Goodluck India Limited (530655) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Q2 FY 2025 Earnings Conference Call for Goodluck India Limited. We have with us today, Mr. M.C. Garg, Chairperson; and Mr. Ram Agarwal, Chief Executive Officer. [Operator Instructions] I would now like to hand the conference over to Mr. M.C. Garg, Chairman and Managing Director of Goodluck India Limited for his opening remarks. Thank you, and over to you, sir.

Hello, everyone. Good morning. I'm pleased to welcome you all to this earning conference call of Goodluck India Limited. I am honored to have this opportunity to discuss our company's Q2 FY '25 performance along with my team and answer any questions or query you may have. Let me begin by defining the broad economic trends we witnessed during the quarter and company performance. It is a matter of -- the results of Q2 are in your hand. And company has performed well under the most adverse condition during the quarter as you must have noticed. The geopolitical tensions and the headwinds going worldwide and Indian demand also looking down, the company has done well and has shown growth in volume and value. The steel prices are very volatile during the whole quarter, but company performance is, in my opinion, is exemplary in all respects. Our business model has stood with us in this difficult time. And in this quarter, a new milestone has been achieved by the company. We commissioned the plant large diameter heavy wall thickness pipe for making hydraulic tube in month of September, which is one of the very few plants [Indiscernible] and commercial production will start any time in last part of this year, any time after January. This facility have been started with an investment of INR 200 crores with a capacity of 50,000 metric tonnes tons. Our subsidiary Goodluck Defense and Aerospace progress is going at a very fast pace, and we are likely to commission that plant by end of this financial year. Hence, -- as per our information today, our demand for the product, which we are going to make is very frantic, and our production coming out is going to be a game changer to the company. Geopolitical tensions -- however, geopolitical tensions have disrupted our export. U.S. elections have shown uncertainty in the business. The rupee volatility and steel prices and basic commodity prices have become unpredictable and volatile for some time till still they stabilize. In conclusion, we remain committed to delivering value to our stakeholder through innovation, efficiency and sustainability practices and confident to achieve our performance as per the guidance provided earlier. Thank you for your attention and look forward to your questions.

This is Ram Agarwal. Thank you for joining us today. Ram Agarwal, CEO of Goodluck India Limited. I appreciate your participation in our earnings con call for the quarter ending September 30, 2024. During Q2 FY '25, we recorded a total operating income of INR 976 crores compared to INR 885 crores in Q2 FY '24. This substantial growth was driven by operational efficiency. Our EBITDA for the period is INR 87.45 crores, up from INR 73.68 crores in FY '24. This improvement in EBITDA can be attributed to the cost optimization measures and increased operational efficiencies. However, market was not favorable, but still, by these 2 measures, we did this. On the profit front, our PET for Q2 FY '25 is INR 45.06 crores, up from INR 34.70 crores in Q2 FY '24. For the half year ended September 30, 2024, the company's net profit on a stand-alone basis increased by 25.66% at INR 79.53 crore as against INR 63.29 crores, while total income grew by 9.25% at INR 1,908.33 crore as compared to INR 1,746 crore last year. Sales volumes fell by nearly 9.4% at 200,489 MT in H1 FY '25 against [183,256 MT] in H1 FY '24. Goodluck India, in my opinion, stands as a testament to the power of innovation and resilience. From its origin in manufacturing regular steel products through its evolution as a premier provider of engineering solutions, the company's journey is marked a relentless pursuit of excellence. With decades of experience, Goodluck India Limited has successfully navigated market dynamics and technological advancement, positioning itself as a leader of the industry. The company's strategic initiatives such as enhancing plant capacity utilization, commissioning new facility by hydraulic tube production underscores its commitment to meeting market demands with forward thinking solutions. This proactive approach is further highlighted by its expansion into the European, Canadian and Mexican markets, a bold move that not only borders its global footprint, but also imposes its competitiveness on the international space. The company's focus on increasing its range of value-added products reflected the understanding of evolving customer needs and the dedication to deliver superior and tailored solutions. This theme captures the essence of company's journey, leveraging engineering excellence to carve out new pathways for sustainable growth and solidifying its role as a trailblazer in the industry. We remain committed to creating stakeholder value to sustain performance, we have invested in our future and continue to uphold the tenants of quality, innovation, customer trust in everything we do. We thank our stockholders and the investor community for their sustained support. I now request the moderator to open the floor for Q&A session.

