CEMPRO — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Good afternoon, ladies, and gentlemen.

I am Pelsia, moderator for the conference call.

Welcome to ITD Cementation Q3 FY24 Results Conference Call.

As a reminder, all participants will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal the operator by pressing * and then 0 on your touchtone telephone.

Please note this conference is recorded.

I would now like to hand over the floor to Mr. Nikhil Abhyankar from ICICI Securities Limited.

Thank you, and over to you, sir.

Nikhil Abhyankar Thank you, Pelsia.

Good afternoon to everyone.

On behalf of ICICI Securities, I welcome you all to the Q3 FY24 earnings call of ITD Cementation India Limited.

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

Without much delay, I'll hand over the call to the management for their opening remarks, which will be followed by Q&A.

Thank you, and over to you, sir.

Prasad Patwardhan Thank you, Nikhil.

Good mornin everyone and thank you for joining us on this Q3 FY24 results concall.

This is Prasad Patwardhan, CFO of the company.

Before I begin, I would like to remind everyone of our standard disclaimer that this call may contain certain forward-looking statements and business prospects of the company, which are subject to a number of risks and uncertainties and the actual results may differ materially from those made in such statements.

I will start with the financial performance of the company during the quarter and subsequently our MD, Mr. Basu, will take you through the operational performance.

We are happy to report a very healthy financial performance in this quarter.

Total operating income for the quarter was INR 2,017 crores as against INR 1,327 crores, which represents a growth of 52% YoY.

EBITDA was INR 220 crores in the quarter as against INR 118 crores a year back resulting in a growth of 87%.

EBITDA margin stood at 10.9% as against 8.9% a year ago.

Profit after tax was INR 79 crores during the quarter as against INR 37 crores a year back, representing a growth of 113%.

Our balance sheet and leverage on the balance sheet continues to be at subdued levels.

Our net debt to equity is about 0.3x.

We have secured orders worth about INR 1,300 crores during this quarter.

If you look at our 9M performance, our total operating income was INR 5,460 crores as against INR 3,460 crores a year back, ITD Cementation India Limited - 3 - 09.02.2024

Thank you.

Next question comes from Sunil Kothari from Unique PMS.

Please go ahead.

ITD Cementation India Limited - 6 - 09.02.2024

Thank you.

Next question comes from Dhananjay Mishra from Sunidhi Securities and Finance Limited.

Please go ahead.

ITD Cementation India Limited - 8 - 09.02.2024

Thank you.

Next question comes from Nihar Shah from Crown Capital.

Please go ahead.

ITD Cementation India Limited - 10 - 09.02.2024

Thank you.

Next question comes from Shrey Gandhi from Mangal Keshav Financial Services.

Please go ahead.

Shrey Gandhi Good afternoon, sir.

So basically, my question would be regarding the Q4. Like Q4, what kind of revenue growth rate you are expecting?

Because historically I've seen in Q4 like your revenue has grown by around 20-30%.

Can we expect the same growth rate for Q4 also?

Jayanta Basu Actually, we have already done quite good in Q3. So, what we used to do in Q4, we have achieved in Q3. So, Q4 will be almost same like Q3. ITD Cementation India Limited - 11 - 09.02.2024

Thank you.

Next question comes from Vignesh Iyer from Sequent Investments.

Please go ahead.

Vignesh Iyer Sir, congratulations on strong set of numbers, and thank you for the opportunity.

Sir, my question is on the interest paid part of our line item.

So, we have paid around INR 58 crores interest in this quarter as compared to INR 52 crores last quarter.

So, just to have an understanding, what is our borrowings as on 31st December and what is the way forward?

What would be the ramp-up in the interest payment as we keep on scaling the execution?

ITD Cementation India Limited - 12 - 09.02.2024

Thank you.

Next question comes from Mehul Mehta from Nuvama Wealth.

Please go ahead.

Mehul Mehta Good afternoon team.

Thanks for the opportunity.

Congratulations on great set of numbers.

My first question is, sir, you have been guiding for focus on entry barriers businesses, like say underground metro, marine, as well as tunneling kind of.

If I look at say December 2022 end, our order book was comprising about 67% from this businesses, which has increased to about like 73%.

So, going forward, can we expect maybe this double-digit margins, which we have achieved, going forward exceeding even that?

Jayanta Basu Okay, true that these businesses, we are good in this.

You have to also understand that no business perpetually gives equal results.

Now, underground metro also will be crowded soon.

So, the competitions will be there.

So whatever margin we have achieved last year, coming year margin would be less if you have to win the job.

So that is one factor.

That is why we are planning to go elsewhere, like abroad marine job, so that we are able to maintain the margin.

Mehul Mehta All right.

Got it, sir.

Thank you.

