CEMPRO — earnings call

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Prepared remarks

Moderator · Conference Operator

Good evening, ladies and gentlemen.

I'm Edwin, moderator for the conference call.

Welcome to ITD CementaƟon India Limited Q2 FY24 Results Conference Call hosted by ICICI SecuriƟes Limited.

As a reminder, all parƟcipants will be in listen-only mode and there'll be an opportunity for you to ask quesƟons aŌer the presentaƟon concludes.

Should you need any assistance during the conference call, please signal an operator by pressing * then 0 on your touch-tone telephone.

Please note this conference is recorded.

I would now like to hand over the floor to Mr. Mohit Kumar from ICICI SecuriƟes.

Thank you, and over to you, sir.

Mohit Kumar Thank you, Edwin.

Good evening.

On behalf of ICICI SecuriƟes, I welcome you all to the Q2 FY24 earnings call of ITD CementaƟon India Limited.

Today, we are pleased to host the Senior Management of the company, which is represented by Mr. Jayanta Basu, Managing Director, Mr. Prasad Patwardhan, CFO of the company.

Without much delay, I'll now hand over the call to Mr. Patwardhan, sir, for his opening remarks, which will be followed by Q&A.

Thank you, and over to you, sir.

Prasad Patwardhan Thank you, Mohit.

Good aŌernoon, everyone, and thank you for joining us on this Q2 FY24 earnings call.

We declared our results for the second quarter yesterday.

And I'm sure you have had a chance to go through our numbers.

Before we begin the discussion, I would like to menƟon that during the course of this call, there could be some forward-looking statements that will be made.

These are subject to risks and the actual results are likely to differ materially from these statements.

So, I would like to request you to keep all this in mind.

I will start with the financial performance of the company and then hand over to Mr. Basu for his views on the operaƟonal performance and then we’ll take your calls.

We have reported a robust performance in this quarter.

With an operaƟng income of INR 1,610 crores as against INR 1,035 crores, a growth of 56% on a YoY basis.

EBITDA at INR 172 crores has grown by about 78% on a YoY basis.

And profit aŌer tax is INR 54 crores as against INR 20 crores with an increase of about 168%.

Our balance sheet conƟnues to be leverage much less.

And our net debt to equity is about 0.34 Ɵmes.

Our order book stands a liƩle over INR 22,000 crores as of Q2 end.

And the new orders that we have secured during the quarter are worth about INR 4,600 crores.

That is all from my side to start with.

I'll now hand out to Mr. Basu for your opening comments.

Jayanta Basu Thank you, Prasad.

Good evening, all of you for joining this con-call.

Happy to say that we had seen another one good quarter in terms of the profitability, and even the revenue as well.

Normally, this was monsoon ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Ladies and gentlemen, we will now begin the quesƟon-and-answer session.

If you have a quesƟon please press * and 1 on your telephone keypad and wait for your turn to ask the quesƟon.

If you would like to withdraw your request, you may do so by pressing * and 1 again.

The first quesƟon comes from Nikhil Abhyankar from ICICI SecuriƟes.

Nikhil Abhyankar Yes, sir.

Thanks for the opportunity.

You have reported very strong robust execuƟon growth in the H1 itself.

And also, the margins are already above 9% in H1.

So, will you be revising your guidance for FY23?

Jayanta Basu Based on which guidance you are talking?

Nikhil Abhyankar Revenue EBITDA and order inflow, sir.

Jayanta Basu I think, we'll maintain the same, which is around INR 7,000-core-plus in the top line.

We hope that EBITDA will be just 10% above this end of the year.

Nikhil Abhyankar And sir, order inflow pipeline, order inflow, sir?

Jayanta Basu Order, so far, we have secured close to INR 5,000 crore, INR 4,800 crore.

And as we said that few jobs, L1 and there are some prospects.

So hopefully, end of the year, it will be around INR 8,000-crore-plus total order inflow in this year.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from Bajrang Bafna from Sunidhi SecuriƟes.