[Operator Instructions] The first question is from the line of Prateek Bhandari from Art Ventures.

Can you tell me about the EBITDA per tonne that we clocked in for this particular quarter?

It is almost INR 8,100 approximately.

So does it mean that we have seen a degrowth in the realization?

How did you calculate that?

So last quarter, we did EBITDA per tonne for INR 8,350. And for this quarter, it was getting INR 8,100.

Please check your records. It was -- in my opinion, it was almost INR 7,700 and INR 8,000 -- it was approximately 8,000, it remains the same, almost flat.

Okay. And what was the volume for this quarter?

Value of the EBITDA -- total EBITDA?

Volumes per tonne. Hello?

In April, it is 200,489 metric tonnes.

How much?

2 lakh tonnes approximately, in exact terms 2,00,489 metric tons.

Okay. So does it mean that we have doubled our volumes from -- on a quarter-on-quarter basis?

No, no, no, absolutely. I think there is some is miscommunication. I can tell you what was the volume in the first quarter.

So last quarter, you mentioned that you did a volume of 102,000 tonnes.

In this quarter, we have done a volume of 160,000 tonnes.

So it is a H1. This is an H1.

No, I'm asking for this particular quarter.

Yes, yes. It is -- you are talking of quarter, we are talking about H1. So H1 it 200,489 metric tonnes.

204,000 approximately?

Yes, yes.

And for this particular quarter.

Like 103,000 tonnes.

103,000. All right. So sir, going forward, where do we see the EBITDA per tonne shaping up to for FY '26? What would be the approximate range for EBITDA per tonne?

Every year, the EBITDA has improved. The improvement will depend on the volatility. If it subsides that we expect EBITDA improvement anything between 5% to 10% EBITDA improvement on the year-to-year basis.

On an annual basis?

Yes.

[Operator Instructions] The next question is from the line of Sumant Kumar from Motilal Oswal.

Can you talk about the new plant ramping up? What is the utilization currently?

New plant, trials are being done. Plant has been commissioned. There are a lot of sizes for which equipments are still coming in. The ramping up is going to take 3 more months. However, inquiries and orders are coming more than what we expected. But some supplies have also been affected. It is a time consuming process. The actual user will get their material, will test it, approve it, and then we will start getting regular orders. But ramping up is going as per schedule.

Okay. And when we see the operating level growth in last 2 quarters, okay, it is not encouraging. So can you talk about with the new plant ramping up in the coming quarter, and also -- and so how is the growth is going to be in next couple of quarters or H2, how is the order book?

Sir, one thing I disagree with you, the growth in demand or growth in -- has not been encouraging. Taking into consideration the headwind growing domestically, and internationally we are still able to grow. And I think that's a very -- compared to the industry as a whole in India if you see, in our sector, only we are the one to grow. Others have fallen behind. We have been able to not only maintain our EBITDA and improve our EBITDA in the most difficult situation. Our diversified business model has stood with us in the difficult time. It is a difficult time for industry, processing industry as such. Market steel price going down every month. You can imagine what kind of situation in which we are. But I feel the company has done very well.

Okay.

And time ahead, I look forward the next 2 quarters, mostly better than the first 2 quarters.

Any incremental update in different sites, the sale of Defense?

In Defense sector?

Yes.

Implementation of the -- erection of the product is going on. Machines are on the sea, and it is likely to be a trial run. It is likely to be commissioned by March '25. And from April '25, we are likely to start the trial conduct for the commercial production. So it is going on as per our schedule. However it is before schedule.

Okay. So then you can start before schedule of April 2025, right?

Basically, it's a trial run and commercial production, it will be starting in April '25 onwards. Erection will be completed by March '25.

So can you talk on solar support structure, how is it growing for the company and the target for us?

Solar support, et cetera, we are already applying about -- 200 megawatts. Already, we are supplying for solar support structure. And it is doing well. We have the good order book there. And we almost everybody we are supplying. Almost everybody we are servicing solar support structure. And we see good visibility for at least next [Indiscernible] years.

