Man Industries (India) Limited (513269) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Results Conference Call of Man Industries India Limited hosted Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Lahoti from Emkay Global Financial Services. Thank you, and over to you, sir.

Thanks, Muskan. Good evening, everyone. I'm glad to welcome the management and thank them for this opportunity. We have with us today, Dr. Ramesh Chandra Mansukhani, Chairman; Mr. Nikhil Mansukhani, Managing Director; Mr. Sanjay Agrawal, CFO; Mr. Rahul Rawat, Company Secretary; and Mr. Kamal Kant Sahoo, Strategy Head. I shall now hand over the call to the management for opening remarks. Over to you, Mr. Mansukhani.

Hello sir, your voice is not audible.

Am I audible?

Yes, sir. Go ahead, please.

Yes. Hi. Good afternoon to -- good evening and afternoon to all the shareholders and the investors. For the full year of 2024, the company has reported a consolidated revenue of INR 3,142 crores versus INR 2,231 crores in FY '23, which is a 40% year-on-year increase with an EBITDA of INR 292 crores versus INR 176.8 crores in FY '23, which is around 65% increase. The PAT level stood at INR 105 crores versus INR 68 crores, which is again a 54% year-on-year increase. The reported PBT and PAT are quite strong on a year-over-year basis, still we are expecting further strong and more sustainable PBT and PAT going forward. During FY '24, we witnessed a higher depreciation and interest costs that were on account of ERW mill CapEx, whose production was delayed due to certification and approval process. The current unexecuted order book as on today stands at around INR 2,100 crores, which is to be executed in the next 6 to 8 months. And the company has sound financial health with net cash position of INR 174 crores. As of now, the company recently announced and settled benchmark in the industry for successful testing of hydrogen transportation pipe by one of the prestigious international testing agencies. Going forward, we are confident enough to take the first mover advantage and which will enhance our order book significantly as all the lines will be -- new lines will be laid down for hydrogen. So also we are happy to announce a strong and sustainable quarter and year, a promising performance in the last financial year and securing new order wins are emphasizing a commitment towards excellence. On operation front, recently, we have announced additional orders worth INR 505 crores to be concluded in the next 6 months. From the beginning of the year '24, we have secured an order approximately INR 1,500 crores. We envisage a strong order book for the coming quarters and are hopeful for strong performance going forward. Having said that, our ERW mill has successfully received the API certificate. These pipes are usually required for oil and gas industry and -- which has a higher margin. Although we have started our ERW mill in the late financial year and we are quite hopeful that the current financial year will be sustainable year for our ERW segment. Your company is aggressively heading towards its expansion plans for both soft and stainless steel tubes, which are very much on track. And we believe we can fulfill our commitment towards all our stakeholders. Thank you.

[Operator Instructions] The first question is from the line of Pinkey Mahato from Emkay Global Financial Services.

My first question is how much CapEx you have spent on Jammu expansion so far? And there's also a follow-up question. Could you break down CapEx that will be spent in financial year '25 and '26?

Yes. So the CapEx, which is already being done is close to around INR 130 crores to INR 140 crores, which has already been done. And going forward, in '25 and '26, it will be approximately -- total of CapEx would be around INR 800 crores further.

Okay. And the second question that I had is, could you provide an update on Merino in terms of timing of transaction closure and expected amount?

Yes. So we have finalized the developer and all the documentations are also now in place. And we should be announcing it very soon. So it is in the final leg with the lawyers. And I think probably this quarter, hopefully, fingers crossed, we should be announcing it.

The next question is from the line of Vikash Singh from PhillipCapital.

Am I audible?

Yes, you are audible.

Sir, my first question pertains to our revenue potential, given that we have ended the year with almost 2,100 order booked and our past history. Can we safely assume that the next year revenue could be in the line of INR 3,500 crores to INR 4,000 crores levels?

Yes, that would be more or less accurate.

Understood sir. Sir, my second question pertains to our margins. Given our more -- given the fact that we're still export heavy, our EBITDA margins somewhat looks lower at 7% to 8% range. So just wanted to understand the -- effectively because the notion is that the export margins are usually on a higher side versus domestic. If you could give us some explanation there. It's going be really helpful.

So this year, the EBITDA margin is around 10%. And so going forward, we would be between the same levels. The 10% is mixture of -- also when we take a lot of water orders, the EBITDA margins are lower in that. So it's the average EBITDA, which comes at the end of the year, but we are very confident that to push those EBITDA margins up once our expansion plans, which are already going in place. Once that is completed, the EBITDA portion would be pushed up.

