Goodluck India Limited (530655) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Goodluck India Limited Q4 and FY '24 Earnings Conference Call. We have with us today Mr. M.C. Garg, Chairperson; and Mr. Ram Aggarwal, Chief Executive Officer, from Goodluck India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. M.C. Garg, Chairperson, Goodluuck India Limited. Thank you, and over to you, Mr. Garg.

Good morning, everybody. I welcome you all for this phone call on behalf of Goodluck India Limited. The year gone by on March '24 results are in your hand, and it has been an excellent, best-ever year for the company. Offers [indiscernible] by the team has yielded good results, and we had a good progress in terms of profitability, profits and all other parameters, which you must have noticed from the [indiscernible]. It has been a challenging year at the same time. Since '92, we are in the export business and export has been our -- one of the first areas. We are exporting our products to almost [ 85 ] as well as the developed markets of Europe, America and Australia. And we are trying to increase, improve utilization of the plant capacity. Without any addition, we have been able to increase in top line of 15%, 20% by better utilizing our assets. And with the increasing output, our requirement of working capital was [indiscernible], which we made up by having a QIP project recently completed. And fortunately for us, and I'm pleased to inform you, there are some of the big names, investors like [indiscernible]. There is a challenge in the demand. But because of our [ concentrated ] quality commitment and our performer with the customers, in the demand slowdown time also we have been able to maintain our momentum. We have lean CapEx and we are putting up a state-of-the-art plant for producing [indiscernible] fuel, which is one of the first plants in India in the [ range ] in which we putting up the bandwidth with which [indiscernible] by July 2025 -- sorry, July '24. And this also will be mainly concentrating on export. We have already signed an agreement, marketing agreement for Europe, Panama and Mexico with one of the reputed companies. And this plant is going to -- will be a game changer for the company, which we expect. The other products of the company, as you are aware, the government [indiscernible] and the materials [ are needed ] on the road. The government of India has announced its intention to replace everything by [indiscernible]. And we are into double [indiscernible] [ Tata Marcopolo ] and many others, SML, et cetera. There is a very good scope of improving. It will be basically adding to our value-added product segment. Not only this, we have entered into solar production. Solar hardware is [ something ] we are supplying almost all parties in India, and we are specializing making the [indiscernible] tubes. We are -- we expect a good increase in the turnover and expand our growth -- net growth will be coming from the sector of solar [indiscernible] and [indiscernible] tubes. And we expect our growth momentum in time to only continue and our dream, but when we say for the next 3 years, we will be fulfilling that dream without fail. With this, I conclude my brief performance of the company, and I hand over to Mr. Ram Aggarwal to treat on the -- to brief you on the [ company ].