Bajrang Bafna CongratulaƟons for a good set of numbers.

So, my first quesƟon pertains to the average execuƟon of the exisƟng order book we are siƫng on, let's say, INR 22,000 crores of order book and we have a visibility of, let's say, another INR 3,000-4,000 crore to flow during this financial year in the second half.

So, considering, what could be the average execuƟon cycle and what sort of growth on this base of INR 7,000 crore execuƟon this year we can expect or, let's say, FY25-26?

Some strategy or the guidance or the thought process of the management will be really appreciated.

And my second quesƟon is the visibility on the, like you are moving more and more towards slightly, the projects where margins are high and the compeƟƟon is low, like marine and some complex jobs where, which is not the business of other companies where you can run a beƩer margin.

So, the trajectory maybe next 2-3 year perspecƟve, where we can move from, let’s say this 10% to maybe towards 12%, 13%?

Is it something the management is thinking from next 2, 3 years perspecƟve?

So that's the second quesƟon from my side.

And some sense on the improvement in the working capital cycle that probably how we are looking at, and some thought process on that will be appreciated.

That's all from my side.

Thank you.

Jayanta Basu Okay.

I think many things you have asked in just one quesƟon.

Good.

So, I'll try to address one-by-one.

This year, the revenue so far, we have done around INR 3,500 crores.

So, this Q3 and Q4 will be definitely a liƩle bit more than that.

So, hopefully INR 7,000-crore-plus, I mean, we'll definitely achieve.

Going forward to next year, we can think about around 20%, 25% growth in top line, because work in hand what we have now they are fairly big, like Ganga expressway, as you know, INR 5,000 crore, and project for Navy, we had ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from PraƟk Kothari from Unique PMS.

PraƟk Kothari We're currently already at about INR 7,000 crore, INR 7,500 crore run rate.

We'll be at INR 10,000 crore very soon.

So, if you can talk about internally, what are we doing, or how are we preparing to execute and scale.

This is something which we have not obviously done in the past.

So, how is our preparaƟon going internally?

Jayanta Basu Well, we are seriously concerned about our internal capability.

If I can define, we address one-by-one.

First of all, technical capability, that's not an issue because we have got experienced people and through experience, they are quite knowledgeable in the business what we are.

We have to build up some new team for the overseas.

So, what we are doing now, we have already worked in Myanmar.

We are working in Colombo.

We are working in Bangladesh.

So, there is a core team.

So, we’re trying to invest some more team with the exisƟng core team.

So that by other 6-7 months Ɵme, they become trained.

The most important part is the support system, because we have to support the execuƟon from logisƟcs, from finance and from whatever do you say.

So, those area we are strengthening.

And the plant machinery is not a problem because nowadays you get the required plant machinery, either you can buy it or you can hire it.

Those things are preƩy available.

So, where we stuck up mostly is the boƩom force, the labor force, work man.

And that is a common problem for all the companies in our industry.

So, we are trying to migrate from most of the manual work to the mechanical work.

That is one area.

And second area, how to educate this labor force, how to keep them, how to conƟnue them in our company, what sort of iniƟaƟve we should take.

So, we’re really focusing on that.

So, these are some of the area, I mean, things we are doing to increase our capability.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from Siddarth Shah from MK Ventures.

Siddarth Shah Yes.

So, thank you for the opportunity and congratulaƟons on great set of numbers.

Sir, in your opening remarks, you menƟoned that second half was normally much higher than the first half.

For example, last year, you had INR 3,000 crores in second half and INR 2,000 crores in first half, so 60-40 type of raƟo.

But the current year guidance is sƟll around INR 7,000 crores, and you already done INR 3,500 crores in first half.

And also, all the projects are taking off well.

Just to understand, is this quite conservaƟve or this is what is pracƟcally possible or what is?