So what kind of EBITDA margins we are looking at, let's say, 1 year down the next year or for FY '26.

So '24, '25 would be around the similar range because the projects would complete only and start by '25, '26. '25, '26 onwards, it would be upwards of 13% and so. And we are targeting around the next 3 years to be around 15%. This is prime EBITDA for consol level.

Sir, just one question on this quarterly -- essentially, if you see that the numbers have been slightly lower side EBITDA as well as the revenues. So just wanted to understand, usually 4Q has a notion that it's the strongest quarter. So what has happened and if you give us the volume details as well how much of tonnage we have executed in 4Q?

No, it is -- see, it's not related to the Q4 is always the strongest quarter. It is where we have -- or which orders are ongoing. And a lot of our export orders were completed in Q2 and Q3 and majority of execution, which was happening in Q4 was mostly water. So that's why the EBITDA is slightly weaker compared to the other 2 quarters.

Understood. And the volumes for 4Q or for full year, whatever you are comfortable with?

So the volume approximately, we are at around 3.5 lakh tonnes.

Understood. Sir, just one last question. In our outstanding INR 2,100 crore order book, what is the oil and gas and water mix as well as the export versus domestic?

So oil and gas, water is currently is, I think, a mix of 80/20 and export is approximately 80/20 as well.

Understood, sir. Sir, just one, for 350,000 tonnes, given 9 months, we have done 200,000. Basically, the last quarter numbers come out somewhere around 140,000 plus. So looks -- so given that higher volume, but lesser EBITDA looks on a slightly distorted side. So am I calculating correctly or there is some error here.

No, no. There might be some error. But nonetheless, this quarter was -- if you see tonnage, obviously, if you do more tonnage also when you're doing more water, your EBITDA is going to be lower, right? Like I said, this quarter was a lot of water work as well, and that's why the EBITDA is low comparatively.

The next question is from the line of Dhavan Shah from AlfAccurate Advisors.

My question is also on the mix of execution during this quarter. So I think last quarter also, you mentioned that the execution was more towards the water side. And this quarter also, we are seeing the execution is more towards water, right? Even though 80% of the order book is from the oil and gas.

Last quarter was not water mainly, last quarter was majorly exports.

Okay. So in exports, the margins are better or lower than the domestic?

Export margins are better. Q3 margins and obviously, if you see, it was better. Q4 is slightly weaker is because a lot of the domestic water book was going on at that time, and that's why. And this keeps changing. Our business is not a quarterly based business, it is a consolidated yearly business. Every quarter has some businesses which we take quickly, then the oil and gas businesses goes on for 6 to 12 months. So it's not everything -- every time in our hand to estimate what is the oil and gas ratio. But we tend to take less water. But last year, since we want to push up our turnover, we want to push up everything, we are going more aggressive in water also. That's why.

And the EBITDA per tonne wise, can you share what is the EBITDA per tonne mix between domestic export, oil and gas and the water business? Because the competitor, which has reported the numbers recently, I think they are showing a good EBITDA per tonne, but it is not reflecting our numbers. So if you can share thoughts on that?

Some of our competitors might have got an order which may be if you get sometimes you get EBITDA which is $200, $250 also and sometimes you get EBITDA of $150 also, so -- per tonne. And then if you do water also, then you'd get probably $60 also in India. So that's why it's difficult to give. But oil and gas tentatively between $150 to $250 depends on how many competitors, which region, how tough is the project. And water is between approximately between INR 5 to INR 7.

Okay. INR 5,000 to INR 7,000 a tonne. Okay. Okay. So you are saying that on an average, we should do roughly INR 9,000 to INR 10,000 EBITDA per tonne on a blended basis for full year?

Absolutely.

And how much tonnage are we expecting in the next year? This year, we ended up with 3.5 lakh tonnes.

We are looking at around 25% increase in the tonnage as well. The difference is that this year, the tonnage was -- even though it is high and next year also, the tonnage will be higher, probably, but the prices of steel came down steeply in the middle. So the direct proportion also varies because 6 months if the price is down and 6 months price is up, then again, it varies.

Okay. Okay. And in the INR 2,100 crores of order book, is there any orders from ERW?

Now yes. We've got around INR 150-odd crores worth of orders of ERW.

Okay. And we -- in the press, I think we mentioned that this INR 2,100 crore order book would be executed in the next 6 months. So maybe by October end, we are targeting this INR 2,100 crores kind of the revenue.

So between October to December, 6 to 8 months is the generic time. Sometimes your delivery date is longer in the -- as per the contract of this, but your FG gets ready and you don't want to block the mill because if you have some other orders to take. But 6 to 8 months is the more accurate base. So probably by November, December, yes.