Thank you, everybody. First of all, I would like to thank you, everyone, for taking out time for attending today's conference call. And I would like to start with this spread view of our numbers. You all have the numbers with you, but a quick review of the numbers I'm taking. In this quarter, we have [indiscernible] a turnover of INR 908 crores against the last year quarter turnover INR 766 crores. And in the whole year, we have got INR 3535 crores against INR 3085 crores last year. So there is an increase of 13.55%. If we talk of the sales volume, earlier year we had done [ 316718 ] lakh tonnes, this year we have done [ 383795 ] tonnes. So -- and the special thing to mention is in our regular sector, there is an increase of only 6% whereas in our value-added sector there is an increase of 39% year-over-year. And if we talk of the profitability of the stand-alone company, so -- in the quarter, we had done INR 47.76 crores this year, whereas last year in the fourth quarter, we had [ INR 36.44 crores ] PBT. And for the full year, last year, it was INR 120 crores, whereas this year, it is INR 179 crores. So it's a growth of 49.7% in terms of PBT. If we see in terms of EBITA, last year it was INR 60.32 crores in the quarter 4. This year, it is INR 72.72 crores, whereas in the whole of the year, it was INR 218 crores last year and INR 292 crores this year it's showing an increase of 34.2%. And in terms of PAT, this quarter we have brought INR 35.5 crores. Whereas last quarter -- whereas last year, the same quarter, it was INR 27.92 crores. In whole of the year, the stand-alone properties INR 130.50 crores, whereas last year it was INR 86.90 crores. So it's showing an increase of 50.22% increase. The project which we have taken, which is going on, which is likely to be commissioned by June or July '24, there, we have done a CapEx of almost INR 141 crores. So with this quick view, I come to the point, as pointed by Mr. Garg, India is at the cusp of tremendous growth and well poised towards becoming the third largest economy as everybody in this election seems everybody is hearing that our GDP should be $5 trillion. Government focus on [indiscernible] mission, infrastructure spending [ 11.1 lakh crores ], which is again being increased because tax regulation -- tax collection has been good. It has been increased by 10%. [indiscernible] houses are middle class, [indiscernible] rooftop solar, INR 2.6 lakh for railways making [indiscernible] by NHI set-top speed, defense outlay being increased, our defense outlook on export is also being increased. Nothing is left where development is not there. So your company is well poised to ride on the wave of development. [ Engine ] auto, defense and infrastructure. In last 2 years, your company has expanded its infra by making first bullet train projects under a joint workshop of L&T, IHI Japan and Goodluck in [ Kutchch ]. Having the first moving advantage, we have almost completed 10,000 tonnes, almost 40% of the project presentation. So the -- which is taking -- which will take charge after 4 June, 3 new bullet trains, 100 railway station remodeling, [indiscernible] scheme, I mean a lot is coming for both our country and in turn, fueling the growth of your company. In the auto sector, as Mr. Garg has told, we are entering construction industry machines such as those are by making hydraulic [indiscernible] of [indiscernible], virtually replacing stainless tubes. We will be one of the few plants in the world in forging sector we have incorporated a subsidiary to defense and aerospace limited, where we will make those parts of artillery and aerospace sector. We have consistently assessed and enhanced our production facility, conducting R&D for new projects with the same asset base, which is our USP. Mechanizing and digitalizing our manufacturing operations collectively is our aim. In all verticals, with the new software we installed market analysis has taken a central state in helping and tapping new markets, because market analysis is the spinal cord of the company right now. We are upgrading our tool mills for new shapes, sizes, [indiscernible] in terms of demand. Our employees, our biggest asset, as earlier also we have said, they are our biggest asset, and company initiating steps to help them go and become our partners in company growth. Sustainability is our aim. As we had told in the last [ calls ] as well, companies continuously investing in measures that will offset millions of CO2 emissions during the project lifetime, because sustainability is a -- main [ core ] issue there. In its strategic development, the company has made significant [ growth ] in road safety sector by adopting European design and subsequently reducing cost of crash barriers. The company is planning to introduce designs in India as well as overseas in association with our overseas partners, advanced stadium, as the earlier [ phone ] call I just told, it is one of the examples of our [indiscernible] offers. With all our initiatives, we feel much more is yet to be done. It's a continuous evolution process to enable us to remain ahead of our competitors. Energy is the keyword to this. Of all the advancement going on throughout the globe, we have companies working vigorously on renewable energy, as Mr. Garg has already told. I believe that at least half of the renewable energy will be transported with hydrogen instead of electric grid in the times to come. I think it is a 5 years' time when this transition will take place. We are working vigorously on solar energy, green hydrogen, [indiscernible] energy. There are many options companies looking into because technology is upgrading with every passing day. I want to assure all the investors, all the stakeholders in the company, that your company is abreast with all the developments going on across the globe and adopting the same to benefit your company. At the end, I would like to emphasize our in investing [indiscernible], equipment to enhance our productivity with financial prudence. Going forward, rising demand for steel in infra, [ favored ] government policy and conductive business environment are expected to result into an even brighter future, however, in green and [indiscernible] Products. Thank you. Now we are -- now we are open for the Q&A session.

[Operator Instructions] The first question comes from the line of [indiscernible] with [indiscernible].

Sir, my question is on our growth perspective. I think we have made a guidance of really, if I'm not wrong, a 10% volume growth for the next 2 to 3 years. I believe the way is [indiscernible].

Your sound is not audible.

Am I audible now?

Yes, yes. please.

Yes. Sir, in terms of volume growth, because other companies have given a guidance of something like 15% to 20%. Can we also do that kind of a growth?

The growth will continue. We are not going climb [indiscernible] 15% to 20% growth is our moderate target year after year which we have been doing for the last 3 years, and we will continue to do so in the next 3 years. The roadmap is clear. Does it answer your question, sir?

We have lost the line of the participant. I will promote the next in line, that is Arjun Agarwal, an individual investor.

First of all, congratulations on a good set of numbers. So taking forward that question that earlier the gentleman was asking, sir, I just wanted to know that isn't our company a bit conservative in providing the guidance that we are providing, based on year-on-year growth?

We are not underweighting, but we are realists. We keep our feet firmly on the ground in the [indiscernible]. We are aiming 15% to 20% growth, which we have been doing in the last few years, if you see the figures. And we continue -- we will achieve the same targets. We have a dream to become a billion-dollar company in the next 3 to 4 years, and we will become a billion-dollar company. The roadwork is ready, plans are ready, but we will be [indiscernible]

Okay. And moving forward with the next question, I just want to know if you can provide a bit of overview on the time line, means in a quarterly terms, if possible, that -- what is the progress on Goodluck Defense and Aerospace, means the plants which we are setting up, what is the time line that we will follow if it is possible to give a breakup in quarterly terms or half-yearly terms?

