Premier Explosives Limited (526247) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '25 Conference Call of Premier Explosives Limited, hosted by Stellar IR. [Operator Instructions] I now hand the conference over to Mr. Akhilesh Gandhi from Stellar IR. Thank you, and over to you, sir.

Thank you, Steve. Good afternoon, everyone. I, on behalf of Stellar Investor Relations, welcome you all to Premier Explosives' Quarter 4 and FY '25 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the fourth quarter and full year ended on March 31, 2025. Today, we have with us the senior management team of Premier Explosives Limited Mr. T.V. Chowdary, sir. He's the Managing Director. And along with them, we have Mr. Vijay Ji Kumar, who is the Chief Financial Officer. Before we begin, I would like to state that this call may contain some of the forward-looking statements, which are completely based upon the company's beliefs, opinion and expectation as of today. The statements made in today's call are not a guaranteed of future performance and also involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect development that occur after the statement is made. Documents relating to company's performance, including investor presentation have already been uploaded on the stock exchange. Now I invite Mr. Chowdary sir to share his initial remarks on the company's performance for the fourth quarter and full year ended on March 31, 2025. Thank you, and over to you, sir.

Thank you, Mr. Gandhi, and good afternoon, everyone, and thanks for joining the call. Financial year '25 delivered a strong performance with revenue increasing 54% year-on-year to INR 470 crores, driven by robust growth in our Defense and Space Services division. Further, we are happy to share that in March 2025, we have also signed a joint venture agreement and shareholders' agreement with Global Munition Limited, a subsidiary of NIBE Ordnance and Maritime Limited, as a Group Company to manufacture defense and aerospace products. Our current outstanding order book stands at INR 750 crores, forming 1.8x of financial year 2025 revenue. During the quarter, execution of old orders has paved the way for bidding and securing larger high-value orders from the Ministry of Defense, the Indian defense industry and international defense entities. In Q4 financial year '25, we received orders from various entities such as BrahMos Aerospace Private Limited for propellant casting and assembly of BrahMos boosters and various overseas clients for design and development of rocket motors and supply of defense explosives, which are under different stages of execution. We would like to acknowledge an unfortunate fire and explosion incident that occurred in -- that occurred on 29th April at our Katepally Village facility in Telangana. The explosion took place in one of the production buildings units, especially in the big solid propellant mixer unit. We do not expect this incident to have a material impact on our operations. As a regulatory requirement, the Pollution Control Board temporarily directed us to shut down the plant, and we are actively working with the authorities to secure the necessary clearances, which we expect to receive within a few weeks. We are closely managing the situation and would like to assure all stakeholders that our facilities are fully insured, and we anticipate receiving the claim in the coming months. Coming to future outlook. Premier is the only Indian company qualified to manufacture countermeasures and specializes in exporting fully assembled rocket motors. Along with rocket motors, it also manufactures and exports warheads, mines and ammunition under the Atmanirbhar Bharat initiative. With the Ministry of Defense promoting domestic production and reducing imports, this policy supports Premier's growth by driving local manufacturing. In financial year '25, we generated a healthy cash profit of INR 40 crores by maintaining stable operations and leveraging our efficient cost structure. We aim to further enhance operational efficiency and boost cash flow. This strengthened cash flow will reinforce our balance sheet with a positive outlook on the defense and aerospace sectors. We are focused on becoming a key player in both domestic and exports market. Now I request Mr. Vijay Kumar, our CFO, to share the financial performance.

