Kilburn Engineering Limited (522101) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Kilburn Engineering Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Anand Jayaram from SKP Securities Limited. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. I am pleased to welcome you all to this financial results conference call on behalf of Kilburn Engineering and SKP Securities. We have with us Mr. Amritanshu Khaitan, Chairman; Mr. Ranjit Lala, Managing Director; Mr. Sachin Vijayakar, Chief Financial Officer; Mr. Vijaysanker Kartha, Managing Director, M.E. Energy Private Limited; and Mr. Rakesh Monga, Whole-Time Director, Monga Strayfield Private Limited. We will have the opening remarks from Mr. Ranjit Lala, followed by a Q&A session. Thank you, and over to you, Mr. Lala.

Thank you, Anand. Good afternoon, everyone, and thank you for joining us. I would like to begin by acknowledging that Q1 FY '27 was a quarter where revenue performance was below the level we would have ideally targeted. However, we want to put the performance of the company into the right context. The primary issue in the quarter was not deterioration in the underlying demand environment, but the timing of the customer deliveries and deferment of certain project executions into subsequent quarters. At the same time, the geopolitical situation has resulted in longer decision-making cycles for some customers and projects. Importantly, we have continued to see healthy inquiry activities across our businesses, and we have already secured approximately INR 190 crores of order inflows in the current financial year till-date at the group level. So while Q1 revenue was impacted by timing, our trust in the underlying business opportunity remains intact. [ As per the ] Q1, consolidated revenue from operations was approximately INR 117 crores. EBITDA stood at INR 24.2 crores, translating into EBITDA margin of 20.1%. For us, maintaining a 20% operating margin in a quarter with lower revenue is significant. It reflects the great discipline we have brought into the project execution. Our objective is to have sustainable business maintaining healthy and sustainable profitability. Let me explain why we remain confident about H2. The most important point I would like to state is that we expect FY '27 to be significantly second half weighted visibility from existing order book, order book arising from deferred order intake, scheduled customer deliveries and projects that have moved into the subsequent quarters. As these projects enter execution we expect the revenue trajectory to improve meaningfully through H2. Accordingly we continue to main our Fy '27 expectation of around INR 700 crores on a consol revenue basis with EBITDA of 20%. We will remain focused on our order book and committed on execution. Order pipeline and market opportunity. The second area I would like to state is the opportunity pipeline. Today, we continue to have an inquiry pipeline in the range of INR 4,000 crores across sectors and geographies at the group level. Obviously, an inquiry pipeline should not be equated with an order book. Conversion depends on customer decisions, project economics, timing and our own commercial discipline. But the breadth of this pipeline gives us the confidence that the addressable market for the group has sustained continuously. We are particularly encouraged by the opportunities in the fertilizer and nuclear where we noticed maximum traction and rapidly developing data center infrastructure ecosystem, which will generate more business in quarters to come. We have seen increase inquiry with our global customer and EPC companies and our object is to convert this opportunity into a large and more diversified order book over the coming quarters. We still continue to target the group order inflows at INR 800 crores in the current financial year. Next, I would like to address the capacity expansion. The next phase of our strategy is not only about winning new orders, it is about ensuring that Kilburn has the capacity and and capabilities to execute them efficiently. We are therefore investing across the group as informed earlier. Kilburn Engineering and M.E. Energy are expanding the manufacturing and execution capabilities, which are at advanced stage and expected to complete by end-October this year. At Monga Strayfield we are in the process of expanding metal sheet fabrication capacity, details of which will be disclosed over a period of time. The capacity investments being made today are designed with a medium-term objective to enable the group's aspirations of INR 1,000 crores annually. Thus, we see this platform building phase for the company for the next level of growth. All in all, our approach to the growth will be as follows: we will be focusing on three things: first, converting our order -- our strong opportunity pipeline into orders; second, executing these orders efficiently on schedule; and third, maintaining our margin. The transformation of Kilburn over the last few years has been driven by organic growth and strategic acquisitions, which will continue. We now have a broader platform, a diversified customer base and access to larger growth markets. Our next objective is to scale this operation in a disciplined and sustainable manner. So going forward, our immediate priorities are very clear: deliver the revenue from the existing order book efficiently, accelerate H2 execution, convert the INR 4,000 crore pipeline into opportunities or into orders selectively and rationally with a target of INR 800 crores and maintain the EBITDA margins of 20%. That's all from my side. With this, I hand over to Anand.

[Operator Instructions] We take the first question from the line of Tagal Shah of Spark Capital, PWN.

I had around couple of questions actually. So the first question was that in this quarter, we got around INR [ 198 ] crores of subscription money actually. We had further diluted our share capital. Now if I'm not wrong, we have completely subscribed actually the promoters as well as the non-promoters to all the shares that have been allotted at INR 425. So what is the future plan for the utilization of this money? Is this going to go for some another inorganic route or maybe you're utilizing this money for working capital require. Any take on that one? And the second question was related to your order book. You just are seeing around targeting around INR 800 crores of order inflow in this particular year. And in this quarter, it was heartening to see even at this difficult times, we got around INR [ 135 ] crores worth of order inflow in this particular quarter. So what gives us the confidence actually that we we'll be getting to that number in the remainder of FY '27? And second, what is the exposure to the Middle East in terms of opening as well as the order backlog, which stands at around INR 485 crores as on date.

