Premier Explosives Limited (526247) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '26 Earnings Conference Call hosted by Premier Explosives Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Omkar Sawant from Stellar IR. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. I am Omkar Sawant on behalf of Stellar Investor Relations, welcome you all to Premier Explosives Limited Q2 and H1 FY '26 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the second quarter and half year ended September 30, 2025. Today, we have with us the senior management team of Premier Explosives Limited, Mr. T.V. Chowdary, Managing Director; and Mr. Vijay Kumar, our CFO. Before we begin, I would like to state that this call may contain some of the forward-looking statements, which are completely based on company's belief, opinion and expectation as of today. The statements made in today's call are not a guarantee of future performance and also involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Documents relating to the company's financial performance, including the investor presentation have already been uploaded on the stock exchange and company's website. I now invite Mr. T.V. Chowdary to share his initial remarks on the company's performance for the second quarter and half year ended September 30, 2025. Thank you, and over to you, sir.

Thank you, Mr. Omkar. Good afternoon, everyone, and thanks for joining the call. H1 FY '26 delivered a strong performance with revenue increasing 23% year-on-year to INR 217.7 crores, driven by growth in our Defense & Aerospace division for the period. Our current order book stands at INR 1,297 crores, forming 3.1x of financial year 2025 revenue. During the quarter, successful execution of old orders positioned the company to bid for and secure larger high-value contracts from the Ministry of Defense, the Indian defense industry and international defense customers. In the month of October, we received an order worth INR 429.56 crores from Indian Air Force for the supply of chaffs and flares countermeasure. In quarter 2 financial year '26, the company secured orders from various international entities for supply of rocket motors, defense explosives and commercial explosives. Looking ahead, Premier remains the only Indian company qualified to manufacture countermeasures and a key exporter of fully assembled rocket motors. In addition, we produce and export warheads, high explosive payloads, mines and ammunition under the Atmanirbhar Bharat initiative. With the Ministry of Defense emphasizing domestic production and reduced imports, we see strong policy support driving Premier's growth. In Q2 FY '26, we generated a healthy cash profit of INR 20.8 crores by maintaining stable operations and leveraging our efficient cost structure, we aim to further enhance operational efficiency and boost cash flow. The 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 export markets. 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 ended September 30, 2025, 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 Q2 FY '26 stands at INR 75.6 crores, which shows a degrowth of 20% year-on-year and 47% Q-on-Q, quarter-on-quarter. Our operating profit for Q3 FY '26 stands at INR 6.6 crores. The operating margin for the quarter stands at 8.7%. We reported a net profit of INR 17.9 crores, which shows a growth of 113% year-on-year and 17% quarter-on-quarter. The PAT margin for the quarter stands at 23.6%. The revenue from operations for H1 FY '26 stands at INR 217.7 crores, which shows a growth of 23% year-on-year. Our operating profit for H1 FY '26 stands at INR 27.5 crores, which shows a degrowth of 14% year-on-year. The operating margin for the half year stands at 12.6%. We reported a net profit of INR 33.2 crores, which shows a growth of 112% year-on-year. The PAT margin for the quarter stands at 15.2%. The decline in revenue and margins this quarter was primarily due to delayed order execution, which is expected to be completed in the next quarter. Now coming to the order book position. The company's current order book stands at INR 1,297 crores, out of which the Defense segment order is majority of INR 1,167.4 crores, which is equal to 90% of the total order book and Explosives segment stands at INR 77.80 crores, which is equal to 6% of the total order book and Service segment, which is Operational and Maintenance Service segment stands at INR 51.9 crores, which is equal to 4% of the total order book. The order book shows a solid and strong growth towards the coming years. We are very much content that with our continued execution run rate in the forthcoming quarters, we'll be continuing with the growth trajectory. With this, we'll now open the floor for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Mr. [indiscernible] Capital.

My first question would be regarding the capacity utilization at a consolidated level. As of 2Q, how much capacity you utilized?

See, we have multiple products and multiple manufacturing facilities. So it cannot be generalized on the capacity utilization. Some of the products, for example, countermeasures, we are at 100% capacity utilization whereas rocket motors, small rocket motors, we are at 60% utilization and large rocket motors, it is only 1/3 utilization. So it varies.

Okay. So if I put forth a total number would it be around 50% of what a total capacity with the current revenue?

Yes. The problem there is where we do the tactical missiles and other rockets, the free -- the casings and hardware comes as free issue material from our customers. And delays in free issue materials will cause the delays and execution delays on that. Utilization also depends on that.

Okay. And my second question is when do we expect the current order book to get executed, the INR 1,300 crore order book, which we have currently?