Thank you, sir. Good afternoon, everyone. The result presentation for the quarter and full year ended has been uploaded on the stock exchanges and on the company's website. I believe you may have gone through the same. The revenue from operations for Q4 FY '25 stands at INR 74.1 crores as compared to INR 86.8 crores in Q4 FY '24, which shows a degrowth of 14.6% year-on-year. Our operating profit for Q4 '25 stands at INR 9.6 crores as compared to INR 15.1 crores in Q4 FY '24. The operating margins for the quarter stand at 12.9%. We reported a net profit of INR 3.7 crores compared to INR 6.6 crores in Q4 FY '24. Let me take you to the FY '25 performance. The revenue from FY '25 stands at INR 417.5 crores as compared to INR 271.7 crores in FY '24, translating a growth of 54% year-on-year. Operating profit, FY '25 stands at INR 58 crores as compared to INR 58.5 crores in FY '24. The operating margin stood at 13.9% in FY '25. The net profit in FY '25 stood at INR 28.6 crores compared to INR 28.1 crores in FY '24. Now coming to the order book. The company's current order book stands at INR 750 crores, out of which the Defense segment order is majority of INR 610 crores, which is equal to 81% of the total order book. Explosive segment stands at INR 73 crores and Service segment, which is Operational and Maintenance Service segment stands at INR 67 crores. The order book shows a solid strong growth towards the coming years. We are very much confident that with our continued execution run rate in the forthcoming quarters, we'll be continuing with the growth trajectory. With this, we will now open the floor for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Dipen Vakil from PhillipCapital.

Congratulations on a good execution. Sir, my first question is on the lines of, can you share with us what is your order book split between domestic and export? And what could be the execution period for the existing order book?

Total order book is INR 750 crores, which is, of course, period of -- this is expected to be executed in a period of 18 months. And coming to exports and then domestic order book, you have...

It's about INR 100 crores of export and balance is domestic.

Got it, sir. Sir, my next question is in the lines of -- so right now, there is a news going on regarding the emergency procurement orders and the inquiries floating around from the government. So can you help us with the status of what kind of inquiries you are witnessing? When order inflows can be expected? And what would be your order inflow guidance for this year?

There are different emergency procurement -- discussions are going on, but I think it is too early to comment on that.

And your order inflow guidance for this year?

Beg your pardon?

Order inflow guidance for FY '26.

Yes. This will be maintained. Around INR 800 crores order book will be maintained with the regular inflow of orders.

Next question is from the line of Sarjeet Yadav from Mount Intra Finance.

Sir, my question is around the incident which has taken place. What do we see that possible cause an impact on any of the deliveries or what could be -- any penalty because of these orders? So what is the financial impact of this event which is happening since one is the delay in the order, second is the loss, and third is when the plant is not functional.

Yes. Coming to the thing, the accident happened in large mixing plant, propellant mixing building where the building has totally collapsed and equipment also damaged the mixer. And this -- the cause for the accident is being investigated. It is too early to say. The experts are put on the job, and then we are getting permission for clearance of the debris and all this. After all that only the assessment and causes can be done. And about the effect of this accident on the performance of the company, this being -- if you all remember, we have two facilities, Katepally and then Peddakundukur for propellant manufacturing. So most of the tactical missiles and all those are produced at Peddakundukur facility. And also, we have a parallel line is Katepally for doing it. So the only the area which can get affected is the large diameter rocket motors, which we supply to ASL and ISRO. The total revenue from this is expected to be INR 25 crores to INR 30 crores of the total revenue. So there will be effect on that amount.

As far as financial impact is concerned, we are fully insured. So we're not foreseeing anything on that.

And closure of this plant -- sir, in case you can just clarify, in case this -- only a part of this plant is closed or the entire factory has been closed for this review because the impact will be different in both the cases.

The Pollution Control Board has as a practice, they have declared a closure notice, which is a regular procedure. First, the debris has to be cleared and then they will see whether it has caused any pollution, the fire and the water which is used in the firefighting whether it caused any pollution, they will check it and then they clear it. So the process is going on. We are pursuing the matter, and we hope by the end of this month, that should be cleared. Other than that, the other operations and all those are open and only that area, the propellant line is only suspended by [indiscernible].

Once Pollution Control Board gives the clearance, only that building is not operational. Rest of the buildings and the rest of the plants are all operational.

[Operator Instructions] Next question is from the line of Ashish, an individual investor.

My question is around trying to see the operating revenue growth over the last 4 to 5 quarters. So for the latest quarter, March '25, the operating revenue standing at INR 74 crores is significantly lower compared to the growth trajectory that has been seen since, I would say, March '24, that has been linearly growing. So would be keen to understand what changed significantly in this quarter, last quarter on the operating revenue front.

What happens is we have defense orders and all these things. When we -- when dispatches shift to one quarter to other quarter, usually it gets delayed. So in the last quarter, there was low dispatches. So that's why the turnover was low.

