ELECON — 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

Thank you.

Our next question comes from Kashyap Javeri from Emkay Investment Managers.

Please go ahead.

Kashyap Javeri: · I have just one question, in your notes to accounts there is something about a settlement of claim

I have just one question, in your notes to accounts there is something about a settlement of claim with vendors roughly about eight crores, So, what is that and second question, in your presentation, you haven’t given consolidated order books.

So, what is the total consolidated order book including the overseas business?

In this settlement with respect to the previous period supplies or is it with respect to the raw material for this particular quarter?

So, for the previous quarter?

Yes, previous quarter. · Management

Elecon Engineering Company Limited July 22, 2022

Kashyap Javeri: · I have just one question, in your notes to accounts there is something about a settlement of claim

Okay.

And you said consolidated order book is 617 crores?

Moderator · Conference Operator

Thank you.

Our next question comes from Pritesh Chheda from Lucky Investment Managers.

Please go ahead.

Pritesh Chheda

Sir, just want to confirm on the sales number, you mentioned a number of 1500 crores in some of the releases.

So, is 1500 crore the number for consolidated sales expectation for FY23 and if yes, then within that what will be the gears business number?

Moderator · Conference Operator

Thank you.

Our next question comes from Pratik Kothari with Unique Portfolio Management.

Please go ahead.

Pratik Kothari

My first question is on the gross margins, if we exclude this seven crore settlement that we had to do the prior quarter, gross margins have improved substantially compared to the previous quarter or the previous year.

So, can you highlight a bit more, in this inflationary scenario how did we manage to get such a high gross margin?

Moderator · Conference Operator

Our next question is from line of Gunjan Kabra with Niveshaay.

Please go ahead.

Gunjan Kabra

Sir, my first question is like a lot of data points including our order book too, is –suggesting CAPEX cycle revival and the last good cycle in manufacturing was in 2003 - 08.

So, then even our revenue grew a lot significantly.

So, what is your view this time in terms of maybe longevity or how are you seeing market this time.

There might be a short term hiccup in between like what is happening right now, but what’s your view on the overall market this time?

Moderator · Conference Operator

Thank you.

Our next question comes from Ankit Babel with Subhkam Ventures.

Please go ahead.

Ankit Babel

Sir my first question is, what was the need to highlight this 6.95 crore vendor settlement figure, was it exceptional in nature or it’s a regular part of the business?

Moderator · Conference Operator

Thank you.

Our next question is from line of Balasubramanian with Arihant Capital.

Please go ahead.

Balasubramanian

Sir in the CAPEX front, installation of solar plants and windmills could you please throw some light on that, so what kind of energy consumption it will replace and when it will be executed?

Moderator · Conference Operator

Thank you.

Our next question is from the line of Sanket with Kedia Securities.

Please go ahead.

Sanket B

Just wanted to understand like currently are we servicing any defense orders or are we seeing any more traction from the defense segment side and also will our margins for the export business versus the domestic business be same or for exports we will get higher margins?

Elecon Engineering Company Limited July 22, 2022

Moderator · Conference Operator

Thank you.

Our next question is from Himanshu Yadav with Edelweiss Wealth Research.

Please go ahead.

Himanshu Yadav

One is the confirmation you said the navy order is 150 crore.

Is this a new order you are talking about?

Moderator · Conference Operator

Thank you.

Our next question is from line of Sunil Kothari with Unique PMS.

Please go ahead.

Sunil Kothari

Thanks for opportunity.

Congratulations Prayasvinbhai for after a long we were able to come out of debt and now with MHE also turning positive, I hope you will be very relaxed.

Moderator · Conference Operator

Thank you.

Our next question is from Barshan Javeri with Crown Capital.

Please go ahead.

Barshan Javeri

So, most of my questions have already been answered.

So, I’ll just have one question.

What kind of risk do you see that can probably impact us in achieving our stated guidance, is there some Elecon Engineering Company Limited July 22, 2022 element that we should be on the lookout for or anything could you could just guide us on that, that would be great sir.

Moderator · Conference Operator

Thank you.

Our next question is from line of Sachin Kasera with Svan Investments.

Please go ahead.

Sachin Kasera

Just two small query sir.

One was you mentioned that, the clients are taking some sort of pause because of what is happening on the steel prices.

So, if you could just tell us a little bit about how do we book the orders and how do we hedge our side of the steel, when we are taking any orders?

Moderator · Conference Operator

Thank you.

Our next question is from line of Renjith Sivaram with Mahindra Mutual Fund.

Please go ahead.

Renjith Sivaram

Just a small clarification, in our press release we have given our target of revenue as 1500 for FY24 and answering to one of the previous question you told your target is 1500 crore for FY23. So, just wanted to clarify is it for 24 or 23 we are looking at this 1500 crore of revenue and is it standalone or console?

Moderator · Conference Operator

Thank you.

Our next question is from line of Arun Subrahmanyam with Ampersand.

Please go ahead.

Arun Subrahmanyam

I just wanted to clarify one thing that you mentioned that your demand is somewhat getting affected, because clients are trying to reconcile with steel price dynamics isn’t that bit of a difficult thing to handle, because considering the gear is such an important thing that the customer is waiting for to place the order because of the steel price outlook?

Moderator · Conference Operator

Thank you.

Our next question is from line of Karthi with Suyash Advisors.

Please go ahead.

Karthi

A couple of things one is so, can you talk a bit about the U.S. customers that you are referring to large ones, what is the profile of these customers, what kind of requirements do you have.

And therefore, how should one take a hit on that?

Moderator · Conference Operator

Thank you.

Our next question is from the line of Pratik from Kedia Securities Private Limited.

Please go ahead.

Elecon Engineering Company Limited July 22, 2022

Pratik Kedia

I just want to know a little macro view about how the CAPEX is shaping up, the steel prices as you know after 2020-21, they had shot up, then they came down but they’re still higher than what they were in pandemic.

So, in this kind of a scenario everybody benefits with the CAPEX, CAPEX should be better this time though.

Are we seeing that happening, what is your view or it will be good to have your view on this.

Moderator · Conference Operator

Thank you.

The next question is from the line of the Disha Kansara with Molecule Ventures.

Please go ahead.

Disha Kansara

I just wanted to know what is the order flow for this Q1 FY22 order.

Sir, my question was what was the order inflow in Q1 FY22?

Moderator · Conference Operator

Thank you.

Our last question is from the line of Ritesh Chaudhary an Investor.

Please go ahead.

Ritesh Chaudhary

Just wanted to know that 130 crore of order which you said has come in for the marine business it is not added in the current order book, right?

Elecon Engineering Company Limited July 22, 2022

Moderator · Conference Operator

Thank you.

This concludes our question-and-answer session.

And now, I would like to hand the call back over to the management for closing remarks.

Thank you.

On behalf of PhillipCapital that concludes this conference.

Thank you for joining us and you may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer session.

Our first question is from line of Shubham Agarwal with Aequitas India.

Please go ahead.

Shubham Agarwal

Sir my first question is related to the subsidiary business.

So, this quarter we saw a decline, muted execution and profitability.

So, if you can elaborate on what were the key reasons for that, and how do we see this subsidiary business for the rest of the year?