Jupiter Wagons Limited (JWL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '24 and FY '24 Jupiter Wagon Limited Conference Call hosted by Systematix Institutional Equities. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sudeep Anand from Systematix Institutional Equities. Thank you, and over to you, sir.

Thank you, and good evening, ladies and gentlemen. Thanks for joining us today in the Q4 FY '24 and FY '24 earnings conference call of Jupiter Wagons. On behalf of Systematix, I would like to thank the management for giving us the opportunity to host this call. Today, we have with us Mr. Vivek Lohia, Managing Director; and Mr. Sanjiv Keshri, Chief Financial Officer. I'll now hand over the call to the management for their opening remarks. And after that we can open for the Q&A. Thanks, and over to you, sir.

Thank you, Sudeep for the introduction. Good evening everyone, and thank you for joining us on this call to discuss the earnings for the fourth quarter and for the financial year 2023-'24. We have sustained robust momentum in our performance with stellar growth in revenue, EBITDA and profit after tax, both for the quarter and the full year. This performance validates the strong execution across core operations, as well as the scaling up of new business lines. There are strong tailwinds at present for our sector due to several years of underinvestment, and we are pleased to be at the forefront of this exciting opportunity. We are delighted to announce that the total income amounted to INR 1,100 crore plus in quarter 4, marking an impressive year-on-year increase of 57%. EBITDA has shown remarkable growth soaring to INR 14,772 lakhs, reflecting a substantial 59% year-on-year increase. The EBITDA margin was 13.3% in Q4 FY '24, highlighting our focused execution strategy as we continue to report industry-leading margins. Notably, profit after tax has surged by 156% year-on-year, reaching INR 10,422 lakh. We are proud to have achieved the significant milestone of surpassing INR 1,10,000 of revenue in a single quarter for the first time ever. This exceptional performance in the fourth quarter caps of remarkable financial year for Jupiter Wagons Limited, characterized by record-breaking revenues of over INR 3,600 crores and a profit after tax of INR 33,279 lakhs in FY 2023-'24. Given the strong performance, the Board of Directors has recommended a final dividend of INR 0.30 per share, accompanied by the interim dividend of INR 0.30 per share, the combined dividend for financial year 2023-'24 amounts to INR 0.60 per share, resulting in a meaningfully higher payout to shareholders. Let me first start with railways. We continue to see robust demand from both the public and private sectors. Over recent years, there has been a notable increase in government funding directed towards the railway sector, companies by a marked rise in actual spending. Notably, 3 new railway corridors are presently under construction, promising significant relief from congestion within India's rail network. Moreover, over the past 12 to 18 months, numerous substantial contracts have been awarded, spanning bullet trains, Vande Bharat, trainsets, high-power locomotives, freight wagons, [indiscernible]. Railway authorities have implemented various strategies to bolster their share in the freight transportation mix. Projections indicate a rise in the rail freight modal mix from 29% in fiscal year 2024 to 35% by fiscal year 2031, driven by factors such as cost and efficiency of rail over road. GDP growth improved infrastructure and connectivity supported by increased government focus on rail freight. In the Freight segment, private sector enrollment and wagon procurement has surged significantly, buoyed by government initiatives like liberalized iron investment scheme, automobile, freight train operator scheme and wagon leasing scheme. As a result, demand for freight wagon is expected to witness substantial and sustained growth. Passenger services to remain a focal point with capacity being expanded for passenger rail as well and development through metro rail projects in several Indian cities. In terms of outlook, we are pleased to report order backlog of 7,10,166 our highest ever. This has been aided by order wins from both public and private sector customers, including Ministry of Railways, Ministry of Defense, and a leading auto manufacturer. These contracts involve the manufacturing and supply of various types of wagons, bolstering our order backlog and providing strong visibility for the future. Jupiter continues to maintain its position as a leading provider of private wagons in the industry. During the quarter, we acquired Bonatrans India Private Limited which further solidifies our integrated business model. It empowers us with the critical ability to manufacture wheel sets in-house, thus enhancing our vertical integration and overall production efficiency. This strategic move underscores our commitment to bolstering our capabilities and ensuring a more streamlined and cohesive production process. By bringing wheel set manufacturing under umbrella, we are poised to achieve greater control over quality, time lines and cost effectiveness, thereby solidifying our position in the market and driving sustained growth. This development marks a significant milestone in our journey towards excellence and underscores our relentless pursuit of innovation and operational excellence, further as part of Make In India initiative and reduce import dependency, we would set our manufacturing facilities for complete backward integration of wheel set manufacturing. Further, the integration process following the acquisition of Stone India is progressing smoothly and remains on track. Looking ahead to fiscal year 2025, we are optimistic about our prospects, particularly with eminent launch of our eLCVs. Additionally, plans are underway to expand our brake system and braking business, further enhancing our outlook for the coming year. In our braking system and break this segment, we are witnessing encouraging progress in line with our expectations. We anticipate a significant increase in execution and performance throughout fiscal year 2025 and remain confident in the growth trajectory of these businesses. With that, we are ready to take questions.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Mohit Kumar from ICICI Securities.