As I mentioned in earlier meetings also, the defense products are dispatched against pre-dispatch inspection. So if the team which has come for pre-dispatch inspection, they get delayed by another 10 days, it will go into the next quarter. That is the reason.

Otherwise, our turnover is higher than the regular one, INR 417 crores compared to previous year turnover of INR 271 crores. It is the highest turnover in the company's history.

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

Yes. Sir, this is regarding the growth prospects of the company. Like I've been keeping the track on this company and invested very heavily. I just wanted to know that like what happened this particular quarter, the revenue has been very less, also the PAT. But keeping the order book that's there in hand, we expect a better quarter coming next and thereafter? Or this sort of variation will continue to happen in future also depending on what you said that the inspection team is coming and thereafter validating and giving the things?

These things will happen quarter-to-quarter. It is not -- we are not in the business of commodity, which is consistently consumed and all that. The defense products are going by order to order. So there can be fluctuations of the turnover. In some quarters, they will be high and some quarters it will be low. But overall performance is annual performance or year-on-year, we have to compare.

[Operator Instructions] The next question is from the line of Amit Kumar, an individual investor.

Sir, I have a question that in recent Operation Sindoor, so a lot of missiles were used, Akash and Agni. So just wanted to know that what is the value we are supplying in these missiles, which were used? And second, if you could provide the revenue and EBITDA guidance for next 2, 3 financial years.

The missiles what are used in this and all those, our contribution is the solid propellants and other energetic components are contributed by Premier Explosives. So the cost of these items will be somewhere around -- they vary from missile to missile. It is not same for everything. So it will be between 10% to 20% of the actual value -- the value of the energetic components supplied by us.

And sorry, I'm new to this company. If you could explain a little bit what is the propellant. I'm not...

Propellant is the one which we feed in the rocket and rocket moves forward only with the propellant. And Premier Explosives makes the solid propellant for all these.

Okay. And could you provide the revenue and EBITDA guidance for next 2, 3 financial years?

Yes, our target is INR 600 crores for the current financial year and expect to reach INR 1,000 crore turnover by 2030. That is -- and EBITDA margin is between 18% to 20% is our future.

Okay. And due to this incident, fire incident, we might have -- there might be some loss of revenue. So what actions you are taking that in coming quarters, we are able to manage the operations without impacting our revenue and EBITDA?

Like I've explained, the other operations are -- except production of the large target motors, which in the total financial year turnover from that segment is expected to be at least INR 25 crores. That will be the loss of turnover.

Even after that, we are targeting about INR 500 crores to INR 600 crores for the current financial year.

The next question is from the line of Sarjeet Yadav from Mount Intra Finance.

Sir, can you just tell us what are the likely some kind of orders which you are expecting during this current year? This is one question. And second is chaffs and flares were facing certain problems. In case we get some fresh orders since we are the only ones who are manufacturing these products, how do you see yourself executing these products?

There is no problem. We are producing only because of the large order we had to meet from the imported payloads. Because of the geopolitical conditions, the transportation delays that are there. But otherwise, the production, there is no issue. We are producing, and we'll be able to meet the requirements given the emergency procurement order. We have already informed to the Air Force also about it, and they specifically asked our capabilities.

Okay. Anything around the -- what are the type of orders we may expect this year, sir?

Different orders are in pipeline. And based on that we'll maintain this, INR 800 crores what we are order book. After executing the INR 600 crores also, we are expecting to maintain the same order book, which means some INR 500 crores, INR 600 crores additional...

Understand, probably You are not able to share the products, that's fine.

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

Actually, I joined the call a little late. So I'm not sure whether this is covered or not. Can you please tell us about the significant drop in revenues and margins, the reason for it?

Revenues, there is no drop. There is increase in revenue, 54% increase in revenue. The margins remain same, not because of thing, because of the -- we have explained that certain orders and all those execution, because of delay in execution for various reasons, we are expecting late delivery charges. The late delivery charge -- provision is made for the late delivery charges, but we have submitted our request for waiving it off. So we are hoping that whatever difference is there, that will be made up in the next financial year.

So how much we are expecting for this financial year?

How much means, you mean the turnover?

Revenue growth, yes.

Yes, we are expecting around INR 600 crores turnover in the current financial year.