I will tell you that the progress is more than our expectations. The plan is under direction. Building work has started. Originally, we had planned to commission the plant by last quarter of '26. What we are expecting to commission the plant by March [indiscernible]. Earlier we had planned to commission it '26. But the progress is good. The inquiries are good. We hope that plant will be commissioned by March for a [indiscernible].

Okay. So sir, it will start contributing, means gradually, it will increase, that is understandable. But it will start contributing a bit from the second quarter of FY '26, it I can say that...

You're right.

Okay. Sir, if it is possible to give a -- from your end, Sir, I just want to understand that what exactly is the current setup that we are having in our company? What we are doing right now in terms of defense and aerospace and how we will -- how we are willing to upscale with this upcoming plant that we have mentioned? Just brief overview that what is currently we are doing and how we want to upscale in terms of [indiscernible] and in terms of the order book or in terms of the future prospects?

Right now, what we are doing, we are working with [indiscernible] projects like our HAL, like our [indiscernible]. So we are working, we are making a small forging part for those projects, and that is what we work in the current setup. The new setup, which is being put up, it is for a particular product, which will be ammunition part. And we will let you know as the progress goes on, we will let you know the exact position of the particular product, what we are doing, what we will be making in that plant. The current working in Goodluck Engineering or the forging division, what we are doing -- right now we are doing only 4%. Suppose we are doing INR 500 crores, which is hardly 2% to 3%. But in coming 2, 3 years, we are aiming to take it to next 7 to 8 years -- 7% to 8% in coming 2, 3 years in the same products, like in aerospace and the defense. But in Goodluck Defense, it's a dedicated project for ammunition and further shells of ammunition, and that will be commisioned, as we have told, in the first quarter of next financial year.

Okay. So just to be clear, from -- just to clear my understanding in this part, sir, the guidance that you have provided means a yearly guidance for the total revenue. But when you from Aerospace and Defense is excluded of that guidance, sir? Or is it including of that aerospace and defense revenue?

It is included. Everything is -- except the new plant, everything is included in our 15% to 20% guidance what we have given.

Mr Agarwal, we request you to please rejoin the queue for more questions. Next question comes from the line of [ Pardeep Rawat ] with [indiscernible] Capital.

So my first question is regarding our capacity. So what is the current year capacity and what it will be after the expansion?

At present, our capacity is [ 412,000 ] tonnes. But that after commissioning of this [indiscernible] plant, our capacity will be 480,000 tonnes, which will be commissioned within this year by March '25, what I've said.

Okay. So we are incurring INR [indiscernible] crores for that new CapEx.

Yes.

And we are expecting revenue from that CapEx, almost like at peak utilization, what could be the revenue?

This year, capacity utilization will be lesser because it will be commissioned in almost start of the second quarter. So this year, it will be a 50% capacity utilization, and in the coming years then it will go to 50% to 70%, 70% to 80%.

Okay. So what would be the revenue potential?

The revenue potential for this new expansion is almost INR 500 crores to INR 600 crores.

So additional INR 300 crores of revenue would come from the new CapEx, right?

In this year.

And my second question is regarding our margins. So what is the margin differential between value-added products and normal products? And can you please also give the segregation between value-added and normal products, the revenue segregation?

So I can tell you, theoretically any product [indiscernible] 10% EBITDA or more is considered as value added. Anything within below, [indiscernible] is considered low [indiscernible] but what product we are going to add into our profile, they will give much more EBITDA to us. It will be 12% to 13% EBITDA, the product which we are going to add.

Yes. So the product that we are adding from new CapEx and that's defense and aviation CapEx, right?

So defense and aerospace we have not included. What we are talking here about talking about the CDW tubes, which the project is being commissioned in July '24. [indiscernible]

That is only for this financial year. That -- for the [ design ] project will be included in the next financial year.

Okay. And my last question is regarding margin also. So what kind of sustainable margins are we seeing, like what kind of targets do you have for margins?

For which product?

Look, overall margin situation improves in India in steel processing. Reason is steel can see rising. There is an abundant supply of steel, international prices are lower, processing capacity is [indiscernible]. So our margins will be definitely better the current year than the previous year. And what product we are making in value-added, like precision tubes, they have become basically proprietary products. Those who buy from us have to buy from us because we are a tube supplier for them. So we don't face any threat on our margins.