And in terms of, Mr. Patwardhan, regarding working capital cycle.

Is there any change as compared to September 2023 to this December 2023, or it remains in the similar line?

ITD Cementation India Limited - 14 - 09.02.2024

Thank you.

Next question comes from Rajesh Kumar Rathi from Right Shopping Private Limited.

Please go ahead.

ITD Cementation India Limited - 15 - 09.02.2024

Thank you.

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

I repeat.

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

Thank you.

Next question comes from Nikhil Abhyankar from ICICI Securities.

Please go ahead.

Nikhil Abhyankar Thank you, sir.

I wanted to get some clarity on what you mentioned that we might also look up at marine jobs overseas.

So, which exact markets will we be looking at and what kind of opportunities are available there?

Jayanta Basu There are three areas.

One is Bangladesh, as because the election is over, and they had a long list of marine work in pipeline around Chittagong port.

So that is one area we are focusing.

There are two jobs in Middle East.

We have submitted our offer.

One job in West Africa.

All are marine jobs.

Nikhil Abhyankar All are marine jobs.

On the domestic front, a lot of companies have increasing their CapEx on port development.

So, any opportunities over there?

Jayanta Basu You mean to say that new ports are coming by greenfield expansion?

Nikhil Abhyankar Yes.

Greenfield expansions.

Jayanta Basu Yes.

As it JSW, JSPL.

Yes, we are there, always there.

ITD Cementation India Limited - 17 - 09.02.2024

Thank you.

Next question comes from Abhishek Dixit from Hem Securities.

Please go ahead.

Abhishek Dixit Hi.

Thank you, sir.

Congratulations for the great set of numbers.

My question is regarding around two months ago with our news channel, we had guided for INR 7,500 crores revenue guidance.

So, are we sticking to that?

Jayanta Basu Yes.

Abhishek Dixit Okay, sir.

And for 20-25% growth in the FY25 also?

ITD Cementation India Limited - 18 - 09.02.2024

Thank you.

Next question comes from Vipulkumar Shah from Sumangal Investment.

Please go ahead.

Vipulkumar Shah Hi sir, thanks for the opportunity.

Sir, one of our peer continuously reports 14-15% EBITDA margin.

So, our margins are 10% and previously it was around 8%.

So, what is preventing us to reach those type of margins, whereas they are also doing almost same type of work?

Jayanta Basu Well, I cannot compare with other company.

See, the business model is different.

We had some legacy jobs, as you must be knowing.

So that has daunted our margin till now.

We really aspire to do margin of that kind.

Let us hope for the best.

Let us see.

Vipulkumar Shah I think one of the previous participants had also asked about legacy projects.

So, what is the quantum of the legacy orders which is left?

If you can quantify in terms of number hundreds of crores, how much work is left for these legacy orders?

Jayanta Basu No, today it is nothing.

I mean, virtually zero.

Almost.

ITD Cementation India Limited - 19 - 09.02.2024

Thank you.

Next question comes from Kaushik Poddar from KB Capital Markets Private Limited.

Please go ahead.

Kaushik Poddar See, you have an exposure to a leading group when they were in a problem because of some reports and all those things.

Your stock price had come down very sharply.

So, when will that orders get executed completely?

The one in Sri Lanka as well as the road project.

Jayanta Basu Road project, almost by end of the year or beginning of next year should be completed.

ITD Cementation India Limited - 20 - 09.02.2024

Thank you.

Next question comes from Sunil Bhojwani, an individual investor.

Please go ahead.

Sunil Bhojwani Good afternoon, sir, and congratulations on the good set of numbers.

Sir, I just want to know, in international work, do we have better margins or is it similar to domestic?

Jayanta Basu International business should fetch you better margin than domestic.

That is the idea for going outside.

Sunil Bhojwani So going forward, if we secure more orders from international, there is scope of improvement in margin.

And on a medium term, say one to two years basis, we see further scope of margin improvement from yours.

Since legacy orders are now out of are mostly completed.

Jayanta Basu There are three things here.

One is that as I mentioned, legacy orders are no more there.

So that is a good thing.

And if we get international business, we can make better margin.

That is a good thing.

But at the same time, the bulk of the revenue which comes from Indian market, the competitions will grow.

The more competent will be qualified.

So, if you have to bid and get the job, your margin will be little lower than what it is to be.

Sunil Bhojwani So, you mean to say, sir, a medium-term margins can go lower but not.

Is that what you're trying to?

Jayanta Basu Yes, I mean, see, if you have to maintain around double-digit, it won't be possible going forward with the Indian domestic business because competition will be more, that we have to compensate by some job in overseas.

It's like that.

ITD Cementation India Limited - 22 - 09.02.2024

Thank you.

Next question comes from Kunal Patodia, an Individual investor.

