Servotech Renewable Power System Limited (SERVOTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Servotech Power Systems Limited Q4 and FY '24 Earnings Conference Call hosted by Ventura Security Ltd. [Operator Instructions] Please note that this conference is being recorded. The company is today represented by Mr. Raman Bhatia, Founder and Managing Director, and Mr. Vipin Kaushik, Finance Controller. I would now like to hand over the call to the Managing Director of the company Mr. Raman Bhatia for his opening remarks. Thank you. And over to you, sir.

Thank you ma'am. Good morning everyone. Thank you for joining us today for this conference call. We welcome you all to our Q4 and annual earnings call 2024. Servotech Power Systems established in 2004 is a leading manufacturer of power electronics products. We specialize in innovative and high-quality solar products and EV chargers, actively contributing to the transformation of the sustainability and renewable energy landscape. We are pleased to announce significant order wins from major oil marketing companies like BPCL, HPCL and IOCL, totaling over more than 5,000 DC chargers and more than 2,600 AC chargers. These orders underscore the growing demand for our EV charging solutions and our strong market position. We are committed to building our global brand through strategic collaboration with prominent players in the EV space. Our extensive network of over 5,600 deployed charging stations nationwide reflect our influence in the market, which has been deployed by oil marketing companies and so many OEMs, which we have sold in white label. Additionally, our newly established subsidiaries dedicated to manufacturing key EV charging components at our state-of-the-art facility in Haryana aligns with India's vision of "Aatmanirbhar Bharat" for energy solutions -- green energy solutions. The rapid growth of electric vehicles and the increasing demand for sustainable power solutions present immense opportunity for Servotech. We are strategically positioned to capitalize on this transformative shift and anticipate accelerated growth in the coming quarters. Our financial performance in FY '24 reflects our strong market position. Revenue increased by 27.5% to INR 355.26 crores, driven by robust demand for EV charging units and efficient order execution. EBITDA grew by 18% to INR 22.36 crores, maintaining stable margins. Profit after tax stood at INR 11.8 crores. Servotech's future is exceptionally promising. The convergence of technological advancement, our commitment to innovation, strategic partnerships and dedication to sustainability position us for significant growth. We are confident in our ability to expand operations and deliver value to our stakeholders. We express our gratitude to our Board, management, employees, partners and shareholders for their continued support. Together, we remain focused on delivering consistent performance and sustainable growth for Servotech. Thank you for your time. We welcome any questions you may have.

[Operator Instructions] First question comes from Balamurli Krishna Ji from Omen Investment Advisors.

I want to know what is the current capacity? I think it's available in the investor presentation. But last year, how many AC or D.C. chargers you have delivered and this year, how many chargers we are planning from the new facility and consolidation, how many we are planning to deliver?

We are having the orders in hand is around 5,000 chargers and EV chargers is around 3,000 chargers. And we are planning to supply around 12,000 chargers in this year and our production capacity support this.

Okay. And any specific reason for this drop in the margins in the last quarter?

I didn't understand. Can you tell me again?

Last quarter, margins are dropped. Last 3, 4 quarters from Q1 onwards, so the margins are slightly dropped. Earlier in Q1, we have 8% around EBITDA margin and now we have around 4% [indiscernible]?

We are -- because your question is very valid in terms of numbers. But we are trying to grow very fast. So we have to do so many things simultaneously like we are setting up new plants. We are setting up new team. So so many expenses, which we have to bear during these quarters, but they did not start giving us a revenue, to understand, because we are not planning to reach the next level of INR 350 crores or INR 360 crores. Now we are planning for how to reach INR 500 crores then INR 1,000 crores and then INR 1,500 crores. According to that, we have to plan our machinery, our plant, our manpower, our team. So we have to bear the cost of that, [Foreign Language]. But technically, it is not a dip. It is an expansion mode.

Agreed, sir. And the margins, so now we are at initial stage and we are at say 1%, 8% margin. But over the long run, maybe 5, 6 years down the line, how would you see the margins panning out? What could be the sustainable [indiscernible]?

If we stop our revenue at this stage, that means we don't grow the revenue, right? And then we can increase the margins. But if we want to grow the revenue in the same pace and simultaneously, we want to grow our capacity and everything, then margin will not increase very much. But yes, in absolute terms, it will increase very, very big.

Next question comes from Agastya Dev from CAO Capital.

Bhatia Ji, last quarter, you had already said that there would be some slowdown in Q4 because of various government regulations and also you were in the process of setting up the new facilities and you are making plans for future growth. So, [Foreign Language]?

[Foreign Language]. Shareholder will feel happy, but probably as a management or as a decision owner or as a Managing Director, I will not be happy because [Foreign Language], but still, we are happy to share with all of you that 30th of -- before 30th of June, we are able to supply more than 25% of the total order value [Foreign Language].

[Foreign Language].

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[Foreign Language].

[Foreign Language] spend for a government or for every company and even for everyone. [Foreign Language].

Next question comes from Aditya Bagaria from Shree Shankar Timber.

Sir, how much [indiscernible] can we expect this year compared to previous year.

[Foreign Language]

Sorry to interrupt you, sir. Could you please speak a little louder?

Sir, I was asking how much growth can we expect this year compared to the previous year and [Foreign Language] are we planning to go into selling of component part also later on?

