Pennar Industries hosted a conference call on May 23, 2024. In the conference call the company was represented by Aditya Rao, Vice Chairman.

Key takeaways of the call

The Custom Designed Building Solutions & Auxiliaries:   The order book of Pre engineered Building (PEB) India is Rs 750 crore. Pre engineered Building revenue in India has increased during the year. The company has commissioned the Raebarelli plant. With the new Raebarelli plant is with orders the revenue will start flowing from Q1FY25 onwards but the peak revenue from the Raebarelli capacity will happen in Q2FY25. In US the capex is underway. Order book of Ascent (the US PEB)  is USD 44 Mn and expects to see substantial double digit growth in revenue and profitability for US operations this fiscal. Good double digit tonnage growth for US production.  Increasing production and DM is the strategy followed by the company.

Hydraulics and process equipment order book is also good.

Addressable market for the railway products the company makes (i.e. railways coach and wagon components) is RS 2000 crore. In FY24 the revenue from railway vertical is about Rs 250 crore.  Railway order book is Rs 120 crore as end of March 31, 2024. Railway is not the major/priority growth vertical for the company.

The company will increase revenue and profitability from focused business and others but the growth in focused business being higher than others.

Continue to see PBT margin expansion with the company growing high margin business where the share of the company is small but has large potential for growth. Target to reach PBT margin of 7% and PAT margin of 5% over next 2 years.

Efforts towards 7% PBT and 5% PAT margin :  In Q4FY24 the PBT margin was 4.76%.  US operations tax rate gone up at 22to 25%. But with blended rate of 23.5% and contribution of US operations at 30%, the company has to clock a PBT margin of  about 6-7% and the company is working towards that. 

On 70-80% capacity utilization on current asset base will give a revenue of Rs 5000 crore plus. 

The market share of the 5 focused business units  the market share of the company is less than 10% of the addressable market and the company is looking to increase the penetration.   In focused BUs such as  PEB India, PEB US, hydraulics, process equipment the company is increasing/increased capacity and with order inflow the business will grow.

On PEB side the company becoming the number 2 player in India will happen within this fiscal as the company has enough capacity with commissioning of new plant.

For the products and services in US the current market share is 2-3%, and there is strong growth potential going forward and the company is making necessary capex and measures for market penetration.

Boilers & process equipments:  Expect to double revenue this year as the additional capacity is backed with strong order book.   The profitability margin is higher than the average for the company and it is a growth vertical for the company.  The PBT margin is at 5-7% against industry average of about 10% and the company is working toward to reach it.  The current revenue is 20% higher rate than average of last year.

 The margin of US business were impacted by cyclicality/seasonality but the the US market is stable.