Man Industries (India) Limited (MANINDS.NS) Earnings Call Transcript & Summary

Thank you, Karthik. Good day, everyone. On behalf of Ventura Securities, I'm pleased to welcome you all to the Man Industries India Limited Q1 FY '26 Earnings Conference Call. Today, we have with us the management, Dr. Ramesh Chandra Mansukhani, Chairman of the company; Mr. Nikhil Mansukhani, Managing Director; Mr. Sandeep Kumar, Chief Financial Officer; Mr. Rahul Rawat, Company Secretary; Mr. Vijay Gyanchandani, DGM, Investor Relations. Now I would like to hand over the call to Dr. Ramesh Chandra for his opening remarks.

Thank you, and over to you, sir. Yes. Good afternoon, everyone. This is Mr. Nikhil Mansukhani here. So as we've delivered a strong profitability and margin expansion, driven by favorable product and geographic mix, the Y-o-Y revenue declined 0.6%, largely due to the deferment of export shipment worth around INR 150 crores and due to geopolitical disruptions. As of 30th June 2025, our order book stands at around INR 3,200 crores with an additional INR 15,000 crores in our bid pipeline. Currently, we are L1 in a few high-value projects, which are at advanced stage. So we expect these to convert and hopefully to announce these orders very soon. Our internal production schedule shows promising momentum in H2 with both LSAW mills fully booked. This backlog, coupled with enhanced capacity utilization is expected to deliver meaningful operational leverage. Exports account for approximately 80% of the order book, a strong testament to our global positioning in the key markets. In our LSAW pipe business, demand is surging for both pipeline infrastructure and oil and gas transmission projects. Our technical strength across LSAW and coated pipe position us to fully capitalize on this growth. Our strategic expansion initiatives in Saudi Arabia and Jammu are progressing well, and they are on track with operation expected to commence by Q3 and Q4 FY '26. We are establishing a 300,000 tonne capacity -- per annum capacity facility in Daman, Saudi Arabia with a CapEx of around INR 630 crores. This is scheduled to be completed within FY '26. This facility will help us offset import duties and big production closer to the core demand centers in Saudi Arabia and an approximate estimated turnover -- incremental turnover would be approximately INR 3,000 crores. Also, we are in discussion with the Saudi government for certain orders. And hopefully, before the plant comes online, we should have something in hand. On the other hand, Jammu, the stainless steel seamless plant, the production -- the construction is going well, and that plant should also be up and running by FY '26. Out of the INR 1,200 crores CapEx earmarked, the total CapEx earmark for these 2 projects is approximately INR 1,200 crores. With that, I now hand over to our CFO, Mr. Sandeep Kumar, to review the financials. Over to you, Sandeep.

Thank you, Mr. Nikhil. Good evening, everyone. Let me take you through the financial highlights. I'm pleased to begin by highlighting the financial resilience and strategic progress we have achieved this quarter in a challenging environment marked by the deferred export and moderated [ traction ] in raw material costs. Our financial performance stands testimony to disciplined execution and operational agility. Let me briefly walk you through the key performance highlights. Total consolidated income grew modestly to INR 774 crores. Our EBITDA surged by 39% Y-o-Y to INR 80.6 crores, reflecting substantial margin expansion of 90 basis points to 10.86% from 7.73% in the same period last year. Notably, our PAT also increased by 48% Y-o-Y to INR 27.6 crores with net margin improving by 110 basis points to 3.6% from 2.59%. These results are mainly numbers. These are indicators of our strengthened capacity utilization optimization cost structure and strategic product and geography mix. With this, we would like now open the floor for question and answer.[ id="-1" name="Operator" /> [Operator Instructions] We have first question from Darshil Pandya from Finterest Cap.

Sir, I wanted to understand since our business were affected last quarter, how are they for this quarter? Are we seeing some normalizing trend?

Yes. So Darsh, the Q1, Q2, the backlog is still there. So quarter is slightly better or similar to the current one, approximate. And Q3, Q4 are very, very robust because of all the deliveries and multiple shipments and new orders. The Q3, Q4 are much, much going to be higher than the Q1, Q2. I mean the entire revenue would be approximately 20% higher than what was there last year.

Got your point. And sir, also to understand what is the other income that we are getting since we are including it in the EBITDA margins. I wanted your thought.

Other income is part of the operation. It is incentive, ForEx, other things, which is forming part of the operations only. This is not from the leasing or some interest income or something. This is the operational other income. That's why we are adding that to our operation from operations for all our calculations.

Understood. Final question would be on the real estate side, sir, what is the number that we're expecting this year? Because last quarter, I can't remember around INR 360-odd crores we had accrued. So what are we expecting for this financial year?