So, some comments on this would be very helpful, sir.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from Laha Nirvana from Laha Professional Investor.

Laha Nirvana Hi.

Thank you for the opportunity.

Sir, I wanted to understand because general elecƟons will be there in Q1 of next financial year.

So, just like in the road sector, there is usually some slowdown.

In our line of business, do you anƟcipate any kind of execuƟon slowdown?

Jayanta Basu Not really.

I think because of elecƟon, there'll be a lot of pressure to do more work.

So, because of elecƟon, I don't see that will affect our work.

In fact new tenders or new projects which come up tendering, but the orders that we have already received or have been awarded to us, we don't expect any slowdown in the execuƟon of the projects that we have on hand.

Laha Nirvana Okay.

And for orders also, sir, do you anƟcipate a slowdown?

And if you do, then do you expect it to be a transient phenomenon which will take it normalized in from Q2, Q3 onwards next year?

Jayanta Basu Generally, there may be a liƩle bit of.

I'm not saying there definitely will be a slowdown, but there could be a bit of slow down or postponement in some of the tenders which come up for bidding.

But that would obviously be a temporary phenomenon, when the elecƟons are through, I mean, the focus on infrastructure would remain.

And I don't think it is going to impact the industry in the long run.

Laha Nirvana Okay.

All right.

And in Sikkim recently there was a cloud burst and flood which kind of caused a lot of destrucƟon.

So, we are doing those tunnel projects in Rangpo.

So, was there any impact on our project or is there going to be any impact in future?

Jayanta Basu So, touchwood, there was no damage to, for any structure or any sort of, I mean, problem we faced.

The only thing that few days the work was stopped, that too only for three, four days.

So, we are able to manage.

I don't see that there's any issue with that.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from Aman Soni, an Individual Investor.

Aman Soni Hello.

Good aŌernoon, everyone.

I'm joining the con call for the first Ɵme.

I have a couple of quesƟon, I’ll go one by one.

My first quesƟon was on the margin profile.

I understand that, the company does different orders from NHAI to Marine and all other things.

So, which kind of orders provide a beƩer margin?

And if you can quanƟfy that, that would be great.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from Sameer Deshpande from Fairdeal Investments.

Sameer Deshpande Hello.

Good evening, sir.

And congratulaƟons for the excellent set of results you have produced over the last 6 months.

So, actually, I heard the net debt is around INR 460 crores or 260 crores?

Prasad Patwardhan INR 460 crore.

Sameer Deshpande INR 460 crore?

Prasad Patwardhan Yes.

Sameer Deshpande Because in the balance sheet, if I go for the consolidated balance sheet, the gross loans are around INR 750 crores, and cash and bank balances it’s totaling around INR 500 crores.

So, it comes to INR 250 crores net debt.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next quesƟon comes from Kaushik Poddar from KB Capital Markets Pvt Ltd. Kaushik Poddar See, with your turnover going up sharply, say, 20%, 25%.

Do you see the margin also growing up, EBITDA margin?

Prasad Patwardhan EBITDA margin, yes, you are right because there are some fixed cost which doesn't get proporƟonately changed.

So theoreƟcally, it should go up.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Ladies and gentlemen, if you have any quesƟons, please press * and 1 on your telephone keypad.

Next quesƟon comes from Kunal Patudia, an Individual Investor.

Kunal Patudia CongratulaƟons, sir, for the fantasƟc results.

And hope to get the guidelines also net for the balance of the six months.

Sir, I wanted to ask about the arbitraƟon awards that we have in our hand, and do we expect any cash flow from any of these awards in this financial year?

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next is a follow-up quesƟon from Bajrang Bafna from Sunidhi SecuriƟes.

Bajrang Bafna Thanks for the opportunity.

Sir, on the Bangalore metro is there anything leŌ?

Because I think most of the provisions has already been done.

Any revenue which is yet to be booked or any more provisions required?