The next question is from the line of Rakesh Roy from Boring AMC.

My first question is regarding, sir, for Q1. In Q1, you have guidance -- the guidance of footprint to 20% growth, still your impact for this growth for whole year?

Can you repeat the question, please?

My question is, sir, in Q1 con call, you have guided -- given the 15% to 20% book -- top end, but still, you have impact for 15% to 20% growth for FY '25? Or you have downgraded this growth? Any idea, sir?

15% to 20% growth is our conservative target for time to come. However, in Q2, the geopolitical situation, we disrupted the exports and slowing the domestic demand, Indian elections, heavy monsoon, they affected the domestic demand, but still we recorded a growth of 8.0%?

10%.

10% we recorded a growth. And I think that's a wonderful achievement under the situation.

Again, you are saying 15% to 20%, now you are saying 10%.

Basically, due to these conditions, the growth target for this quarter, it has gone down. But now the monsoon is over, election is over, U.S. election is over, so we hope in this H2 or Q3 and Q4, market demand will persist and the guidance what we had given, we are likely to achieve it.

So you are still intact -- [Indiscernible] down 10%, but you're are saying 15% to 20% is achievable?

In the coming quarter, it will be, however, a blended one, it may be a little lesser.

[indiscernible] management is confident we will achieve the growth as guided earlier. However, in the second quarter, I told you the heavy monsoon all over the country, elections, Indian elections, U.S. election. We are an export company. Disruption in export definitely affected the demand, but still we were able to record a moderate growth of 10%.

Okay, agree sir. My next question is, as you said, you were saying the EBITDA per tonne for this quarter is nearby INR 8,100. This EBITDA will maintain in near future Q3, Q4 or this will be coming down?

It will be maintained. It has to improve year after year. There is no reason. I don't see any of reason for it to go down.

Sir, why I'm asking because iron ore price is increasing. So that's why I am asking you?

Sir, I'm not questioning why you are asking. I'm happy that you're asking. And you should ask me pointed question [Indiscernible] satisfy you. I'm happy you asked this question.

Okay. Sir, my next question is regarding Defense business. Earlier you were saying you have the capacity of nearby 1.5...

We are truly confident. We will not only maintain EBITDA, we'll improve it year after year.

Agree, good sir. My third question is regarding Defense business. Earlier, you were saying you have the capacity of nearby 1.5 lakh tonne every year. So for this year, you are -- can we assume is a 70% utilization [Indiscernible] how much utilization you are targeting for FY '26?

I have already told you that the erection -- machinery will be commissioned by March '25. So in this current financial year, there will be no production. But in the next year, when we start from April '25, yes, we will aim for minimum 60% to 70% of the production target in the coming financial year.

[Operator Instructions] The next question is from the line of Abhishek Dixit from Hem Securities.

Sir, my question is regarding on other income. Like for this quarter, there has been a surge in other income. It's around INR 18 crores. Whereas in earlier quarters it was INR 1 core and in the same quarter last year, it was INR 4 crores. So what was the reason for surge?

Actually, our other income is an interest income and export rebate and some other income also. So further details, you can e-mail us, we will clarify you.

Interest income and export rebate...

Export rebate, interest income and many other miscellaneous income.

Okay. Sir, like we consider this a normal, what rate was earlier in the quarter then our PAT has been flat, like it has not grown much. It was...

Your voice is not clear. Can you see a little louder?

Yes. Now it's clear?

Yes, yes.

Sir, I was asking, like if you consider the other income has normalized, what it was in earlier quarters. So PAT is like it is flat. There has been a growth in PAT due to mainly other income only.

Basically, when you will see these conditions in the market, in the Q2, if you consider it from Y-o-Y, then there is a good -- despite all these problems, company has been able to maintain the things. Otherwise, it was very difficult -- monsoons was almost 4, 4.5 months. All the projects were delayed. There was no site was working. No supplies were going, and geopolitical, after election, no new projects have been declared. U.S. election, all the export was down. But still, in these difficult quarter, we have navigated our company to maintain if you -- in your words, we have maintained a status quo.

Okay. So sir, can we expect second half of the year, it will be much better than the first half?