[Foreign Language] we are aiming more than 10x in the next 3, 4 years. That is our planning, right? [Foreign Language] we were having a factory area is around 50,000 square feet. And this year and maximum till next year, we would reach up to 200,000 square meter area. [Foreign Language] which will support us.

Next question comes from Amit Kumar, an individual investor.

[Foreign Language]?

[Foreign Language] that is more than 5600 chargers till 31, March 2024.

This financial year FY '24 [Foreign Language]?

[Foreign Language].

Financial year '23-'24, sir?

[Foreign Language] 5600 approximately.

Okay, sir. Sir, next question, our GP margins [indiscernible] 400 basis points [Foreign Language]?

[Foreign Language]?

Sir, gross margins [indiscernible] 400 basis points [Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language] ?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Operator Instructions] We have a follow-up question from Agastya Dev from CAO Capital.

[Foreign Language]?

[Foreign Language] That is backward integration, right?

[Foreign Language]

[Foreign Language].

[Foreign Language]?

[Foreign Language] that is the thought process [Foreign Language].

[Foreign Language] because of regulation and [Foreign Language] but it will pickup. But as of now [Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

We have a follow-up question from Balamurali Krishna from Oman Investment Advisers.

Sir, somewhere I have read that the new plant will be capacity of 6 lakh EV chargers per year. Is it right? Sir, this figure?

6 lakh, yes, it is including of AC chargers and DC chargers both. Because AC chargers requirement is huge and its volumes are very big. You are correct.

And how will be the -- I mean, percentage break down for us? Because DC chargers are most -- because of power rating, these are costlier than AC chargers. So how will be the percentage in the production capacity? How much percent will be AC and how much percent for DC?

18% [Foreign Language] because AC charger will sell with each and every car. We are working with the many automobile companies. And most probably very soon, we will get approved as a vendor for this AC chargers, which will come with the car and with the Volvo chargers. So, quantity will be huge. And there is another one charger that is a polar charger which is an onboard charger that also will get included in this manufacturing that means we will an OEM manufacturing for all these big automobile companies soon, [indiscernible] will be valuable.

Okay. And how much revenue we are targeting this year?

How much?

How much revenue we are targeting this year?

I cannot comment on this right now.

Next question comes from Sumit Srivastava, an Individual Investor.

[Foreign Language]?

Sir, LED [Foreign Language] So we count it as a part of solar. Majorly, we have only two parts. One is solar, one is EV. [Foreign Language], so it is also counted as a part of solar.

[Foreign Language]?

[Foreign Language].

[Foreign Language] Basically, power electronics-related [Foreign Language]?

[Foreign Language].

Sir, main customers [Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language]?

[Foreign Language] We will start to roll AC -- we will soon become AC charger vendor after some approvals?

[Foreign Language]

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

Sonipat, Haryana.

[Foreign Language]?

[Foreign Language].

We have a follow-up question from Aditya Bagaria from Shree Sharkar Timber.

You already answered my question. The last person asked the same question I was going to ask. So I have nothing more to ask. Thank you so much.

[Operator Instructions] Next question comes from Naman Parmar from Nivesha Investment.

Sir, I joined late very. So I just wanted to know what is the capacity currently for the solar AC, DC chargers?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language] We can test any charger in less than 5 minutes by computerized testing. In fact, just like a car and push the button, it will work. Everything is automatic and you will get the result on the screen [Foreign Language] and you will get [Foreign Language]. So everything [Foreign Language].

[Foreign Language]?

[Foreign Language] instruments are available in our factory and our lab, so we can test everything in-house through the simulation.

[Foreign Language] solar product, EV chargers?

[Foreign Language].

[Foreign Language]?

[Foreign Language]

We have a follow-up question from Agastya Dev from CAO Capital.

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

[Foreign Language] that means every revenue, margin will be a net profit. [Foreign Language]

[Foreign Language]?

[Foreign Language] that you will get noticed soon.

[Foreign Language]?

[Foreign Language]

Next question comes from Vijay Barta, an Individual Investor.

[Foreign Language]?

[Foreign Language] that is number one. Number two, [Foreign Language]. So I think we are good enough. That is my thought process, right? Extraordinary [Foreign Language]. In fact, bottom line or top line [Foreign Language].

[Foreign Language].

The last question for the day comes from Ishan, an Individual Investor.

Thank you for answering all the questions so well. I had one question. What was the thinking behind acquiring team in the Bengal Premier League? If it was purely for marketing reasons, why didn't we buy ads, things like that? I just wanted to understand what is your thinking behind that?

[Foreign Language] I can answer you in Hindi if it's okay? [Foreign Language] That is my thought process. [Foreign Language]. It was a plan [Foreign Language] they are doing on that. So it was a conclusive decision by the team. That's why we took the decision. And we are expecting it will be a good in future.

Thank you. Now I hand over the floor to management for closing comments.

We sincerely thank everyone for joining us today. We trust that we have provided a comprehensive overview of our company and business model and addressed all your questions. We are witnessing significant growth across our diverse product range, fueled by our continuous research and development efforts and strategic initiatives. We remain committed to introducing innovative products, expanding into new markets and delivering value to all our stakeholders. For any further questions or inquiries, please don't hesitate to contact our Investor Relations team, [indiscernible] or Naman Maheshwari from Captive IR. They will be happy to assist you. Thank you again for your time and participation. Have a wonderful day. Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of Ventura Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.