Congratulations on a very good set of numbers. So my first question is, what would happen the private wagon ordering for FY '24? And is it possible to give us a sense of market share and the outlook for FY '25?

Yes. Good evening, Mohit, and thank you. Private, again, Jupiter continues to dominate the private segment. So if you look at the private order books, I think Jupiter share would be more than 60% to 70% in this segment. This year, we have delivered the maximum number of private brakes. I think over 100 brakes have been delivered by Jupiter, which is by far the -- if you compare to the rest of the industry, there's a significant difference between us and our next competitor. Going forward also, our private order book remains very robust. I think 40% of our order book is still private, and we continue to see the momentum. And this year, we will be manufacturing a very -- I think more of an order book will be much more specialized wagons, both in the steel, cement as well as the auto segment and which will continue to be industry-leading designs.

Sir, last year, we had a very good opportunity from the government side from the Indian Railways side directly. Sir, is there any color you can think about, think about the opportunity from the Indian Railway this particular year? And is there any tender which are awaiting to be closed as of now?

Yes. Already, there is one tender. I don't remember that I think it's close to about 6,000 wagons, which is going to be finalized very shortly. But beyond that also we see the growth momentum to continue, and the freight loading numbers have been increasing substantially, which we can see, as well as the core sector, especially the demand for the coal for the steel and other core sectors remain very strong. And we expect the growth momentum to continue. I think post elections, we should see significant tenders coming up.

My last question is what is our plan for Bonatrans India? Can you please help us with a medium-term outlook? What is the kind of capacity you're looking at or the kind of CapEx you require to achieve this capacity?

So this year, we are looking to produce about close to 14,000 to 18,000 wheel sets in Bonatrans and we are looking at revenues of about INR 400-odd crores. This will, I think, significantly help us as this -- a lot of the production will be captive, and that will definitely help Jupiter in terms of our own freight production, as well as our margins. Beyond that, I think our focus is to completely backward integrate this facility. We plan to do it over the next 18 to 24 months. There will be a sizable investment there. And we already have the technology lined up through our foreign -- our partnerships in Europe. Further, I think there's a significant export potential because one of our significant partners and promoters in Jupiter Wagon, which is Tatravagonka, they are again, very keen to acquire wheel sets from India. And right now, they are facing a challenge because of the Russia and Ukraine conflict. So yes, so we are very bullish about that business.

Thank you very much -- ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants, please limit your questions to 2 per participants. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Rishabh Parekh from Sunidhi Securities.

Just a couple of questions. One is on Bonatrans. Can you all give some more color on the kind of capacity expansion that we will be doing in terms of how many wheel sets you will be able to manufacture once the full capacity is on stream and revenue and margin impact on that? And what would be the amount of the CapEx spend?

So in terms of capacity, I think we are looking to produce around 200,000 wheels, which is about 100,000 wheel sets. So that is the capacity plans which we have, out of which a significant portion definitely will be earmarked for exports. As you're aware that Bonatrans already has all the necessary certifications, both in India for supplying to the metro, as well as for Vande Bharat. Today, Bonatrans is a significant supplier to Siemens, to Alstom, to BEML, for the Vande Bharat as well as the LHB coaches, we are supplying wheel sets. So all the necessary Indian -- as well as freight. So all the Indian accreditation is there. Further, it is accredited to supply to Europe as well as to North America. So the idea is to build capacity so that we can play a significant role in these markets. In terms of investments, I think our CapEx in this business will be anything between INR 1,000 crores to INR 1,500 crores of CapEx, which we are looking to invest in this business. And margins, again, I would not like to comment on margins right now, but definitely, compared to the wagon business, the margins are higher in the wheel set segment.