If you add up all of them, again, there also, it's a bouquet of multiple products. If you consider all to be executed, it is 2 years plus.

Okay. Understood. And sir, just one last question regarding your CapEx in Odisha. We are incurring INR 800-odd crore CapEx. So considering the fact that we are not operating at 100% margin. So what is the thought process behind putting such a big plan currently and affecting the return on capital ratios?

Yes. Like I mentioned to you just a few minutes before, we have a bouquet of products. It's not 1 item or 2 items. It's multiple items. They are produced in different plants and different things. So the capacity utilization doesn't depend on that. And this -- what we are planning to have in Orissa is for the defense raw materials, which right now we are not producing. And in addition to that, the filling of bombs and other things, which is in addition to our present operations, these are the additional products, which are going to be added to the list.

Okay. And just one last question. Do you revise the INR 600 crore guidance of top line for FY '26? Or you would still stay with the same guidance considering the current quarter numbers?

Yes, we'll be in that range. That is -- it can be INR 500 plus, INR 550 or INR 600 range.

[Operator Instructions] The next question is from the line of Mr. Omkar from Stellar IR.

No, sorry, I have no questions.

[Operator Instructions] The next question is from the line of Mr. [Dhruv Patel from LLP.]

I just wanted to ask why is the revenue growth so timid this quarter? And how do we see the revenue growth and the profitability for the next 2 quarters?

Overall, at the end of the year, we are targeting or like we mentioned earlier, it will be in the range of -- revenue will be INR 500 crores to INR 600 crores. We'll be in that range. And profitability also, we expect to maintain total between 15% to 20%.

15% to 20% EBITDA, right, sir?

Yes.

And sir, what is the other income of INR 22 crores, sir? Like I read the note that it says some raw material thing. Can you like share insights on that?

Like in our earlier quarter results, first quarter and then previous results, this was -- there was a provision made towards late delivery charges for some of the customers. And this provision -- now the late delivery charges are shared by our supplier because the causes were different supplier. Now those -- that is added back to the income.

Okay. Okay. And anything on the MOU that we have signed with the Andhra Pradesh government today?

Yes. It was signed yesterday and for an allotment of land bank of around 400 acres in Andhra Pradesh for setting up of defense explosives and the defense products.

Okay. And how do we fund that, sir? How do we fund that CapEx?

As on date, we are thinking it will be with internal accruals. But otherwise, we have already taken our board permission for QIP, depending on the -- it is not immediate. It will take 2 to 3 phases. So phase investment, it comes. So we feel that we can finance it with internal accruals.

That should be over a couple of years, right, at least?

Yes. More than a couple of years. It is 3 phases, which may spread out to 6 or 7 years.

The next question is from the line of Mr. Amit from Clear Blue Capital Advisors, LLP.

My question is related to the fire incident that happened with one of the units at the company. Can you...

Can you be a little louder, please?

Is this better?

Yes, this is good.

My question is related to one of the fire incidents that happened at one of the units of the company. Can you tell us what was the production loss in this quarter because of that?

Like we have mentioned in other earlier occasions, the main product which is affected because of that is the large diameter rocket motors. And it is not for this quarter. The overall business, the turnover, which is going to be affected are delayed because of the extent is estimated at around INR 20 crores, yes.

Okay. Around INR 20 crores. And what are the steps we are doing for -- to avoid such an incident in the future?

This is -- in the explosive industry, once the accident happens, there is nobody to tell us who is there and all those. So we have to -- an expert panel is put in place to go through the incident and they have suggested recommendations and all those about some additional automation and other things, which can prevent such things. So the actions have been taken with the help of expert panel and with our internal expertise and the actions are being taken for rebuilding the facility, which got burned. And the new facility, additional precautions will be in place.

[Operator Instructions] the next question is from the line of Mr. Aditya from [indiscernible] Capital.

The provision that was for liquidated damages, was it for the chaffs and flares order that we had created earlier or this was some other order?

Yes, yes.

Okay. And sir, also on chaffs and flares and so like we received this order. So do you still maintain that chaffs and flares order countermeasures order is once in a while order and maybe it might have been used in recent conflict to that, so this was emergency procurement? Or do you see now change in customer behavior that maybe this kind of order can be expected every year for us?

The chaffs and flares, these countermeasures, they have a slight life. That means after loading into the aircraft, how many hours that can be flying and all those. So after achieving so many hours, then you have to replace and load fresh. And in addition to that, there will be something called warware stage, which are used for the practice and all those. So present quantities, the orders what we are getting are for replenishing all the stocks which are spent so that the quantity is quite high. But it will not be at this level, but there will be regular consistent every year offtake of the material.