Definitely, it is always. You go by last 4, 5 years, it is always better and moreover now the monsoon has subsided, U.S. results have come. So I hope it should be normal now.

Okay. And sir, for this hydraulic plant, what's our max potential turnover?

Right now, what we have -- we have done a capacity of 50,000 metric tonne. And we hope to achieve it in 12 to 18 months. And as soon as we get 80% and 90%, then again, we will have to do a certain CapEx to double its capacity because market is ebullient to accept this product.

And sir, how is the demand for these hydraulics in India and export market?

The market is excellent. Demand is excellent. It is a replacement of seamless tubes.

So demand is there. There is no doubt of demand basically. It is only the production, how fast we can ramp up our production, and we can feed the thrust of the market. Market needs this because it is a construction material. The construct -- it is being used in a construction machine. And everywhere, construction is going on. Destruction is going on, so construction is a natural step, and it has already started.

And you said in your filing also that it will act as an import substitution.

Definitely, it is.

Domestically, yes. A lot Chinese seamless pipes are coming to the country, and the samples are going to the people who are using these seamless pipes and their approval is awaited. This approval will take some time.

The next question is from the line of Disha, an individual investor.

I would like to know, can you help me with the update on the bullet train project?

Yes. The bullet train project, as far as we are concerned, we have got an order of 22,000 metric tons. And out of that, we have produced almost 65% order. And in next 8 to 9 months, maximum to 12 months, it will be completed. But as far as the total bullet train operation is concerned, for which L&T and [NHRCL] , so I hope in the -- by 2026, it should be operational as per the government estimates.

[Operator Instructions] The next question is from the line of Deepak Pandey from [Indiscernible] Capital.

So just want to understand, at large for the company right now, the CR coil business is the low-margin and high-volume business. So going ahead, do you see some kind of demerger for the business in the medium to long term?

We don't plan to do this. It is a business running for last 25 years at the same capacity as it was installed. But it is just a low-margin and same volume products, which we are doing because we have some committed customers who buy from us, and we are servicing them. It is not of much significant to our overall volumes in the company.

Understood. Understood. And do we see any further expansion in the same, CR coil business?

So we don't plan to do this.

Okay. My second question, sir, pertains to the Defense vertical. Has there been any development on the product side? Or have you spoken to the potential buyers in this quarter?

We are speaking to a lot of potential buyers, rather potential buyers are speaking to us. And several of them domestically and from overseas have visited our plant. And we find a lot of interest in the buyers to buy our product, only awaiting the commissioning of the plant.

Understood, sir. Sir, on the Defense part, is there some sort of demand and supply scenario that you have for the Indian market?

Indian market, definitely Indian market has a good demand. For the last 2, 3 years, if you see because in India, [indiscernible] local authority which purchases it, earlier it was purchasing a very little quantity. But you must have gone through a news item, where they have placed the order of almost 250,000 plus requirement for 2027. So along with all the world, India is also looking up to increase its win size for this particular product because all these ammunition, it is being standardized to 155 mm, what we are doing. I hope your queries were clarified.

Understood. Understood. And for the sir hydraulic tube plant that we inaugurated recently, how long do you see the plant to get stabilized and commercial production to start?

It will take anything between 4 to 6 months. Commercialization is going to start, it's a long-drawn process. Tubes are made, they go into line, equipment, they are tested, approved, then only they can be commercialized. Approval is a long term process.

The next question is from the line of Vinit Agarwal from Aditya Birla Money.

Congratulations on good numbers. So I just have one question. We have seen government CapEx this first half was only 37%, which was lower compared to last year. And in second quarter also, we have not seen that much improvement compared to what was expected. So how you are seeing on ground reality? Like will it improve further in the second half? And like what is that you are expecting?

What we are looking -- what I perceive as per the market report, and the infrastructure, the projects, which are basically -- which was basically not coming, not been announced after the election results, now they have started coming up. From the month of October, I see there is a demand in the government projects because March is coming and all the funds are to be spent. So there should be a normal activity in the government procurement rather it should be an improved activity campaign to H1. This is my perception, and my team is working on this.

[Operator Instructions] The next question is from the line of Yash from Unifi Capital.