And just a follow-up question on this. So that we are going to do 15,000 to 18,000 wheel sets in FY '25. So what could be the improvement in our margin because a lot of this would be for CapEx. So how much margin expansion can we see in FY '25 because of integrated wheel sets?

So again -- but I will not comment on the overall -- in terms of numbers. But what I would say is that definitely compared to FY '24 and FY '25, not only because of wheel sets, but because of the braking business and the other new segments which the company has entered, there will be improvement in margins and it will be a very visible improvement in margins. It will not be something marginal, but there'll be a visible improvement in margins.

Sure. And can you give us some color on Kovis and DAKO for '25?

So as I've been telling in all my earlier calls that this year, you will see the execution in both the businesses. I think combined in both the businesses, we have order books of more than INR 300 crores plus, and there is going to be significant exports also happening. So I think FY '25 is when we are going to start seeing revenues and profits being accreted in both the businesses.

And the ballpark revenue number can it be about INR 500-odd crores?

We are looking at least about INR 300 crores of revenue at least in both the businesses.

Sure. And sir, last question on our net debt. So post-acquisition and QIP, what is our net debt position?

Net debt is around 0 because the long-term borrowing we don't have, and we have the sufficient cash available. And if you take the short-term borrowing also, so it is around 0.

The next question is from the line of CA Garvit Goyal from Nvest Analysis Advisors, LLP.

Congrats for a good set of numbers. My question is on the Bonatrans only. Just a clarification on, like you mentioned in this year, we will close to around INR 300 crores kind of top line. So just to understand a bit like are we going to produce for the outside players? Or are we going to the captive consumption? Because you mentioned 2 things there. So can you clarify the same?

Yes, no, as I mentioned in Bonatrans it will be both captive as well as the -- as well as the outward market because that is again a significant business for us. As I mentioned that we are already a primary supplier for most of the metro projects in India as well as for the Vande Bharat and LHB passenger coaches. So that business is going to continue to remain a significant business for us. Compared to freight per wheel set, both in terms of the pricing and definitely in terms of margins because these are more complicated wheel sets. So it's much better than on the freight business. So it will be a mix of both captive as well as, I think, outward business.

So INR 300 crores is from the outward business. Is that understanding correct?

No, no, INR 300 crore, basically -- I said, it will be between INR 300 crores to INR 400 crores. It will be -- that includes both the captive as well as the outward business.

No. If it is captive consumption, then how it will be there in the top line? It can't be there in the topline, right?

So the total revenue, which we are expecting from Bonatrans in FY '25 is around INR 400 crores. This INR 400 crores will include both the captive business as well as the outward business. But in terms of the breakup, specific numbers right now, we will -- we are not in a position to share.

Okay, sir. Okay, fine. And sir, Board approved INR 1,000 crore QIP. So can you please put some color on the purpose of raising those funds like what are the exact plan for the utilization of these funds? Like you mentioned about the new products, including those automated doors and the vacuum toilets as well. So can you please elaborate on your plans on it like what is the expected CapEx for it and how the funds are going to be utilized?

I think for us, right now, the most significant and the major CapEx is towards the wheel business, where we see a very assured road map and a market which is there. And as I mentioned that it is a very margin positive business. So most of the I think whenever we do the fund raise will be towards the CapEx requirement of the wheel business. And definitely, some portion of it will be used for other businesses, but the significant investments will go towards the wheel growth.

Right, sir. And sir, in this quarter, we did a run rate of -- in this quarter, we did a run rate of 840 per month for the railway wagon. So considering that we are currently at 900 capacity, right? And with significant orders to be executed in the next 12 months, like you mentioned and the order book is also reflecting the same, so do you see any slowdown in ramping up these orders or upcoming order inflows? And if not then, so what are your plans to further expand on the capacity on the wagon side beyond 1,000 wagons per month?

So as I mentioned, we are -- right now, our target is to achieve 1,000 wagons. We are not looking to expand beyond that as of now. But then again, that is also subject to how the order book flows over the coming years. We don't see any significant slowdown in the order books. I think on the post elections, you will see whatever indications which we have, there will be an uptick in terms of the demand. So again, our first target is to achieve a consistent run rate of about 1,000 wagons. From thereon, we will decide as to how to move forward.