So approximately 1/3 of it, just a general idea?

Difficult to tell. But at least 50% of what we are supplying will remain every year.

50%. Okay, sir. And also sir, any new product development that we are doing? Are we working with DRDO like some new kind of...

See, the DRDO, any new product development which comes from DRDO, PL is there. Premier Explosives is the main converter into production from that. So several projects we are working. We cannot name this and that.

But the energy remains committed there? But your energy remains committed to new product development for now?

Yes, yes. In addition to DRDO developments and all those, we also have in-house development. So that also always keeps going parallel. And the exports -- several export rockets and rocket motors are also being designed and developed by us.

So, like we have been exporting these rocket motors for a while. So like has our capability taken up like we must have a learning curve? Are we going on for more higher value, more higher advanced rockets or is it like a similar product? What is it happening?

Yes. We always look for higher level and higher products and all those. This is -- we are in this business for the past 25 years. We started in the year, Millennium year 2000. So we have acquired enough in-house capabilities of designing and producing, which we are utilizing now.

Okay, sir. And like, of course, like a lot of the exports that we used to do was these rocket motors to Israel. So do you think this should soften a little bit since there's a -- supposed there will be ceasefire announced?

It's not clear. Ceasefire is the peace time. But in peace time also, the defense products have to be produced and then we should be prepared for it, whether it is Israel or any other country. This is -- defense is different and the ceasefire is different. So we'll have to -- whatever consumed in the present war have to be replenished and also they should build up enough defense stock. So this will be a continuing business.

Okay, sir. Got it. And also on exports, like could you just give a little bit more sense that what all products that we export, if there was a step that we can say that maybe rocket motors will do this much and do we also export explosive materials like RDX, HMX or anything like that?

Yes. We produce RDX, HMX and also sell in domestic market, use for our internal consumption and also we export. We also export [indiscernible] in the Defense & Aerospace. We export industrial explosives also.

Right. And sir, for your export mix, can you share like what's the split of different products?

It will be about 35% to 40% exports.

Okay, sir. And sir, I think one of our plant was supposed to come online around this time. Is there any update that you have shared that I might have missed?

Can you repeat again?

I think there was one of the facilities or plants were supposed to come online -- was supposed to come live for us. Is that correct understanding or...

Expansion of RDX and HMX plant. Yes, it's going on. I think it is going as for the schedule and plan. By the end of financial year, we'll be starting the production.

Sorry, I could not hear you. Please come again.

By the end of financial year, we will be starting production.

By the end of financial year?

Yes. Yes.

The next question is from the line of Mr. Shubham from Perpetual Capital Advisors Private Limited.

So I'm relatively new to the company. So I just wanted to ask few basic things. First of all, I will need your comments around what were the reasons behind the sluggish growth for us in this quarter for both of our segments if you could repeat that?

It's very difficult to -- your audio something is wrong. It is very difficult to -- we are trying to hear you very hard, but can you repeat the question, please?

Can you hear me?

Yes, we'll try.

So sir, I just wanted to know, I missed your comments around the reasons behind the sluggish growth in both of our segments in this quarter. I just wanted to know the reason if you can give it?

No, there is no sluggish growth. Why that impression has come? We have growth in our turnover and also in profitability and all those. Yes, quarter-to-quarter, yes, there can be a thing, but it is a quarter or month is a very short period to consider a sluggish growth.

Okay. And sir, what is our current demand situation for both of our segments, both industrial explosives and...

Like we have already told, we have -- our order book is of INR 1,300 crores. So it's a healthy situation, and then we are executing those.

Okay. And sir, what kind of EBITDA margin do we generate in both our segments, if you can share?

It will be in the range of 15% to 20%.

So that is on consolidated basis, right?

Yes.

Segment wise, do you give out that number?

That varies. Segment-wise, it varies. Industrial explosives is different and defense explosives is different, and the raw materials are different. So we don't have that segmental figures.

Overall, it will be like that, 15% to 20%.

Okay. And sir, so you said you are doing 45% to 50% of your top line from exports, right? So is there any margin differential in our export business compared to domestic?

How do we say that margin depression because -- yes, there is difference between exports and domestic. It is not only export and domestic difference in case of defense, quantities also. When you supply bulk quantities, large quantities, yes, the price difference will be there. When you supply smaller quantity, it will be on higher side.

Okay. Sir, one final question on your Odisha CapEx. So could you please share what is our total planned CapEx over there? And what kind of -- I mean, when the plant will reach commercial production and what kind of revenue we can generate from that?