2% is O&M contracts.

Revenue recognition from FGD orders is expected to accrue from Q4FY23 and it’s in addition to the set target.  Execution bandwidth is increased quarter on quarter basis.

Expect to close current fiscal with an order backlog of Rs 15000 crore with OI for FY23 at about Rs 10000 crore.  The company has fixed an order booking target of Rs 8000 crore for FY24 and Rs 9000 crore for FY25.

Completion status of project on hand: In case of Udankudi the company has completed 15% of Rs 345 crore order. Likewise it completed 25% of Rs 176 crore in case of Buxar and 75% of Rs 855 crore Maitre project is completed.  Further the company has so far completed about 70% of Bhusaval and 60% of Yadadri power projects as well as 90% of Ramayanpet canal project. 

It has completed about 35% of Rs 780 crore Hassan and Mizoram road project. The work is expected to commence  this year in case of Rs 428 crore Bangalore Metro order which was taken in JV with rites by the company. 

Adani FGD project: Received initial orders for Engineering and technical equipment. Further order for balance equipment/work will follow soon.

Debt – Gross debt and net debt as end of Sep 2022 was Rs 481 crore (down from 527 crore)  and Rs 292 crore (down from Rs 320).

Performance in H1FY23 is in line with the internal target and the company is confident of achieving its FY23 revenue target.   It expects a sales revenue of Rs 3600 crore for FY23.  The company expect alteast a revenue of  Rs 5000 crore as some of the job that come for execution next fiscal such as BMRCL and Adani FGD jobs includes materials. 

Drinking water project is getting lot of flip and mobilisation and procurement for this project is already started. So far DPR is completed for 2000 villages.  The company has completed 3% of work and expect a revenue of Rs 100 crore plus every month from this project starting after next couple of months. 

In near term, current margin is expected to continue for Q3 & Q4 of FY23 with some marginal improvement.

Orders under pipeline is about Rs 15000 crore including Rs 3500 crore of FGD orders, Rs 2500 crore water project, Rs 500 crore railway maintenance sheds orders, Rs 1000 crore railway project in  Nellore, Surat and Kazipet, Rs 6000 crore of road projects. 

Expect execution cycle and order inflow in international business to improve going forward.  

The MDO job will start commencing by Q4FY24.  The company expect a quarterly revenue of Rs 70-80 crore in FY24 and Rs 250 crore for FY25.

Billing of FGD order will start from Q4FY23.  More clarity on FGD order conversion will be known by Q4FY23 or Q1FY24 and that will give an idea for revenue growth and margin going forward.

About 81000 MW of FGD order are yet to be ordered out and if the company gets about  3500 MW that will be big. The company has entered Metro Rail segment in big way and the company expect strong order traction in this segment. Expect one more contract worth about RS 600 crore in metro side next fiscal.  Opportunity is quite large and so order booking of RS 8000 crore is very much achievable for the company.

So new verticals supplementing the traditional verticals of the company are to drive the order booking growth in FY24.

O&M provides high margin compared to others business verticals such as erection, electrical and civil business of the company. In erection the company used to work with a margin of 13-13.5% but that has come down to about 11-11.5% with comedown of scale.   In case of civil the company spent about 2.5-3% in buying the PQ but now able to prequalify on its own strength in case of tenders that will be a savings. But in case of projects such as railway water, civil the competition is high so working with a margin of 11-12% . In FGD the company was expecting a margin in the range of 10-11%.  In the near term the company expects the margin to improve to about 11.5-12.5% but with increase in contribution from FGD business and new verticals how the blended margin pans out has to be seen.    

Now the company is equipped to execution projects worth Rs 750-1250 crore in a quarter. 

Post completion of Adani FGD project there will be an O&M opportunity of Rs 1021 crore and similarly in case of drinking water project there will be an O&M  component of Rs 80-100 crore.