So by when it is expected, sir?

By I think quarter 2 is what we are looking at.

The next question is from the line of Mahesh Bendre from LIC Mutual Fund.

Sir, on wagon side, the incremental orders that are expected to come up maybe during the year. Given the current order book of all the wagon manufacturers, do you think there is a scope for us to improve our realizations in those new orders of wagons and margins could be much higher in those?

Yes, Mahesh, definitely, as I mentioned in my call that we are right now focusing on a lot on the private order book. And there also, there are certain new designs of wagons, which we are currently in the process of executing which those are very complicated designs and most of the industry is not producing those wagons. I think Jupiter is the only producer of those wagons. So that definitely, we expect the margins to improve. And combined with brakes getting produced in-house and wheel sets again becoming captive, so definitely there will be an impact on the margins.

Sir, is it also true for the railway business also? Railway wagons?

So on the railway side, definitely, the -- there is no -- in terms of -- I think the margins are consistent, and they're going to remain like that. But definitely, you -- going forward, you will not see any significant uptick in margins. The uptick in margins in the railway business will happen through the efficiencies which we bring into the business.

The next question is from the line of Bharat Shah from ASK Investment Managers.

I wanted to understand the cash flows for the year, operating and the financing and investment cash flows.

I will give the line to Mr. Sanjiv, the CFO, he will guide you on that.

Yes, the operating cash flow this year, we have generated the cash of around INR 100 crores. And after the payment of the income tax, there is a use of the -- actually in the operating around INR 6 crores only. But that actually increased due to -- we increased our product -- sales revenue from INR 2,000 crores to INR 3,600 crores. And consequently, that inventory has increased by around INR 400 crores. So this is the reason that you are finding that there is a cash used around INR 6 crores in the operating cash flow.

I don't get all the breakup of the cash, operating, finance, investment cash flow for the year.

Yes, it is available. Yesterday, as per the LODR requirement, the cash flow is already -- given to the stock exchange. So you will find that detailed cash flow there.

I'll check that out. Sorry, I missed that. And on the order book, what I heard was about INR 7,100 crores, right?

Yes, you are right.

And what is the breakup of that? And what kind of execution cycles do we see?

So I think of the 7,000 majority of it is related to our wagon order book. I think, close to about 75% -- [indiscernible] would be wagon, and I think these order books have to be executed over the next 18 months.

And the business?

Balance would be related to the CV business, the commercial vehicle business, which we have. The containers and the brake system also.

And that would be fulfilled by what time?

In this financial year FY '25.

Entire remaining almost about INR 1,700 crore, INR 1,800 crore of CV business would be executed in the current year.

Yes, correct. Absolutely.

And from the wagon business, I presume in the year maybe 2/3 of the order book will get utilized.

As I've told you, 18 months is the execution timeline and every quarter, we keep on adding significant order books. So it -- there will be a rollover which will happen on the order book side. So -- and as you've seen over the last year, 1.5 years, though our execution has increased significantly, but our order book keeps on increasing quarter-on-quarter. So I think it will -- you'll continue to see those trends going forward.

So INR 1,700 crores of CV, about INR 3,600 crore of wagon. So that means INR 5,300 crore and maybe some amount of the current year order book executed. So about INR 5,500 crore, INR 5,600 crore turnover is a reasonable possibility, right? For the current year?

Again, specific numbers, we are not in the habit of disclosing, but yes, if you look at the breakups something in the similar vicinity is what we are looking at.

The next question is from the line of Parvesh Kazi from Nuvama Group.

Congrats on a good set of numbers. So 2 questions from my side. One would be great if you could discuss how are we seeing the private sector ordering as far as the wagon business is concerned? And second, also on our brake business, how has ordering and tendering in FY '24? And what is -- how do we see FY '25 mapped out?

Yes. Thank you, Parvez. So in terms of the private order book, I don't -- as I mentioned that the order inflow is very strong. And this is despite the fact that currently wagons under [ GPWIS ] scheme, basically, the BOXN wagons, there is still -- the railway has not lifted -- they had put a temporary hold on that, which we also expected to get lifted post elections. But despite that I think the order book has remained very, very significant. And we are now executing a lot of designs which are very unique and are being done for the first time. And where Jupiter is maybe one or very few of the wagon riders who are executing these designs. So this gives us a significant chance to improve our margins, as well as to further build on these order books. And I think as and when the requirement for the BOXN wagon comes up, I think that will be significant because whatever we can understand from the industry is that still there is a huge requirement for these wagons. So as and when railway clears the same, you will see a substantial jump in terms of the ordering, which is going to happen in those.