Okay. And margins to be in similar lines?

15% to 20%.

Yes. EBITDA, we are expecting 18% to 20%, probably around 15%.

Okay. Sir, also, if you can give me some update on the Odisha plant, how the CapEx will be done and how will you manage it?

It's a very general thing. You can be more specific, it is better.

Means whether we will be doing it through internal accruals or raising some debt, some loans?

Yes, that's what I said. Those are the ongoing debt -- of the company and finances. But you have anything specific question, then we can tell.

The next question is from the line of Santanu Chatterjee from Mount Intra Finance.

My question is like that although our top line is growing like anything, it's 54%, but bottom line is not improving only because of LD charges. From which quarter we are expecting this kind of LD charges will go away?

See, LD charges will always be there. The only thing is, for any reason if there is a delay in supplies, LD will apply to us.

Actually, earlier contract will be completed by this year-end. Maybe by December or March, we are going to complete that. So once that is completed, the LD issue should be completed. As sir said, in case in future, if we get some orders and if it gets delayed, we can't say. So if we execute it without delay, there won't be any LD charges.

Sir, why I'm asking this question only because our normal margin is more or less as you have envisaged 18% to 20%. But due to this LD charges, that EBITDA margin dropped down significantly from that level to currently around 12.9%. So if this LD charges persist from here onwards, then how we can actually revert back towards our expected guideline, 18% to 20%?

Actually, LD -- I told you this LD is only on the specific contract, not on all the other orders. So once it is completed, the LD issue will not be there.

And then for your information, the last order what we executed, also LD was there. After the LD was directed, we have submitted our request and appeal with all the reasons, and it was considered and then LD got wavered. So we -- in the present case also, we have submitted our reason and all those. And we are hoping that it will be considered probably. So automatically, this will be added to the next -- current financial year.

Great. And sir, what is the current status of our Odisha plant? Is it going according to our plan or there will some...

Going according to our plan only. See, the government revenue department, they have their own pace of working. But still, they are quite fast comparatively. Like in the last meeting also, I have shared that we have -- land is identified. There are some patches of -- forest land is there in that 500 acres, which the government is working on that. If the government land can -- alternate land can be shown, then forest land, we can add up.

That means whatever is our commencement date for Phase 1, that is intact currently?

Yes.

The next question is from the line of Dipen Vakil from PhillipCapital.

Sir, my first question is I want to understand the timeline of Premier Explosives receiving a contract. So for example, in January, BDL received a contract for MRSAM. So when are you expecting to get an order for propellants or any supplies that you contracted to MRSAM? And similarly, QRSAM is expected by end of this year. So can you help us with the kind of timelines on Premier Explosives getting an order from their clients?

We already have orders on our hand. MRSAM, we have order of more than 500 numbers from BDL. BDL is the only integrating agency and Premier is the only propellant supplying agency. Only thing is we are dependent on the hardware as FIM from BDL. Right now, they are providing us around 30 numbers per month hardware. So whatever filling propellant and then delivering back.

Got it. So it is safe to assume that within 2, 3 months, you start receiving order from the clients once they receive the order?

Yes.

Okay. Sir, I wanted to understand that -- second question is, I wanted to understand that chaffs and flares order is running in a delay. So what would be the pending order book for chaffs and flares? And -- so what kind of delivery schedule you are looking at it?

We'll be completing around 60% of the order by this -- by next month. And by December to March, we will be completing the complete order.

The next question is from the line of Akshat from Ratnabali Securities.

So we see a significant increase in payables and inventory. Can you share the reason for that?

Your voice echo is coming. Can you please check the audio?

So I was asking that we see a significant increase in inventories and payables. Can you share the reason for that?

Last year, turnover was INR 271 crores. This year, it is INR 417 crores. Turnover has also gone up. Accordingly, inventories have also gone up.

And for payables?

Yes, yes. Payables are also there. Payables also have gone up because of it.

So the increase in payables is almost close to 10x.

Yes. Current assets have also gone up in the similar number.

The next question is from the line of Manish from Middleton Capital.

Sir, you said that you will reach INR 1,000 crore turnover. What was the timeline you set for that?

Year 2030 is our target year.

