Cemindia Projects Limited (509496) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ITD Cementation India Limited Q3 FY '21 Results Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Adhidev Chattopadhyay from ICICI Securities Limited. Thank you, and over to you, sir.

Yes. Good morning, everyone. On behalf of ICICI Securities, I'd like to welcome everyone on the call today. Today from the management, we have with us Mr. Jayanta Basu, the Managing Director; and Mr. Prasad Patwardhan, the Chief Financial Officer. And I would now like to hand over the call to the management for their opening remarks. Thank you.

Thank you, Adhidev, and good morning to everyone for joining us on this call, Q3 earnings call. This quarter, we have seen significant improvement in our operating performance. Our turnover for the quarter at INR 792 crores is about 43% higher than the turnover reported in the previous quarter ending September '20. Another notable point is even on a year-on-year basis, we have exceeded our turnover which we had reported in the quarter ending December '19. So there's a growth of about 12% in our turnover, and we have exceeded -- I can very confidently say now that we are out of the COVID issues, and that is demonstrated by the increase in our turnover. Our EBITDA margins have also improved in this quarter to about 11.5%. And for the quarter, we have turned the corner after 2 quarters of losses and we have reported a profit of about INR 30 crores in this quarter. As far as the order book is concerned, our order book as of December '20 is about INR 12,030 crores. New orders that we have secured in this year add up to nearly INR 2,900 crores or INR 3,000 crores. And even after the end of the quarter, we have received new orders worth about INR 520 crores. So all in all, we have had a very satisfactory performance in this quarter. And we hope that going forward, we'll continue to improve upon this performance in the quarters to come. I will now hand over to Mr. Basu for his opening comments, and then we'll take your questions. Thank you.

Thank you, Prasad, and good morning, everyone. As Prasad has just mentioned, as you all know that our performance in quarter 3 is as expected. It is much better than quarter 2 and quarter 1. And we could somehow overcome the situation from the COVID. And I hope and wish that we'll maintain the same momentum going forward. As we know that our order booking is quite high, INR 12,000 crores. I'll now take you through the segment wise performance what we had in last quarter. Urban and Infra is one of the segment, then we have got Metro, we have Airport and we have Marine. So one by one, if I take you through the main jobs, like Urban and Infra, we are working in Mumbai Metro, Calcutta Metro, Bangalore Metro and Nagpur Metro. Mumbai Metro, the tunnel job, as I have reported last time, the entire TBM tunnel has been completed successfully, and the work in 3 stations are going on in full swing, and we are in the right track. And we expect that, as per the latest program, we'll be able to complete the job on schedule. Kolkata Metro, it was a big turnaround. After the fiasco last year, I mean last to last year, now we could complete the tunnel up to Sealdah from Esplanade. The second tunnel we have started very recently. And I hope by end of May or sometime during June, the entire tunnel work will be completed. Bangalore Metro, underground tunnel, we have started. I think we have done around 9% to 10% progress so far, which is a good achievement in terms of Metro underground work within the given time and COVID issue. And main tunnel, which tunnel boring machine, is expected to start from April. We don't see any other issue there. Initially, there are some constraint about the site -- front availability. But I'm happy that Bangalore Metro has done a good job and they could be able to provide us enough front to go ahead. We have got -- these are the 3 underground metro. Apart from that, there are tunnel jobs in elsewhere like Drill & Blast Tunnel in Sivok Rangpo sectors, which is in Sikkim. And all the 3 projects are now started picking up. We have mobilized the required plant and machinery, and the tunnel jobs in 3 projects, 3 x 2 around 6 fronts are going on smoothly as because this is the working time there. So till May, we have to make substantial progress, and we are on the top of job there. Our next segment is elevated in Urban Metro. As you all know, we are working in Nagpur Metro, Calcutta Metro and Bangalore Metro. Bangalore Metro, we have got extension of time for the 3 jobs up to mid of this year, and we'll be able to complete the 3 jobs by the middle of this year, except 1 job where still the front availability is a problem, which may go up to next year sometime. So with that, on an average, around 88% job has been completed in Bangalore Metro. So that is a good thing that all the 3 jobs, apart from 1, we are almost through now. Nagpur Metro is a matter of another 2 to 3 months' time. We hope that by that time all the work will be completed. Coming to Marine, there are plenty of jobs we are executing now, like Udangudi, Myanmar, JNPT at Mumbai, Dhamra Port for Adani, Haldia for IW, Port Blair and there are around 3 or 4 new jobs. Udangudi's average standard progress every month, we are able to do around INR 35 crores to INR 40 crores progress, which is as per our requirement. Myanmar has been going very well. There is some local issues now, but even then we are able to progress. I mean our work has not stopped. Yes, we are not able to do 100% progress, but we are able to do around 50% to 60%, even in the given condition. And around 20% jobs we have completed in Myanmar. We have got a couple of new jobs very recently. Vizhinjam, that big order has come. We have started mobilizing Vizhinjam breakwater. Sea Bird, another big job, our initial setup is going on. And recently, have got 1 job in Pamban bridge, construction of couple of foundations from RVNL, job has started. Krishnapatnam Port from Adani also we have just started. The Airport, so far, we are doing Trichy and Pune, and they suffered a little bit due to COVID, but now it has to come back to the track and work is going on now. It's a season time now. So there are some shortage of supply of material during COVID, but which you can overcome now, so work is going on in full swing. These are the main jobs what we are executing apart from small other -- many other small jobs. I will touch upon a little bit about the progress what is there in the pipeline. For Urban Metro, Patna Metro, Chennai Metro, underground and elevated, Delhi Metro, of course, there. So we are all pursuing all those jobs. Then we have got -- in Marine, we have got, as I said last time, Adani. There's a big port getting developed in Colombo. There is a chemical terminal coming in Gujarat. And there are 2 or 3 overseas jobs also we are pursuing in Marine. With all that, I think, around INR 16,000 crores to INR 20,000 crores jobs are in pipeline. And with the thrust given by the government this year in budget, we hope to do better going forward. That is all in a brief. I'll request you to have -- whatever question you have, we can answer them. Thank you.

[Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a decent recovery during the quarter. Sir execution wise, you got recovery, but still on the margin side, you are still lagging. EBITDA margin if I see for the quarter is about 9%. So were there any one-offs or any late burn still impact of COVID which is hurting us that's why we are not seeing this improvement in margin?

Parikshit, we have seen improvement in the margins, as we have been saying in our past calls as well. The margins are gradually improving. If you see our margins in the earlier quarters and even in the last year, we are getting there. We hope that with our order book that we have on hand, we will see an improvement in the margins going forward. But we can't go from a COVID position to the highest level of margins in 1 quarter. That is going to be a gradual process. And we are seeing -- this 1 -- this quarter 3 demonstrates the improvement in margins, and we are hopeful that this will continue going forward.

Okay. Sir, on this -- with the execution ramp-up you're seeing in Sikkim and in Marine projects and the overall reduction in the order contribution from the elevated metro, which is typically low single-digit margin projects. So do you see, I mean, the revenues which you were earlier targeting to -- at least to a quarter basis about INR 1,000 crores. So are we on track to for 4Q of the financial year to get that run rate?

Yes, I think so with the new orders which is now getting converted to revenue from first quarter of next year, we should be able to achieve that.

Okay. And sir, this orders in JNPT to which we were -- PSA, we were submitted some bids. So any update on those bids? And what is the status of those projects? If you can just touch upon that?

Look, Parikshit, there is a contract between PSA and JNPT. And PSA is supposed to complete the Phase 2 work within a certain time. Now I believe because of COVID, they got some extension, and they are not in a hurry to do the work. But the update from them that once after this next monsoon, from October onwards, they will be able to commence the work. That is the latest update.

Okay. Okay. Sir, and lastly, on the balance sheet side, Prasad, if you can tell what is the debt status right now? So if you can have a stand-alone debt -- sorry consol debt and what is the cash on the book and net working capital days?