So in case of any situation of rising input prices, do you see any kind of threat on margins? Like do we easily pass on those price rises? Or do we have like a lag between the past ones?

As a whole, all cost increases are passed on to the consumers. But some times with a time lag. However, I don't see any possibility in the current year price rising immediately in international market or domestic market.

Next question comes from the line of [ Pravin Desai ], an individual investor.

Yes. I want to ask that you have told that our defense and aerospace project is starting ahead of schedule. So what will be the revenue at the full capacity of that plant? And one more thing that you have told are inducting for solar, but how about the hydrogen? What are you proposing to go for a hydrogen production? Or how are you going to go ahead with hydrogen? Just please explain.

These all are the future products. Company is definitely in the renewable energy. In the renewable energy, we are just supplying solar hardware. And energy, whether it is solar energy, which is a part of the hydrogen what you are talking. But this project has to take shape. Everything is on the drawing board. But definitely, we are taking that action and we will let you know as a guide for point of time.

Yes. But sir, what would be the revenue of that defense and aerospace in future when we run at full capacity? Can you just elaborate?

It should be almost INR 300 crores to INR 350 crores from aerospace and defense.

[Operator Instructions] Next question comes from the line of [ Sriram ] [indiscernible], an individual investor.

Hello? Am I audible?

Yes, yes.

Sir, my question is when in pre-COVID, if I see your operating margins, it is at 8%. Currently, we finished the year at 8%. Now from what I understand, like 50% of our revenue comes from general products like CR coils and other products, and value addition is currently 50%. So I'm just trying to understand with 50% of value-added products, the margins do not change. They are still at 8%. So can you just explain like what is the gross margin for each of those 4 segments?

I can tell you, 3 years ago, our EBITDA was INR 5,800 per tonne. Today, our EBITDA margin is almost INR 8,400 per tonne. In terms of percentage you see, you may not find a difference where the volumes are increasing. Percentage goes down of EBITDA. But in terms of absolute terms, our EBITDA we are getting per tonne is very important than the [indiscernible] discount. And it continues to improve with the product mix and the market mix which we are changing every bit [indiscernible]. Every month, every quarter, every year.

Okay. Sir, can you give the EBITDA per tonne for each of the segments if possible? 4 segments you have.

That figure we don't have, but we will put the question to my second [indiscernible] and will reply you [indiscernible].

Next question comes from the line of [indiscernible] with [indiscernible].

Sir, again, a question on margin now that you are being EBITDA per tonne of nearly INR 8000, now going forward, we have defense products that will come in. How long will it take before we start touching the INR 10,000 mark?

That's a very interesting question. Very, very interesting question. I want to achieve it today.

But my point is that in 2, 3 years, should we be near around INR 10,000?

Maybe [indiscernible]. Margins are a function of the market process. There's disruption taking place. As a management, I should give the guidance [indiscernible] aiming for that INR 10,000 per tonne. But can I give you a fixed time line? Sorry, I will not be able to give. Our aim is to achieve that per tonne.

Okay, sir. And sir, in terms of defense, if you can throw more light on where are we and how much -- are we actually -- have you started selling and how it is progressing in terms of volumes, let's say, in FY '25 it will be, how do you foresee that?

I will tell you there is a good demand on it. So many people are interested in buying from us. We have developed the protoproducts. Prototype, we have done in our plant. And that is also likely to come within this week, and we will start replying to them. However, the commercial production will start for the new plant by March, April '25.

Next question comes from the line of [ Vignesh ] with [indiscernible].

Just one on the rationale behind the new plant which we are putting up with the hydraulics [indiscernible] plant.

Your voice is not audible.

Is it better now, sir?

Yes, yes.

Just want to understand the rationale behind the new plant, which is going to commission those hydraulic tube [indiscernible].

The rationale is the demand. The inquiries we get is the only rationale. There is a high product margin. So construction going around the world. There is a shortage of hydrogen fuel across the world, not in India only. Everybody wants it from us. And everybody has booked. At what order we will [indiscernible] management's assumption of no problem with sales.

Okay. Okay, sir. And I know like which sectors are we supplying these products to? Just to understand the demand side?

Mostly construction industry, construction equipment industry.

Okay. Okay. That's fine. And other question is, generally, how is the capacity utilizations in our other segments?

Can you repeat, please?

How is the capacity utilization in our plants? Is it running at full capacity or we need to go for the new CapEx kind of things for expansion?

Then we are running at almost 87% efficiency, 87% cap utilization. So -- and we aim to achieve 105% utilization from the existing plant. And whatever CapEx we are doing, the further addition will go on that.

Next question comes from the line of Amit Kumar, an individual investor.