Goodluck India Limited (530655) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '22 Earnings Conference Call of Goodluck India Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Garg, Chairman of Goodluck India Limited. Thank you, and over to you, sir.

Yes. Good afternoon, everyone. Welcome to Goodluck India Limited Earnings Conference Call for the Fourth Quarter and the Full Year Ending 31st March '19 -- '22. I would like to begin by expressing my gratitude to you all for taking the time to join us. On the call with me today are Mr. Ram Aggarwal, CEO; and Mr. Sanjay Bansal, CFO. The company is an established manufacturer of engineered steel products. It was incorporated in the year 1986. It is headquartered in Ghaziabad, with 3,64,000 tonnes manufacturing capacity. This capacity is spread across 6 facilities, 5 in Sikandrabad, Uttar Pradesh and 1 in Kutch, Gujarat. Employing over 3,000 persons, with over 3 generations of hands-on experience of promoters. This year, we have added [ 18,000 metric tons ] in forging division and [ 40,000 metric tons ] in precision tubes engineering division. Goodluck is into 4 major verticals, which are ERW steel tube; precision tubes; precision engineering and fabrication; and forgings. We have started our solar as a separate vertical, owing to the superlative demand in this segment. Also aerospace and defense who are other areas of interest, which, in our opinion, require total -- special focus, and we have huge opportunities hereon. We cater many diverse sectors of the economy that include auto, infra, high-speed railway, specialized infrastructure, solar, defense, aerospace and defense components. Last 4 to 5 years have been particularly significant for the company. We have undertaken important CapEx, penetrating strategic markets, expanded product portfolio and diversified our value-added offerings. We have set a few goals for ourselves that include increasing the share of value-added products in our total product portfolio. We are on course of making Goodluck world-class manufacturing organization with special focus on value addition. We would like to see ourselves evolving as a partner of choice for high-end engineering and fabrication player in infrastructure and manufacturer of best-in-class precision tubes, a formidable player in the area of defense and aerospace. We are on course of our goal towards evolving a solution provider from just being a manufacturing company. I would like to hand over the floor to Mr. Ram Aggarwal, who will be talking about the business in detail. Thank you.

Thank you, sir, and welcome all of you to this call. After the opening remarks by Mr. Garg, I would like to take you through the company in a bit more detail. I would like to dwell on each of the segment now. We will start with engineering structures and precision fabrications, a key segment not only in terms of our engineering expertise and passion but also in terms of growth opportunities. In this, we are evolving to provide both fabrication and services for infrastructure solutions, be it road bridges, smart city structures or super critical bridges for high-speed railways corridor and many others. Company has a total capacity of 60,000 MTPA for this segment. The order bank by the company from L&T for the bullet train under high-speed railway corridor is on course. Work has started, and we are hopeful that the project will get over as per the schedule. Here, we are working alongside the Japanese engineers. There is a huge scope of growth and expansion in this segment, and we envision an order book of over INR 1,000 crores in the next 2 to 3 years. Another area of focus is a solar power field. We provide specialized structures for the solar panels, which are in high demand across the board. The government initiative of 100 gigawatt solar energy is likely to boost company's solar support structure capacity. Here again, we can foresee a huge opportunity. The next segment on which we are bullish, that is the forging. We specialize in stainless steel, duplex, carbon, alloy steel forging, exotic materials and flanges, which is supplied in more than 100 grade products. Company caters to various and wide industries like automotive, trucks, agriculture machinery, equipment, valves, fittings and petrochemical applications, hand tools, hardware, off-highway and railroad equipment, general industrial equipment, marine and, moreover, airspace and defense. Forging for defense -- yes, we have to restart. We were on the next segment of forgings. So we specialize in stainless steel, duplex, carbon and alloy steel forgings and flanges, which is supplied in more than 100 grade products. Company caters to various and wide industries like automotive and trucks, agriculture machinery and equipment, valves, fittings, petrochemical applications, milk plants, hand tools and hardware, off-highway and railroad equipment, general industrial equipment, marine and, recently, aerospace and defense. Forgings for defense and aerospace has successfully made mark across the industry. Recently, as we had informed earlier, we have increased our forging capacity. We can now forge a single piece of 14 tonnes, which earlier was 7 tonnes. Subsequently, total capacity per annum increased to 30,000 MT, enabling manufacturing of high value-added products. With this, we will be in position to manufacture and supply high value-added products, which would result in greater profitability. We are supplier to some of the biggest names as for Indian aerospace and defense like [indiscernible], DRDO, L&T Defence, Godrej Aerospace, Pralay missiles, BrahMos missiles, K9 Vajra, tracked howitzer, et cetera. Our third segmented is precision pipes and auto tubes. Here, we offer products that require high engineering expertise. We are among the very few players to manufacture high-quality precision tubes. Our products are one of the leading products in terms of quality and consistency, resulting in high customer satisfaction and repeat orders. The segment is a substantial contributor of export revenue to the company. Industry catered to are aerospace, nuclear power, wind energy. We have supplied to some of the most respected brands across the world in both road and auto segment. Our one other sector is CR coils, pipes and tubes, which is our oldest sector. Here, we manufacture ERW pipe and tubes that find application precision tubes support structures and other infrastructure, agriculture, auto and many more. The company has been gradually consolidating its export business. The excellent range of products and services have enabled us to extend our presence in 100 countries across the globe, with a base of over 600 customers. The current domestic-to-export revenue stands at 42 -- 58:42. That's all from my side. I shall now hand over this call to Mr. Sanjay Bansal, who will talk about the financials in detail. Mr. Sanjay?