As far as our consolidated debt is concerned, as of December, it was about INR 520 crores. The cash on the books was about INR 70 crores, INR 80 crores. So our net debt is about INR 450-odd crores. As far as the working capital days are concerned, we are at roughly 120 days. But one thing that Parikshit you need to keep in mind is the receivables that we disclosed in our balance sheet that includes contractual retention which gets paid out at the end of the project. It is not contractually due at the moment. So that includes -- the working capital days that we are mentioning about 120 days includes about 30, 35 days of contractual retention which is not due. So that is where we are. One more point I would like to add, as far as the debt is concerned, as of December, we had debt on the Bangalore Metro project of about INR 100-plus crores. As on date, it is -- it has nearly halved. It is at about INR 50 crores, INR 55 crores as of now. So we don't expect the debt levels to go up significantly going forward. It should be more or less at the same level.

The next question is from the line of Venkat Subramaniam Raman from Organic Capital.

In the past, we've had a series of issues, Bangalore, Calcutta, IL/FS, et cetera. Now is there -- on the technical side, et cetera, do we still have any challenges left or we are -- we really see light at the end of the tunnel? Are we done with whatever provisions we need to make?

Yes, Calcutta, we have done it. As I have mentioned in the beginning, that we could complete the tunnel successfully through the June which was affected, and the balanced tunnel work will be completed by sometime May this year. So there is no technical challenge in Calcutta. Bangalore, it was more of a technical, it was a logistics channel. I mean, availability of the front from the client side because of congested working area. So now, as I had mentioned, that 3 projects we have already completed, almost completed, except 1 job. So that remains to be seen.

Related question, Mr. Basu. Given the kind of complexity of work that we do, do you believe that we're getting compensated sufficiently? Are we getting underpaid? Are we getting more aggressive actually in our bids, et cetera?

Well, there are segments like Marine and Underground Metro and to some extent, the Airport where we are doing well. But to remain in the market, you have to do other work as well, like some bridge work we have started and some elevated metro, though, we need to -- I mean, percentage wise, we have reduced a lot. So -- and it's a competitive market. We have to see what customer requires, what is the economy and what is the competitive situation. So given all these things, I think we are doing well.

And a related question again. Given our confidence of billing up about INR 1,000-odd crores per quarter and also given our order book, when do you think our operating leverage will kick in, based on which our PAT margin, which we kind of target something like about 4.5%, 5%, when do you think it can head North? And where do you think it can settle?

Well, as far as the operating leverage or the debt on the balance sheet is concerned, we are very conscious of not letting the debt increase significantly. Having said that, one must realize that for any Infra project, we need to first invest money for the first 3, 4 or maybe 6 months, depending on the size of the project, before the working capital cycle really gets managed and the client starts making payment against our bills. So it is a working capital intensive business that we are in. So we can't wish away the working capital or leverage that we have on the balance sheet. But the endeavor is to keep the debt within manageable levels, and we have been able to do that even during this COVID period. That is one part. Secondly, as for the PAT margins go, we have seen our results for this quarter, and we are gradually -- the operations -- as we ramp-up the operations and whenever we touch INR 1,000 crores or we cross INR 1,000 crores, we are bound to see an improvement in the margins. But -- I won't be able to put a number on it, but we are pretty hopeful that the PAT margins will also improve in FY '22.

Some of our competitors in similar fields, Prasad, have PAT margins of almost about 6.5%, 7%. When we get to INR 1,000 crores plus, et cetera, you think we can kind of get there?

I, frankly, don't see ourselves reaching PAT margins of 6% or 7%. No, I don't really see that. There are -- I agree with you, there are a couple of players in the -- in our industry who have been reporting margins in the range that you mentioned. But frankly, for a pure EPC contractor like us, we don't see PAT margins of 6%, 7% getting reported. But an improvement in the margins from where we are today, yes, that is certainly possible.

The next question is from the line of Viral Shah from Prabhudas Lilladher.

Congratulations on a good set of numbers. My most of the questions are answered. Just one. Sir, in terms of order inflow per se, what are we looking at now going forward and which are the key segments where we can see good amount of order inflow? That is one. And secondly, in terms of Kolkata Metro, sir, where we are in terms of claims and -- with the insurance companies. So, these are 2 questions of mine.