And by when can we expect the Jammu and maybe -- I think we were planning to expand in Saudi also, right? So when can we expect the CapEx to be commissioned for both of these?

We're announcing Saudi, hopefully, like I said, next time, and it's already under progress, but it should be -- the tentative time line for operations is March '25 and that is -- SS is March '25 for the first phase and the second phase because the mother pipe and pilgering is there, that would be probably second -- between second and third quarter of '25.

This for Jammu you are saying second and third phase?

Sorry?

Second and third phase -- first phase, March '25 is for Jammu you are saying?

This is for Jammu, yes, as well as for Saudi and for Jammu, second and third phase in the sense of there is mother pipe and pilgering and everything. So that would take another 3 months to 6 months to stabilize.

And capacity-wise, can you share how much capacity will come on board because of Jammu and Saudi by March '25 and maybe by 2Q, 3Q, '25, what kind of capacity increment numbers can come.

So approximately capacity in Saudi would be around 400,000 to 500,000 tonnes. And in Jammu would be around 20,000 to 25,000 tonnes of stainless steel.

Okay. So by March '25, how much will come on board?

March '25 will be the first -- is the operation. So then the first year of operations will be probably 30% or 20% of production for 20% to 30% for SS. And for Saudi will be probably around 40% to 50%.

Got it. Got it. Got it. And how is the order inquiries right now from the export market in domestic?

Very good. The domestic market is still competitively very strong on water, slightly weaker on oil and gas, but export market overall is quite bullish.

The next question is from the line of Kalpesh Gothi from Valentis Advisors Private Limited.

My question is to ERW projects. What kind of revenue we're targeting for next year? And what kind of utilization we are targeting?

So we are targeting around volume of around 4 lakh tonnes. And approximately, utilization would be around 50% to 60%. But the utilization is quite subjective, depends on the size of order, the thickness and everything. Sometimes you get an order which is ongoing and a good size, then your utilization percentage suddenly jumps up to 70%, 75% also of that placed order. That's the approximate guidance, which I can give you.

In the previous question you answered, you said margin expected to be remained flat in '25 and in '26, 13%. And you said for over the period of 3 years, I missed the margin you are expecting?

Yes. So like I said, that the margin from the operations of the stainless steel and the Saudi would obviously drive up the EBITDA portion in the '25, '26. And looking at the next 3-year horizon, we were looking at an EBITDA of between 14% to 15% comfortably for the group.

Right. Sir my last question is related to the company, we got demerge Man Infraprojects. In 2019 we recorded, but the shares yet not be given to the shareholders, what the status is there?

So basically, whatever Man Industries had to do, we have done and we have done the needful and giving it to the court. But per se, everything is pending from the other side and so we are -- I can't comment more than that. I don't know when it will happen. But whatever we had to do as a company, it's already been done.

So it is stuck in the court, right?

Yes, it's still in court, and we don't know. I can't give an answer to that when it will happen.

So is it better -- just cancel the recorded because of recorded other entities there, but the share is not being delivered, at least we can do that right, I guess?

No, that's what I said that, see, there was an obligation of our company, Man Industries, which has already been completed and filed in court. The other side is not doing needful, and it's not moving. So we can't do anything. So I really cannot comment any further, it is in court, and I don't know when it will happen.

[Operator Instructions] The next question is from the line of Pradeep Rawat from Yogya Capital.

So my first question is related to our CapEx. Sir, all the CapEx that we have completed till now, ERW pipe and stainless seamless pipe and that steel band and connector CapEx. So what are the asset turns that we can expect from these CapExes separately?

So basically, ERW can generate a top line of approximately INR 700 crores to INR 800 crores and bands is, give or take, approximately INR 100 crores to INR 150 crores with a good bottom line bands would give approximately a 20-plus percent bottom line. And SS, we could achieve on a 70% to 80% utilization of SS, would be around INR 800 crores to again INR 1,000 crores of top line and a comfortable EBITDA between 18% to 20%.

Okay. And with respect to stainless seamless pipes, so as we can see in the industry that there are some distressed companies that are turning around right now and their utilization is ramping up. So do you foresee any kind of supply glut in the foreseeable future?

If the companies which are shut are continuing and giving -- and there is more demand, then I don't think there will be a glut, and also our competitors of what the kind of mill we are putting, it is only mainly Ratnamani, and that's what we are aiming at. So I think we -- I don't -- currently, whatever the market research, what we see and what it shows and the growth pattern, we don't see any issues in any glut or excessive material in that particular market.