And similar outlook on the brakes business?

On the braking side, I think the demand continues to be very robust. As you know, the Rolling Stock program of the Railways is very significant. So as well as now you're seeing a lot of replacement demand coming in because both in terms of the passenger as well as on the freight side, the fleet utilization has gone up significantly. So I think you're going to -- as I've been mentioning, I think year-on-year, you're going to see significant increase in terms of the total requirements for breaking -- from the braking business.

The next question is from the line of Gagandeep from Nvest Analytics Advisors LLP. Please go ahead. Participant line got disconnected. The next question is from the line of Rishabh Parekh from Sunidhi Securities.

Can you just throw some light on the container business?

Yes, Rishabh, so the container, we are, again, very bullish on the container business. This year, I think has been a transitional year for us with regard to that business. We have moved from -- earlier, we were making the very generic marine containers. But this year, we have moved on to manufacture very specialized containers, especially related to BESS and data centers. So that has been our core focus. We are now working with a lot of marquee names -- global names, such as GE, Schneider, Toshiba, Tata Solar. So these are the kind of names which we are now working with, and the certain containers that we are producing, which have been produced for the first time in India. And I think going forward, we will continue to focus on these segments. And I think the next step this year, which we are moving towards is providing the complete integrated solutions -- both for BESS as well as for data centers. And given government's focus in both the segments and especially for power storage in the solar sector that has been a key challenge. So we see significant order books coming in this segment.

And just wanted to understand your capacity expansion plan because in your presentation, it mentions that 1,000 wagons per month will come on stream once the 2,000 tonne foundry is started, which will take 18 months. But to the previous participant, you mentioned that it will start in Q2, the run rate 1,000 wagons per month. So I was just a little confused.

No 1,000 wagon will come -- see we are doing 2 foundry capacity expansion. One is on the existing foundry and one we are looking at a new foundry in Jabalpur. So the 1,000 will come in as soon as the expansion, which takes place in the existing foundry, which we are expecting in Q2, end of -- before end of Q2, that capacity will become online. So that is when -- around that time is when also we are seeing -- going to see an increase in our wagon numbers happening.

And the additional 2,000 tonne foundry will add on how much capacity?

So there given that, one, which will definitely help us in terms of margins because again, in Jabalpur if we have a captive capacity, we'll save a lot on the transport cost. And secondly, we are looking I think one business which we are very focused on is on the weldable crossing side, where we have significant orders and the outlook is very strong. Because I think in the next 3 to 4 years, what we can understand is the railway looking to buy more than 100,000 of these crossings. So today, our main constraint is on the capacity. So we are now looking to bring -- build significant capacity for this business. So I think a lot of that capacity, which will get freed up will go towards that business.

Understood. And sir, can you just throw some light on our RITES JV?

There is no JV. We have a MOU with RITES where we participate together in a lot of the -- most of the global tenders. So that is in -- that MOU continues, and we are regularly participating in tenders. I think the global tenders take time to convert into order books, and we expect -- I think in FY '25, we should see significant order books coming out from these tenders.

The next question is from the line of Aakash from Dalal & Broacha.

First of all congrats to the management on great set of numbers. Sir, I would request a breakup for the complete full year FY '24 revenue that we did of INR 3,640 odd crores. If you could give a breakup for that product segment wise?

Okay. Thank you, Aakash. And I'll pass on the line to Sanjiv. I think he can share.

Aakash, you can mail to us. We will give the detailed breakup. Right now, I'm not carrying that breakup. But on a broad way, around 76% or 77% is from the wagon and balance is from the other CV business and containers includes.

Okay, sir. No worries, we'll take it off line. My second question was on the brake system and the brake disc side sir ; wherein, you all said that more businesses combined, you should be able to manage around INR 300 crores plus of revenue, right? So what kind of margins are you expecting there?

Again, as I've mentioned earlier, these -- the margin profiles are much better than in terms of our existing business. So you will see margins upward of definitely upward of 14%, 15%.

For KOVIS and DAKO, right?

Yes .

Or company level as a whole.