After getting a INR 600 crores turnover next year, aren't you being too conservative for...

We are not in the commodity business. It is other part from defense. So today, there is a demand because of the present situation and then emergency procurement orders and all those. But after 2 years, it may not be the same thing. So that's why we'll try to be a little conservative.

The next question is from the line of [ Akshay Sharma from Golden Miraj ].

My question is on the bulk explosives side. What's our current utilization? And what are the constraints in terms of if we need to add some capacity, how quickly can we add there?

See, we have -- right now, we are operating our two bulk explosives plants located in the Singareni Collieries area. Both are working and delivering. We have another two plants in Coal India -- they come under Coal India, that is Western Coalfields in Chandrapur and another at Singrauli in Madhya Pradesh. These two are right now -- since we don't have any Coal India order, so they are now idle. Next Coal India tender when it comes, again, we'll have to participate and see that because of the prices and all those, which are -- margins have become very low because of raw material costs have gone up there. So we are careful before we are accepting the order.

Okay. Okay. And what are the margins for this segment, sir?

This segment, there is a big fluctuation because of the raw material. So I don't think we'll be able to tell the margin today.

So we can say we are working at 50% capacity.

Yes -- not 50%, you can say we are at 30% capacity.

The next question is from the line of Anuj from Tijori Finance.

This is Anuj from Tijori Finance. So my question would be -- I mean, I can see a significant jump in order book, which went up 21%. So my question is like the current order book, which we have almost INR 84,000 crores. So how much order we are getting from, I mean, Indian defense or from Indian government?

We have about 80% order book is from defense only. Balance is domestic -- I mean commercial...

Commercial. Okay. And the inflows, I mean, the new order book, which is almost around INR 31,000 crores. So in that also, we can assume that 80% of the order is coming from Indian defense, right?

What is that INR 31,000 crores?

The new bookings, which you have almost INR 31,000 crores, right? I mean the new order inflows...

What is that INR 31,000 crores?

I mean, I can see the order book details, which went up, I mean, from December '24 to March '25...

We have only INR 750 crores order, INR 750 crores order book as on date. So that will be maintained. And also out of that around 80% will be from defense.

The next question is from the line of Praveen from Ananya Research.

Sir, out of this INR 800 crores of order book size approximately that you are mentioning, how much is the international part? And part two of the question is you are expecting some potential international customers from Philippines. Is there any update on the same?

We have about INR 100 crores in exports and balance is domestic.

Okay. Any update on the Philippines that you've been working, sir? Last quarter, you have been mentioning about it.

Philippines, we are not working directly with Philippines. We are exporting industrial explosives to Thailand and Philippines, not the defense.

The next question is from the line of Keshav from BHH Securities.

Yes. Sir, this Telangana plant in which there was a blast. What is the financial impact of that on your P&L?

I think just a few minutes back, I was explaining the same thing.

Okay. I missed it. I missed it. Yes.

See this plant, it is not the Telangana whole plant or something. It is one building of Katepally plant where the accident took place. That building has become inoperative. And temporarily, the Pollution Control Board has suspended the license and declared a closure.

Of the whole plant? Of the whole plant or only that building?

Whole plant.

Whole plant, okay?

Full plant, but we have already approached them, and then it is -- we are expecting that to be revoked by the end of this month. And the revenue loss because of the accident is expected to be around INR 25 crores in the current financial year.

Okay. Okay. And the poor financials -- sorry to repeat at all. And the poor financials of this quarter were attributable to something else or what? The poor financials, PAT, everything has fallen -- EBITDA, sales, everything has fallen. So this is attributable to what?

This is -- some of the deliveries which you are expecting to do it, those are delayed because of the delays in the inspection. But still, the turnover-wise, there's a big jump in the turnover. In the quarter-to-quarter, it can vary sometimes based on the deliveries and inspections and all.

Okay. Okay. So going forward, we should -- the company should do well financially and operationally?

We hope so. Yes, we hope. All the efforts are for that only.

Yes, sir. So we want some clarity and color on the commencement of operations at the Telangana plant, which has been closed? And what is the impact on production because of the closure? And what -- can you just give your comments?