Ranjit, if I can address the first point. This is Amritanshu. The fund raise which has got completed has strengthened the balance sheet of the company. This was subscribed by investors and the promoter family also. Today, we are sitting on a net debt-free balance sheet. The idea is to fund part of the CapEx, which is being planned to enable the company to cater to over INR 1,000 crores of revenue in the coming years. So we will be ready for the growth, which we believe is the way forward for the company. Regarding acquisitions, we keep looking out for opportunities, both in organic and inorganic way. In the inorganic side, if any opportunity does [ suitify ], we will inform the investor community. a growing company like us always has aspirations for adding new verticals, adjacent to our line of business, which can increase our overall business opportunity to grow. So we will look at that. But we are also very excited about organic growth because there are areas where Kilburn is present and where its subsidiaries are present, and we see a lot of opportunity for growth in those areas. As Mr. Lala mentioned, we are seeing fertilizer and nuclear being very strong sectors going forward in the coming 18 months. And for our subsidiary we are seeing a lot of inquiry and potential for a lot of equipment, basically storage equipment, which Monga Strayfield sheet metal division makes for the data center infrastructure growth, which is coming not only in India but globally. And then our entry into the Ferrous Alloy segment is allowing us to bolster M.E. Energy's growth plans as we are seeing multiple inquiries in the ferrous alloy space where earlier waste heat recovery systems were not present. But now with the kind of size of equipment plants being put up by that sector, we are seeing good opportunity for us. So fund raise will be used in those ways.

Okay, sir and the first question.

So actually, Mr. Khaitan has already answered the question partially. As I mentioned, we have a strong pipeline of INR 4,000 crores across the organization. And we are seeing a lot of traction in the fertilizer segment. We already have bagged a few orders and some more on the offering. At the same time, we have lots of inquiries coming in from the ferrous alloy business as well. You mentioned about the Middle East. Well, Middle East, we don't have any orders currently from Middle East, but we have a couple of large inquiries based in that region. And in fact, we were already at the final stage of commercial negotiation before the conflict had begun, and that still continues. So hopefully as the war subsides, we will have discussions going forward over there. But it is not only the inquiries from Middle East, the overall scenario has kind of -- differs some of the decision making processes with some of the customers.So that's taking a bit of a time.

Okay, so you see the things normalizing by H2 FY '27 as you have highlighted in the presentation?

Hopefully, you know, we see a spurt in the inquiries and discussions and suddenly, you know, some unexpected things happen in that region and suddenly we find that things are getting delayed. So that's what has been the observation.

[Operator Instructions] We take the next question from the line of Bhavya Nahar from [ Tomara ] Investments.

So I understand that certain large-sized orders that you are expecting, let's say, in the Waste Heat Recovery System in the O&G space, et cetera, have been delayed. Can you give us an update on where they stand, like whether they are still in the pipeline? And what's the expected time line to receive those orders?

For Kilburn, some of the inquiries which are in the Drying Solution business, I expect that some of them would be closed hopefully by the end of this quarter and early next quarter. For waste heart recovery may I ask Mr Vijay Kartha to give a view on the status of inquiries.

Hello everybody, Vijay Karta here from [indiscernible]. We already have a very strong [indiscernible].

Sorry to interrupt you, but the audio is not clear.

Can you hear me?

Yes.

we have a strong inquiry lineup on [indiscernible] we are to all we are of the out based power plant in [indiscernible].

Vijay, I will take that question. I think you have a lot of background noise. If you can just move away and then address it. I'll just address this on ferrous alloy. So on M.E. Energy, we have a strong inquiry pipeline. With our entry with our [ Bhutan ] project for ferrous alloy, we are in discussion with a couple of more potential inquiries in the space, as well as we have inquiries in the cement space and the steel sector. The steel sector is seeing a lot of expansion taking place. Due to that also, there is a potential large pipeline of inquiries, multiple inquiries in the INR 10 crores to INR 15 crore segment for M.E. Energy addressing the steel sector.

We take the next question from the line of Sameer Chheda from [indiscernible] Private Limited.

I just wanted to know that the you said that because of the decision making lag in the war conditions, the order inflow is getting delayed. So I want to know is the delivery -- I mean, the order which we are executing, are the customers delaying the delivery of those they want the products to be delivered later or how is that also getting affected?

Yes, that is correct. Ranjit, you can take it.

So when you look at the execution cycle, there are various milestones and some of these milestones are getting approvals from the customers on the drawings on the quality inspections, et cetera, et cetera. And in some places, we are seeing that customers are actually delaying this whole process, including approval of our engineering drawings and all. So overall, your execution cycle increase and obviously it slips over 1 quarter or more than that. So that's what we observing in 3 or 4 projects.

Okay. So we are targeting INR 700 crores by year-end, INR 100 crores is done now. So in spite of this delay which is happening, do you think you will still be able to get things through because I think war has now become the new normal. And there is no quick resolution happening to those conditions.

Right. So as far as Kilburn is concerned, we are very clear that we don't have any holdups at our end. So as soon as the orders come in, we start the execution, it is more at the customer's end. And when you look at the current situation like where we stand as of middle of Q2, I expect a lot of activity to be having in terms of execution in the second half. That's why it is when you look at the weighted average, the second half looks heavier.

Got it. And the order pipeline, I think during last quarter was approximately INR 4,000 crores.

That was Inquiry pipeline, sir, which still stands at INR 4,000 crores. But if you look at the closing order that is around INR 485 crores. There will be some more orders after that.

Okay. So these are repeat orders from customers coming in or these are new orders which we have bid for?

It's a combination. The ones coming from fertilizer are the new orders, right? And -- but the kind of dryers are similar in nature, what you would find in any other chemical drying process. They are similar in nature, but the sectors could be new.