Okay. This is Jayanta Basu. I'll answer your last question first. Calcutta Metro, technical issues are all over. And commercially, we don't see any risk there as we have been maintaining. And claim through clients also we are pursuing and the insurance also we are pursuing. We are yet to see the result, but we are pursuing very much and it is progressing. Coming to order book, definitely we are pursuing with the Marine jobs. There are 3, 4 big Marine jobs and put together will be around INR 7,000 crores, INR 7,500 crores of tender in pipeline for Marine. We're, of course, pursuing Underground Metro like Patna Metro, Chennai Metro and Delhi Metro which will be coming soon. Similarly, Airports, which is now under privatization, also, we are looking after. There are a lot of prospects, we think, and we are pursuing the Airport job also. So this is in a nutshell about the prospect.

Fair enough, sir. And in terms of order inflow guidance and -- which are the sectors where you are seeing good amount of order momentum per se. Could you highlight that as well?

Yes. As I mentioned, Marine, Underground Metro and Airports, these are the 3 sectors where we expect there will be good inflow.

Okay. Sorry, sir, I missed that. And in terms of tender pipeline, what will be your tender pipeline be? That's it from my end.

Will be around INR 16,000 crores to INR 20,000 crores.

The next question is from the line of Mohit from DAM Capital.

Congratulations on a good set of numbers. Sir, my first question was, how much is the Bangalore old order book is left in terms of crores -- in amount?

Bangalore, there are 4 jobs, and total value of the job will be around INR 2,300-odd crores. Except one job, almost 92%, 93% job has been completed. If we take an average, it will be around 88% job we have completed, out of INR 2,300 crores.

Understood, sir. Which are the orders which are likely to contribute substantially or incrementally in FY '22 out of our order book? And is this you are trying for, we can work only till May and it will not contribute anything from May towards September. Is my understanding right?

Yes. That is a very rain-prone area. So normally, it is not even advisable technically to work during monsoon at this area because landslide prone. So we've seen that July, August or at least part of June and then July, August, the progress will be slow. Thereafter, again, from September onwards, work will start. And now as -- because it is a winter and good season and work is going on in full swing. And work in hand position today are INR 12,000 crores.

And sir, looking on incremental revenue which will flow in from specific order, which will start contributing substantially to the top line FY '22?

Most of the orders that we have on hand today, they are -- they will contribute to our top line in the next year. So to be more specific, we have the TANGEDCO, Udangudi project, Marine project in the state of Tamil Nadu, the Bangalore Metro Underground project. These are some of the projects, even the Sivok Rangpo, although the work may be a bit slower during the monsoons, but otherwise, we expect these projects to contribute significantly in addition to the new projects that we have done, we have -- which we have been awarded. For example, this quarter, we have received an order from the Indian Navy. It's a Marine order worth about INR 1,100 crores. That should contribute to our top line in FY '22.

Understood, sir. And sir, are you looking to bid for this Mumbai sewage treatment? Is it something on the cards or which is not in the consideration?

It is within our radar, but we are not very sure because it comes and goes. So we don't know the reality. So of course, we have done a lot of work for 2 of the jobs. There are 6 -- I think, 6 or 7. So yes, it is in our radar, but we really do not know what we'll do finally.

And last year, this Bharat -- this PSA container terminal, I have heard that they have postponed this -- the construction by 3 to 4 years. Is that understanding right? And most likely, the orders will get delayed, in the sense order -- ordering of this project?

I don't think 3 and 4 years because my understanding and feedback from them that by end of this year, they will resume the tender process so that they can start work from sometime during November and December this year.

And sir Myanmar, sir, when are you supposed to close that particular port, in the sense the entire construction?

Yes, Myanmar work is going on. It is a 2 years contract. So far, I think we have done around INR 100-odd crore out of INR 600 crore job. Yes.

It will take another a year or so. Am I right?

Yes, another, I think, 1.5 years.

[Operator Instructions] The next question is from the line of Shreyans from Equirus Securities.