Last quarter, you mentioned that your auto CapEx will start contributing to revenue from Q2 and it is expected that CapEx will contribute to INR 250 crores this year and next year INR 500 crores. And now you are saying that the capacity will take another 3 to 4 months for commissioning. So can you give a clarity on that?

Basically, the long -- large [indiscernible] plant, for which we have invested, that plant is under trial right now and from the last quarter, let's say January, we will start it's commercial production. However, what you are asking ramping up the production, yes, definitely, it may take 3, 4 months more, and from the first quarter of the next financial year, I hope it will be online because it's a normal process to take 3, 4 months. Whenever a new product [Indiscernible] approved source, but it takes 3, 4 months' time to get approval because it's a long cycle. So that was the only purpose to telling, but it is online. Commercial production will start from for this January '25 and will be ramped up from April '25.

It's the first of its kind plant in India. There is no plant of this size. It is going to replace Chinese, similar [indiscernible].

So will this CapEx contribute to revenue this year or it will start from next year itself?

Next year only.

This year, on the fourth quarter, it will give a bit contribution. But from April '25, it will be full contribution.

Okay. So this is not going to contribute to this year's revenue, but still you expect to grow to 15%, 20% in next 2 quarters?

Yes, we hope that we should almost reach INR 4,000 crores this financial year. Last year, it was INR 3,500 crore. And this year, we should reach almost INR 4,000 crores, nearby INR 4,000 crores.

Okay. And when will your EBITDA margins start to improve? Will it be only after the Defense CapEx and the Auto CapEx start contributing to revenue significantly?

Yes, naturally, when this Defense CapEx is completed and this LDP plant is ramped up, so there will be a real significant improvement in the EBITDA margins, and -- which are most likely to -- you can see in the next financial year.

And when is the Defense CapEx expected to start contributing to revenue?

It should start from -- trial run will commence from April '25. So for the second quarter of next financial year, it will start contributing. I hope so.

Second quarter, so the potential is around INR 300 crores, right?

Almost -- when it will reach its full capacity of 150,000 shells then it is likely to be INR 300 crores to INR 350 crores. However, it will again depend on the market prices and the conditions, but...

The demand right now that you are seeing -- demand is very good, and you're getting so many inquiries. So you should hope to achieve this number.

Hello.

Am I audible?

Yes, yes, you are audible now.

The Defense CapEx margin will be more than 20%, right?

We hope so.

[Operator Instructions] The next question is from the line of Chirag Mehta from Chirag Mehta and Co.

Congratulations on a great set of numbers. Now my only question is that what are the listing plans of that Goodluck Defense? And how much fund raise you may plan for the company?

So it will all depend on the ramping up of the production of the company. It should start from the -- as I have told from the next financial year. As soon as the plant is stabilized, then we will start falling over the issue. But definitely, it is on the -- it is to be done, but the time is to be decided.

Approximately, we have some internal working, like is the -- just a thought process of how much funds should be raised from the market.

You are not audible. Can you just repeat?

I was just saying that if you have some internal figures regarding how much funds raised approximately you are planning from the market?

So right now, it has not been decided so far. Because now our total focus is on the erection of the plant, to start the plant. Once it gets started, then we will start working on it.

Sorry to interrupt, sir. The current participant has been disconnected. We'll move on to the next question. It's from the line of Disha, an individual investor.

I have one more question. So is there any plan to increase export going forward? And what kind of revenue contribution shift in percentage terms to -- like do we see?

We are export thirst company. Our exports are nearly INR 1,000 crores annually However, in the first half, second quarter of this year, export to be hit on due to geopolitical tensions on the sea routes, Red Sea problem. However, we -- our emphasis is once again on export only, our new plant, which has been commissioned. So most of the products will go for export only. So we expect to get a good growth in export.

As there are no further questions from the participants. I now hand the conference over to Mr. Ram Agarwal, Chief Executive Officer from Goodluck India, for their closing comments.

I thank all of you for taking your time out to attend the earnings con call of Goodluck India Limited today. In case you have any further questions, any query, please feel free to reach out to our Investor Relations team. Thank you. Thanks once again.

Thank you, sir. Ladies and gentlemen, on behalf of Goodluck India Limited, that concludes today's session. Thank you for your participation. You may now disconnect the call. Thank you.