Real estate for this financial year, the launch is going to be in quarter 2, quarter 3. So once the launch is done, we will be able to give you a more clear picture. But I think approximately INR 70 crores to INR 80 crores should be there. Again, that would come in Q3, Q4 because the launch of the project is, I think, in Q3, start of Q3. [ id="-1" name="Operator" /> The next question comes from Shubham Purohit from SBI Securities.

Sir, a few questions from my end. Could you please provide the product-wise sales volume for the quarter?

We operate only one segment, which is the steel pipe and total revenue is coming from the steel pipe segment only.

In that, the total volume in, say, let's say, LSAW, HSAW, ERW?

We don't disclose that number because that number is coming from the total business together. So as a policy, we are disclosing the total revenue number only.

Okay. So my next question would be, could you like elaborate on the Jammu plant GST arrangement and the calculation for the rebate?

Yes. So Jammu, we are in the NCSH Scheme, which is national center scheme. Basically, it is 18% gross GST on every sale that you do in the country. And that is you can take the benefit over 10 years. So suppose you have an investment of machineries of INR 100 crores, you get a grant of around INR 300 crores, which can be utilized over 10 years. So you would get INR 30 crores in the form of entire 18% GST, number one. Number two, you would get a 6% interest subsidiary if you borrowed from bank. These are the 2 main subsidiaries.

So yes, this 18% GST would be on the sales, right?

Yes.

And what would be your investments in the plant and machinery?

INR 430 crores. [ id="-1" name="Operator" /> Your next question coming from the line of Yash Sinha from MIPL Family Office.

I just want some clarity on the [Technical Difficulty] [ id="-1" name="Operator" /> The next question comes from Mr. Bharat Kumar from Choice Institutional Equities.

[Technical Difficulty]

Your voice is not audible. Can you speak clearly? No, your voice is cracking. We cannot hear you. [ id="-1" name="Operator" /> The next question comes from Riken Gopani from Capri Global.

Sir, firstly, if you could help understand for the first quarter, what would have been the volume performance compared to the same quarter last year?

Rikin, we can share those details independently.

Okay. Okay. And what we are saying is, of course, the third and fourth quarter will be relatively stronger. So you still see -- I mean, of course, there was some slippage because of the disruption in Q1. Q2, are there any specific factors that will still sort of drive broadly steady numbers Y-o-Y?

So the reason is basically a lot of backlog gets created once the first quarter. So second quarter is pretty much pushing through what the first quarter has been done. And Q3, Q4, a lot of the new orders, the production is going on in Q2 and the shipment is in Q3 and Q4. So pretty much all the mills are busy in Q3, Q4. So in fact, Q2, but the shipment will be in Q3, Q4. So we are seeing quite a sharp uptrend on Q3, Q4. Q1, Q2 will be similar, though whatever is missed in Q1 is going to be coming ahead in Q2.

Okay. Okay. And secondly, if you could help understand in terms of margins, while we did say that even in Q1, there was some impact because of the export shipments getting delayed. What has helped the overall gross margins and the operating margins in this quarter?

Basically, we are working towards getting orders, whether it be local or export, value-added products, the product coated and then CWC, some offshore pipeline work which we are doing. So overall, this year, the margins will be probably north of the numbers which have already come this quarter. So like we even said previously that we are working on the higher margins, and we are working on bid also on the projects which are higher margins. And currently, we are doing a little bit of less of water orders also locally. So that has also impact not really bringing down our EBITDA. So that's why EBITDA margins are, in fact, highest, I think, more than 11% at a stand-alone, I think, approximately 10.8% on a consolidated level.

Okay. So that's actually supported by the mix change within the domestic business also, not just the higher margin business because that is still to be executed in Q3 and Q4. So you will see further improvement in operating performance, is it?

I think actually, all the orders because 80% is exports, Rikin. So all the orders, whatever is going out are all good margin orders. So like we said, domestic as well as export, all the orders which are taken at a better margin. And we expect this...

Got it. Got it. And lastly, if you could throw some more light on the Saudi commissioning in terms of would you start seeing this generating business in this year in any way? Or it would only be from next year that you would see any meaningful contribution?

It would be next year. [ id="-1" name="Operator" /> The next question comes from Pritesh Chheda from Lucky Investments.

Have you started executing the South Asian order, which you had announced some quarters back?

Yes, we have started execution in this quarter. And so yes, that would be coming up in the coming quarters.

Part of...

We have already started executing this order in this quarter, and we expect this order to complete by this year-end. So current quarter...

Sorry, go ahead.

Yes, please go ahead.

So the question was, was this the first quarter of that execution?

Yes. This is the first quarter we have started executing the Southeast order.

Okay. Okay. So basically, what you're calling out also to the previous participant is that this year, largely, we'll see better margin orders getting executed throughout the year. So the operating profit growth will be much faster than the top line growth. Is it correct?

Yes, that's correct.

And on the top line front itself, we are calling out 15% to 20% top line growth, correct?

Yes, correct.