I just now answered the same question. I think the Telangana plant, it is expected to be revoked by the end of this month -- because we have already approached the officials and submitted our replies and reports. So it is expected to be revoked by the end of this month. And the financial impact is expected to be around INR 25 crores revenue for the financial year '25-'26.

The next question is from the line of Niraj from White Pine Investment.

Sorry, I just got late. I don't know whether you answered this. So the LD damages -- you had a apportioned 15% of revenues for the LD damages. So what is the status right now? And this quarter also did have the 15% additional cost as you reported in numbers...

We already explained that. What we are saying is we have only one order in which we have LD. So if we -- when we are executing that order, there will be a reduction of 15%. So that also we are requesting them to reverse it and give it back to us. So that effort is also going on. So otherwise, only on particular order, there will be 15%. Otherwise, rest of the orders, there is no LD.

Sir, cumulative of all the order supply that you have done, that one order that is LD, how much is the total amount is there, total?

As of date, it will be around INR 35 crores.

Cumulative INR 35 crores. And sir, another question is in case -- another question, in case there's a QRSAM order given by the government to an extent of -- what percent should it flow to you of that QRSAM and Akash, both?

Beg your pardon, question is not understood.

If there's a QRSAM order and an Akash order, what percentage of...

There is no QRSAM order with us.

No, no, no, I'm not saying that, sir. I'm saying hypothetically, if there's a QRSAM order that is given to BDL, what proportion of that should flow to you is what the question is?

The 100% requirement of propellants and energetics flows to Premier Explosives because as on date, we are the only qualified source.

Right, sir. And what is that amount as a percentage of the cost of the missile or so?

Yes. I think a few minutes back, I explained it is around -- between 10% to 15%, depending on the missile to missile it changes. I think the questions are becoming repetitive.

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

I hope I'm audible. My question was on the construction of the new larger plant for RDX and HMX at Katepally. So if you can just share an update on the thing? Is it nearing completion, sir?

It is going on. Civil works are -- both are going in parallel, civil works as well as the fabrication of the equipment and all those. And as on date, we still feel that by August, we'll -- by August, we'll be completing the civil works and then fabrication and then commissioning of the plant and then production, all those are expected by October.

Okay. And I think in the last 1 or 2 calls back, you were alluding to RFPs in this RDX and HMX segment. So any new inquiries or RFPs that we are participating of late, especially from exports?

Yes, we have several queries for export of RDX and HMX.

The next question is from the line of Niraj from White Pine Investment.

Sir, what is the status of the RFP for the ammunition and the grenades?

Beg your pardon, position of RFP?

For the ammunition and the grenades. So what is the status of the RFP of ammunitions and grenades?

Multiple RFPs have come. Earlier because the technology what we have is from DRDO, but unfortunately, the material, some of the components required for that are not available from MIL. MIL says they cannot supply now. So that's why we have not accepted the orders from -- for grenades. Now we are -- we have found other sources. So we are hoping that in the latest RFPs which are out, we are going to participate.

The RFPs that were earlier open, that is not -- tt is closed or what?

Yes, earlier because -- yes, because the technology and all those, it has to be DRDO technology where we have to use MIL material. I think it's a bit long story that.

Okay. Okay, sir. But this -- how large are these generally the RFPs in terms of value?

I won't be able to tell that. There are multiples, it's not one RFP or anything. There are multiple RFPs.

Okay. And sir, the question on the BrahMos side, on the rocket motor. Sir, what is the status right now? Last time you had said that you received the orders on the rocket motor?

The order we have 60 numbers of BrahMos supply orders with us. So now this one -- this accident has paved way for shifting this to our PDK plant. So we plan to produce from PDK plant and meet the requirement.

And that will take, sir, how much time to shift?

It's a working plant only. It doesn't require anything.

Okay. And the orders that you had told, the INR 26 crores, that is the same amount, right?

60 numbers.

Ladies and gentlemen, this was the last question for today's conference call. I now hand the conference over to Mr. Chowdary for his closing comments.

Yes. Thank you for your support when we have all the difficult times due to accident and all those. I really thank everybody from bottom of my heart for cooperating and then still having the confidence in us, and we'll overcome all the adversities and then we'll definitely perform well in future as per your expectation. Thank you very much.

Thank you. On behalf of Premier Explosives Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.