Thank you, sir. Good afternoon. At the outset, I'm Sanjay Bansal, CFO. On behalf of Goodluck, welcome to you all for joining us for a conference on the performance of the company in Q4 and financial year 2022. Regarding Q4 performance, total income from operation was increased to INR 702.02 crores against INR 484.36 crores during Q4 of previous year, registering a growth of 45%. EBITDA for the quarter stood to INR 53.57 crores against INR 31.28 crores during Q4 of FY '21, registering a growth in EBITDA margin at the rate of 71% on a year-over-year basis. The profit before tax, including other comprehensive income, was INR 24.30 crores in Q4 of 2022 as compared to INR 8.18 crores in Q4 of 2021. Performance for the full financial year has substantially improved as compared to previous year. Turnover increased by 66% to INR 2,617.10 crores. EBITDA increased by 53% to INR 186.89 crores. NPAT stood at INR 75.02 crores as compared to INR 30.05 crores, increase by INR 150 crores. The volume stood at 2,64,418 tonnes as against 2,24,603 tonnes in FY '21, a growth of more than 17%. The earnings per share has been at INR 29.48 per share. The volume stood at 2,64,418 tonnes during FY 2022 as against 2,24,603 tonnes in FY '21, a growth of over 17.7%. The earnings per share has been at INR 29.48 per share in FY '22 as against INR 13.01 per share during previous fiscal. However, performance of the company has improved substantially in 2022 as compared to 2021 due to increasing level of activity, higher margins in exports and savings in finance and establishment costs. The proposed -- the improved working trend would continue in current fiscal year provided geopolitical trend on Ukraine and Russia [indiscernible]. Thank you very much.

Sir, should we open the floor for Q&A?

Yes.

Yes.

[Operator Instructions] The first question is from the line of [ Malar Maneh ] from [ MHM Capital Market ].

Sir, am I audible?

Yes, please proceed.

Yes. Sir, can you please give the capacity utilization for each of the 4 segments?

Sir, overall utilization of the capacity you are asking?

Yes, I'm asking utilization of the capacity in percentage terms individually for each of the 4 segments.

Individually segment, we may not be ready. We can give you October, so the overall utilization is around 80%.

Segment-wise is not possible?

Immediately not possible, but we can tell you afterwards.

Okay, sure. Second question was that we have mentioned our volume growth, I think, around 17.7%, but revenue growth is 66%. So there seems to be an improvement in realization per metric ton. So what is driving this improvement in realization?

The volume growth has taken place. Raw material price is higher. So top line has improved. But margins have also improved during the time.

Correct. Okay. And sir, you had mentioned the FY '21 volume figure in metric tons. Can you please repeat that for FY '21?

It was 2,24,000 tonnes.

Okay. But when I'm going to the investor presentation, there, it says 2,19,903 tonnes.

Maybe then...

We will check it and come back to you.

I can correct myself. I've said my memory. I don't have the figure before me.

[Operator Instructions] The next question is from the line of [ Aniket Raitkar ], an individual investor.

Yes, sir, congratulations on the good set of numbers. Sir, I have a couple of questions. So first question is related to balance sheet. So are we moving to reduce our long-term borrowing to 0?

Yes. This is the target of the company to reduce the borrowings.

