Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bharat Wire Ropes Ltd (BOM:539799, Financial) reported a consolidated revenue of INR622 crore for FY24, reflecting a 6% year-on-year growth.
- EBITDA increased by 18% year-on-year to INR164 crore, with an EBITDA margin of 26.39%, up by 283 basis points.
- Net profit for FY24 was INR96 crore, marking a significant 55% year-on-year growth, with a PAT margin of 15.47%, up by 491 basis points.
- The company achieved a 7% year-on-year increase in volumes and a 5.6% increase in revenue due to debottlenecking of capacity and new product development.
- Bharat Wire Ropes Ltd (BOM:539799) has a strong order book position, secure for three to four months of operations, and is focusing on high value-added products to drive growth.
Negative Points
- The company experienced an 18% reduction in EBITDA in Q4 due to disturbances in Red Sea material movement.
- The cash conversion cycle increased to 140 days from 84 days last year, primarily due to a buildup of inventory and debtors.
- Freight costs have increased due to Red Sea disturbances, although these costs are gradually being passed on to customers.
- The company has not provided specific revenue growth guidance for FY25, creating some uncertainty about future performance.
- The subsidy collection process is dependent on government allocation, with INR90 crore yet to be received, which could impact cash flow.
Q & A Highlights
Q: What is the current situation in the Red Sea and what kind of guidance are you looking forward to for FY25 in terms of revenue and margins?
A: The Red Sea disturbance is gradually stabilizing. Initially, there were delays in shipments and availability of shares, but things are improving. Freight costs have gone up but are gradually coming down. We have not given any official forecast for revenue growth for next year, but we expect the growth trend to continue. Majority of the freight cost is passed on to the customer.
Q: From a margin perspective, are we operating at a peak mix as of today, or is there room for improvement?
A: We have not reached the peak. We have just started to focus on value-added products, so there is a lot of headroom available to improve the product mix.
Q: What is the working capital requirement looking like, given the increase in the cash conversion cycle?
A: The working capital cycle has gone up due to a buildup of inventory and debtors. We extend credit to certain reliable customers, which sometimes gives us better pricing. We maintain the working capital cycle within a reasonable level of around four to five months.
Q: What is the expected subsidy collection for FY25?
A: The total subsidy yet to be received is about INR90 crores. We expect to collect around INR40 crores in the current year, depending on government allocation of funds.
Q: What is the customer concentration in terms of revenue contribution?
A: We have more than 200 customers. The top five customers contribute less than 20% of the revenue.
Q: Will the subsidy impact our profitability in FY25?
A: The subsidy will continue until October 2025. We are focusing on increasing the contribution from high-value products, which will neutralize the impact of the subsidy.
Q: How do you see price competition for non-value-added products affecting the company in FY25?
A: The general engineering products are mostly exported globally. We compete with Koreans and Turkish manufacturers, whose cost of production and sales prices are higher than ours. We do not see significant pressure on pricing.
Q: What is the expected volume growth and EBITDA per ton for the next year?
A: We expect to grow at around 10%. The EBITDA per ton contribution is expected to increase, depending on the product mix. Last year, the EBITDA was INR41,000 per metric ton, and this trend is likely to continue.
Q: What is the current capacity utilization and peak utilization achievable?
A: Current capacity utilization is around 60%. The peak utilization achievable is in the range of 75% to 80%. We are constantly debottlenecking to achieve this.
Q: What is the split of the 6% year-on-year revenue growth in terms of volume and value growth?
A: Volume growth has been significant, with sales increasing from 24,000 tons in 2021 to 41,000 tons in the current year. Realization has also increased from INR100 in 2021 to around INR145 to INR150.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