And can we expect some sort of the total loss that we booked over last any maybe one to two year kind of Ɵme frame?

It’s upwards of INR 150 crores, if I recollect it right.

So, any possibility of geƫng this money back to some seƩlement or some arbitraƟon.

So, some guidance on that will be really helpful, sir.

Jayanta Basu Well, Bangalore metro, physically all work completed.

There are four contracts there.

So out of that three contract already taken over by the client, final bill cerƟfied, our cerƟficaƟon is under progress.

The fourth one also completed and taking over also is happening.

So, what about leŌ out revenue would be hardly few crores, which will come through the final bill.

And the provisioning part is almost over.

I don't expect there'll be anything further required that I have clarified in the last con-call as well.

And we have got a few claims and the addiƟonal work done.

We have submiƩed our bill.

So, those are under process and some will go for arbitraƟon.

And as you know that arbitraƟon process takes Ɵme.

We will not be able to comment on the Ɵmeline, but definitely we’re pursuing few claims on our extra items.

Bajrang Bafna So, what is the total cost overrun that we have booked so far in P&L in the Bengaluru project?

The total amount Ɵll date.

Prasad Patwardhan Bajrang, the numbers are not readily available with us.

Maybe we can reconnect offline and discuss this further.

Thank you, sir.

Next quesƟon comes from Mehul Mehta from Nuvama Wealth.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next is a follow-up quesƟon from Sameer Deshpande from Fairdeal Investments.

Sameer Deshpande Thank you for the follow-up quesƟon.

I wanted to know what is the amount of advance received against contracts in our current liabiliƟes?

Prasad Patwardhan Well, as of the quarter end, the total amount of advances outstanding is about INR 1,300 crores, INR 1,400 crores.

Sameer Deshpande INR 1,300 crores, INR 1,400 crores.

Because normally we must be receiving the advances when new contract we are geƫng, we will be receiving certain porƟon as advance.

So, it is INR 1,300 crores, INR 1,400 crores.

What was the amount last year, any idea on that?

Prasad Patwardhan No. I wouldn't have the last year’s figure readily available right now.

Sameer Deshpande Okay.

Because our unbilled work in progress as on 30th September is around INR 1,540 crores.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

Next is a follow-up quesƟon from PraƟk Kothari from Unique PMS.

PraƟk Kothari Yes.

Sir, one comment from you on ports.

I mean, we read about Mr. Jindal's comment on the kind of capacity which they expect that India should build, similarly from Adani Ports.

Recently this development the US government funding one of your projects.

Just your comment, I mean, what kind of pipeline or runway do you see for next few years on the port side?

Jayanta Basu Yes, port side, there are a lot of capacity deficit we have in our country, either the container cargo or the bulk cargo.

When I say bulk cargo, it is iron ore, coal, ete.

So, there will be a lot of new terminal, it has to be there in the coming years.

And you can see that is geƫng reflected in the Odisha, one by one of the promoters like, Adani, Jindal, ArcelorMiƩal, and many of them are focusing in Odisha to building up the port there.

And at the same Ɵme, defense also coming up with a lot of marine jobs in and around the coastline in Ahmedabad and many other places.

So, there is a lot of marine job prospect in India going forward.

ITD CementaƟon India limited 09.11.2023

Thank you, sir.

There are no further quesƟons.

Now, I hand over the floor to the management for closing comments.

Prasad Patwardhan Thank you very much for joining us on this Q2 FY24 earnings call.

On behalf of the company, Mr. Basu and myself, I would like to wish each and every one of you a very Happy Diwali and prosperous New Year.

Look forward to interacƟng with you again aŌer our Q3 results.

Thank you.

Thank you, sir.

Ladies and gentlemen, this concludes your conference for today.

Thank you for your parƟcipaƟon and for using Door Sabha's conference call service.

You may disconnect your lines now.

Thank you and have a pleasant day.

Questions and answers

ITD CementaƟon India limited 09.11.2023