And -- okay, okay. And sir, what is the status of L&T LOI? Hello, sir?

Hello?

Yes. Sir, I just want to know the status of L&T LOI.

L&T LOI, the bulk has already started. Most of the infrastructure work has been completed, and the required approvals are on the way. So from June onwards, we can see the project on the floor.

Okay. Okay. And so sir, what is the reason behind the good export performance and without the geographies and -- from which segment we are getting more export order?

It is the precision tube and galvanized pipe. There has been a good demand overseas because there were shortage in the world over of the product.

Okay. Okay. As you said that the company is focusing on the value-added segment. So how you're going to see the contribution of value-added segments in the business?

We -- our emphasis is, from the beginning, helping to only improve our performance or to value-added products. And we are aiming at that. And all our incremental expansion is taking place in that direction only. That is the result that after 3 years of investment, what we made in the last 5 years, it has been able to -- that investment is certified now and giving us a head start last year.

Okay. Okay. Okay. And sir, what is our current order book? And what are the targets in terms of the order book?

So basically, we are in 4 verticals. In every vertical, orders are different. Suppose if you talk of the infrastructure sector, we have almost INR 475 crores orders. And if we talk of the CDWs tubes, auto tubes, so there is a visibility of orders for the next 6 months because [indiscernible] order come in quantity every month. And in the forgings, we are having a visibility of almost 5 to 6 months orders. And in the general sector, which is ERW pipes, CR sheets, these are the monthly orders. So we normally have 45 days order, and those orders are available right now. So there is no doubt of orders or the order book right now what we are foreseeing.

Okay. Okay. And sir, what about our plan -- as you can see, the solar sector seems to be very focused area right now. So what are the target plans? And what kind of order we can get?

Basically, right now, solar is on the [indiscernible]. Everywhere, whether it is U.S., Germany, basically Europe, U.S. or India, everywhere, it is a solar. Even the RIL, Reliance, has given a 100 gigawatt target for -- up to 2030. Government of India is already having a target. So solar, there is no doubt of orders. Now as far as Goodluck is concerned, we are giving the support structures and track tubes in this sector, record tubes in this sector. So right now, we are having a visibility of almost 300 megawatts in the coming 2 to 3 months, but it will improve. After the rains are over, the work will start, and the visibility will be better.

Okay. Okay. Got it. And sir, as far as defense sector is concerned, what are our targets? Any new products added to the portfolio?

So basically, defense sector, it has just started because India in -- up to last year, India had been importing almost $100 billion purchase. But now government is putting pressure that it should be made in India. And due to this Ukraine conflict or the China conflict also, government has put pressure for making in India, but it has just started. What we are doing, we are doing some parts of BrahMos missiles. We are doing some parts of K9's guns. But now the market has started to open. Products will be added. We have installed our machines to make those products. But the product's actual position, it will come in maybe in the next 6 to 8 months.

Okay. Okay, okay. And sir, who are our top 3 competitors -- 2 to 3 competitors in the industry?

Basically, we are in 4, 5 verticals. So every vertical has different competitors. So now we are our best competitor. We have to compete with ourselves.

Sir, can you name a few in terms of the segment, the segments and names?

If you talk of forgings, Bharat was very big name. We are very distant cousin to him. They are making 10,000 tonnes. We are making 2,000 tonnes. But definitely, we aim to -- okay, okay. So basically, we were on the defense side. So it will take some time to really identify the products. But the machinery is there, and government has also to identify which products they want to source from India and what are the critical products they are -- they have to still import from overseas.

Okay. Okay. Okay. And sir, what is the status of the cash flow? And are we planning to reduce our working capital?

Definitely, we are trying to reduce our working capital. But as you know, our turnover is increasing. Material prices are going up. So cash is our basically raw material. We always try to do it minimum. But as soon as the turnover increases, there's working capital increases.

Okay, okay. And sir, as the steel price is moving up, so what are your steps? And how do we plan to take care of that? I mean are you going to pass this price to the -- your end consumer? Or how are you going to manage this?

The increased prices are -- will be passed on to the consumer always, with little time [ lines ]. But they are [indiscernible]. It's a complete pass-through.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Mahesh Garg for closing comments. Over to you, sir.

I would like to take this opportunity to thank each member of Goodluck India family. I would also like to thank our clients, creditors, banks, financial institutions and other stakeholders. And we look forward for your interest of all our stakeholders. And for any further queries or information, please get in touch with our Investor Relations team. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Goodluck India Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.