Please go ahead.

Kunal Patodia Good afternoon, sir, and fantastic results.

The best ever performance.

Congratulations for that.

My question is regarding arbitration awards.

Last quarter concall, you guided that we are expecting some inflow.

So, have we received that award, the money is in, or do we expect any new awards inflow in this current quarter?

Jayanta Basu Few arbitration award we have.

Some of them have been challenged to the court and some of them will get sought out through new scheme called Vivad Se Vishwas.

But during this quarter, we have not received any inflow.

We hope that, yes, sometimes something will happen.

But as you know that, this particular things goes very slow in our country.

But we have got some positive side from three or four projects as well today.

Kunal Patodia My second question is, as you are saying that new participants are now eligible to bid and the competition is increasing.

Sir, aren't we also improving our eligibility for bigger and better orders, like INR 2,000 crore, INR 3000 crores-plus orders?

Jayanta Basu Yes.

If you see historically, we used two join venture with our partner, that is our promoter to get qualified.

And now, we are able to do by ourselves, most of the job, including underground, metro and airport.

Now going forward, there will be bigger jobs and in some of the jobs definitely we have two partner outside expat agencies and the work is in progress.

Kunal Patodia ITD Cementation India Limited - 25 - 09.02.2024

Thank you.

Next question comes from Nirvana Laha, an Individual investor.

Please go ahead.

Nirvana Laha Hi, thanks for the opportunity.

Congratulations Mr. Basu and Mr. Patwardhan for delivering on what you've been promising.

Congrats for that.

My question is, how much can you tell me the CapEx that we have done for 9M?

And based on the kind of CapEx you indicated for next year, I think you mentioned INR 200-250 crores.

Mr. Patwardhan, can you help us with the depreciation number, expected depreciation for next year?

Prasad Patwardhan ITD Cementation India Limited - 26 - 09.02.2024

Thank you.

We have a follow-up question from Sunil Kothari from Unique PMS.

Please go ahead.

Sunil Kothari Thanks for the opportunity again, sir.

Sir, one thing just wanted to understand is what is our core strength on a cost structure which make us competitive international market because we have to buy raw material, so many local contractors.

So, cost structure for us and for Japanese or Korean will be similar.

So, where we are stronger in terms of cost?

ITD Cementation India Limited - 30 - 09.02.2024

Thank you.

We have a follow-up question from Abhishek Dixit from Hem Securities.

Please go ahead.

Abhishek Dixit Hi, sir.

In the recent budget session, the government has focused more on the expansion of the existing airport and development of new airports and metros and Namo Bharat.

So, on the ground level, are we seeing much opportunities in the aviation sector and despite the competition also in the sector?

Jayanta Basu Yes, aviation, there are great opportunities and we are very much there.

As you know, Pune Airport, Trichy, Pune have completed, another one airport we are doing.

And there's a list of around 20 airports.

The tender will be out after election one by one.

So, there are opportunity, you're right.

Abhishek Dixit Okay.

But these will be after election?

Jayanta Basu Yes.

I think code of conduct and all sorts of things after election only they will take off.

Abhishek Dixit Okay.

Thank you, sir.

Best of luck for your next quarter and year.

Jayanta Basu Thank you.

Thank you.

We have a follow-up question from Mehul Mehta from Nuvama Wealth.

Please go ahead.

ITD Cementation India Limited - 32 - 09.02.2024

ITD Cementation India Limited - 34 - 09.02.2024

Thank you.

Ladies and gentlemen, this concludes your conference for today.

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

You may disconnect your lines now.

Thank you and have a good day.

Questions and answers

ITD Cementation India Limited - 1 - 09.02.2024

Moderator · Conference Operator

Thank you, sir.

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

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

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

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

We will wait for a moment while the question queue assembles.

First question comes from Deep Mehta from Bank of India Mutual Fund.

Please go ahead.

Deep Mehta Thank you for the opportunity and congratulations for a very robust set of numbers.

A couple of questions from my side.

First is, what is the contribution of legacy low margin orders in this quarter in overall revenue?

Jayanta Basu The legacy orders are mostly more or less out of the system now.

There are a few residual work that is pending on the projects but the larger contribution is coming through from the newer projects that were awarded to us maybe last year or last couple of years.

So, the contribution of legacy orders now is significantly lower and probably it is out of the system now.

Deep Mehta Okay.

And now with this legacy orders being more or less over, do we expect similar margin trajectory for this year as well as next year?

Jayanta Basu We have seen an improvement in our operating margins.

The EBITDA margins have been improving during the year and our endeavor is to keep performing the way we have performed during the year, and hopefully, we'll see an improvement in the margins going forward.

ITD Cementation India Limited - 5 - 09.02.2024