Okay. Now on the Jammu plant in terms of the plant status, so has arrived for you guys? Or what is the exact plant status of Jammu?

So majority of the machines have been delivered. The construction of [Technical Difficulty] PV has already started. We should be in Q4 ready for hot trials and for some approvals as well, we will apply them. So 3 months there because of the problem of the war, all the manpower and everyone had left practically from the state. And then it was quite a big task for us to get them back. But now they are back to normalcy. And that is why the slight amount of delay. But all the machines and every major -- all the major equipments are already delivered on site.

All the equipments are already delivered on site.

Yes. All the major equipments are delivered on site.

So the extrusion press is it delivered or that is yet to be delivered?

That is getting shipped out on first week of September. It's under trial right now in Europe. And our people are already there, and it should get shipped out around September, some date in September. [ id="-1" name="Operator" /> The next question comes from [ Pratiksha Singvi ], an individual investor.

I wanted to ask that given the recent U.S. tariff imposition on Indian exporters, there is likelihood of market shift from U.S. to non-U.S. destinations. Now UAE is an emerging potential alternative, how is your company planning to address the anticipated increase in competition in such markets?

So definitely, there will be slightly bit more competition. But under the product which we sell, which is API, we've been selling majority of the sales in UAE in the last 5 years have been by us. And in our business, the past track record creates a big differential on getting the business and not guessing the business. But we keep working hard towards it. We have some value-added plants, which we are putting in Middle East for getting the ICV so that we also get that business because now every country is protecting themselves, including Middle East and GCC. So we have a small investment of a coating plant for getting the ICV so that we get the pipes also. So -- but U.S. doesn't affect us because U.S., we were not selling because of the duty in the past also. So currently also, we would not be -- no exposure in the U.S.

Okay. Understood. Next that I wanted to ask was that in the recent -- like last conference call, management indicated that current inventory buildup, it would be shipped in next quarter. I wanted to ask that what proportion of current quarter's revenue attributed to such inventory buildup?

What we said last time is true because inventory buildup in last quarter has been liquidated as I told in the previous question that we have started executing Southeast order. So if I take total turnover, around 30% is coming from that particular order in this quarter. [ id="-1" name="Operator" /> The next question comes from Yash Sinha from MIPL Family Office. I repeat the question comes from Yash Sinha from MIPL Family Office. There seems to be no response. We have the next question from Jayshree from Trinetra Asset Managers.

My question is answered. [ id="-1" name="Operator" /> [Operator Instructions] The next question comes from [ Pratiksha Singvi ], an individual investor.

Sorry, I missed a question. Last question that I wanted to ask from my end was that company's operating profit margin, if we exclude other income, it has declined from like 10% to 7% quarter-on-quarter. So what was the reason behind this divergence? And also you mentioned before that inventory was around 30%. So like material cost would also -- should have been declined because of this inventory buildup. So I want you to elaborate on that.

First of all, the other income, as I explained earlier, has been part of our business operation. It includes incentives and other export incentives plus ForEx. So you cannot -- when you're doing the analysis, please add other income also because this other income is not coming from the nonoperating assets. All the other income is contributing from the operations only.

Correct. From the only current business only. It is not getting generated.

So please add that into your business, part of sales and then you add. So there is a positive in the EBITDA to 10.86% at consol level, 11.37% at the stand-alone level. [ id="-1" name="Operator" /> We have the next question from Pritesh Chheda from Lucky Investments.

Can you call out your outlook on the Saudi market in terms of the annual market size currently there and what do you see the annual market size heading to in the next 3, 4 years?

So if you talk about the LSAW, pretty much the market is around 2 million tonnes. And HSAW is around 1.5 million to 2 million tonnes as well. That's the market trend over the last 3 years, and we expect it to continue for the next 3 to 4 years with a lot of large orders already out and under negotiations from the government.

So basically, a 3.5 million tonne market will stay 3.5 million for the next year or what?

These -- around 3.5 million are year-on-year. The time line to execute would be between 12 to 24 months for each order. And that's why if you see last couple of years, there has been a large backlog because that's the quantity and the capacity -- capacity is lesser. So a lot of the mills are full for 3 to 4 years. That's one of the main reasons why we want to go there because there is excess business, and we hope to get that.

Okay. So capacity -- so what is -- so this is the demand? And what is the annual supply usually that happens in Saudi?

Annual supply is LSAW is approximately 800,000 to 900,000 tonnes on the higher side. And spiral is approximately around 800,000 tonnes, 700,000 to 800,000 tonnes.

So you said 0.8 million tonnes in LSAW and even in HSAW 0.8 million tonnes. So basically, the demand is 3 million, 3.5 million, the supply is 1.5 million.

Correct.

Okay. And that's where you are putting up that 300,000 capacity. And any other capacity which is coming up in the system? Because I think we heard on Welspun also wanting to expand.