Skipper Limited (SKIPPER.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Skipper Limited organized by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Navin Sahadev from ICICI Securities. Thank you, and over to you, sir.

Thank you. Good evening, everyone. On behalf of ICICI Securities, I welcome you all to the Q1 FY '26 Earnings Call of Skipper Limited. Today, we have with us Mr. Sharan Bansal, Director Skipper; and also the CFO, Mr. Shiv Gupta. So without any further ado, I hand over the call to the management for opening comments. Over to you, sir. Shiv Gupta Good evening, everybody. This is Shiv Gupta, Shiv Sankar Gupta, CFO. Yes. Thank you, Naveen. Good afternoon, everyone, and welcome to Skipper Limited's Quarter 1 FY '26 Earnings Conference Call. I would like to extend my gratitude to all our investors, analysts and stakeholders for your continued interest and support. Before we proceed, I would like to remind you that certain statements made during this call may be forward-looking in nature and should be reviewed in conjunction with the risks and uncertainties associated with our industry and business. Some of the key operational and financial highlights in comparison to previous year quarter were as follows. I'm pleased to inform you that we have delivered yet another good quarter and registered our best first quarter revenue on back of strong execution in Engineering and Polymer segment. The net revenue for the quarter stood at INR 1,2539 million against INR 1,0917 million, up by 15%. The segmental revenue breakup were as follows: Engineering INR 1,248 million, up by 24% over previous year quarter. Polymer INR 1,272 million, up by 34%. Infra segment, INR 1,019 million, down by 39%. The company engineering export revenue grew 30% year-on-year to INR 3,254 million in quarter 1 compared to INR 2,508 million in the previous year, reflecting strong international demand momentum. Export share in overall engineering revenue stood at 32% in this quarter. Now moving on to our quarterly financial performance. Our reported EBITDA of INR 1,272 million was the highest ever for any quarter, rose 22% in comparison to INR 1,047 million in previous year period. Consolidated EBITDA margins improved to 10.1% vis-a-vis 9.6% year-on-year, driven by operating leverage and execution of higher quality T&D contracts. The Engineering segment EBITDA margins for the quarter stood at 11.3%. We have clocked the desired margin range of 11% to 12% now for past many quarters. Going forward also, we will see a consistent margin performance from this business on back of better quality contracts execution and benefits of operating leverage. The management focus continues towards bottom line improvement. The stand-alone PBT increased by 41% to INR 598 million and PBT margin improved to 4.8% of sales for the current quarter period against INR 423 million and margins 3.9% of sales in previous year quarter. The stand-alone PAT also increased by 41% to INR 447 million and PAT margin improved to 3.6% of sales for the current quarter period against INR 316 million and margin of 2.9% in previous year quarter. On the order front, I'm happy to inform you yet another good quarter for us. During the quarter, company secured significant size domestic contracts from Power Grid Corporation of India Limited and export markets in Middle East, contributing to a total inflow of over INR 1,9774 million. The current quarter order inflow was up by 158% compared to the previous year quarter period. During the quarter, we secured 3 prestigious 765 kV transmission line projects from Power Grid in the states of Rajasthan and Andhra Pradesh, strengthening our position in the high-voltage segment and also secured a major tower testing and design order approval from the Middle East largest utility, reflecting the growing acceptance of our in-house design capabilities among global utilities. This has propelled our order book to an all-time high level of INR 85,205 million plus reinforcing strong execution visibility. The tender pipeline remains deep with the current bidding pipeline at all-time high of approximately 300,000 million, reflecting strong opportunities in both domestic and international markets. We are participating in a wide range of high-value tenders across domestic, Middle East, LatAm, Asia Pacific, North America and African markets, many of which are significantly larger in size. The vibrant domestic T&D environment aligns with Skipper's commitment to leverage India's transmission sector growth with the government's focus on scaling renewable grid infrastructure and improving electrification. Skipper is poised to support this growth. Our qualification to undertake EPC projects at the highest voltage level of 765 kV and 800 kV gives us a strong advantage. We are among the very few companies in the country with the capabilities to execute these high-voltage projects backed by years of expertise and experience. Strategic highlights. We also made meaningful progress on several strategic fronts. A few of the updates are as follows: Our 75,000 million tonnes per annum new capacity is now fully installed and commercially operational. This is a strategic enabler that now allows us to target fast track export orders and short-cycle demand, segments where we faced constraints last year. In addition, we have embarked on another 75,000 million tonnes per annum capacity expansion with a bold vision to become the world's largest transmission tower manufacturer with 6 lakh million tonnes capacity by FY '28 end. In the Polymer business achieved 40% year-on-year growth in volume terms, we have increased focus on plumbing segment to improve profitability and enhancing our retail distribution network and are gaining momentum with product diversification. Number of distributors billed and increased by 39% year-on-year. Monthly billed retail outlets grew by 23%, strengthening last mile reach. Further, company Board has approved formation of subsidiaries in 3 key international regions to accelerate export growth and deepen global market penetration. In conclusion, Skipper Limited continues to deliver strong operational and financial performance, driven by our focus on execution excellence, strategic initiatives and prudent financial management. We remain optimistic about the future and are confident in our ability to create long-term value for our stakeholders. Thank you, and I'm happy to take questions now. Thank you.

[Operator Instructions] We have our first question from the line of Balasubramanian from Arihant Capital.

Exports have witnessed around 30% growth in this quarter. I think our major focus in North America and the Middle East. And we are also getting a lot of orders from that. But it seems that the approvals are slow. So what is the realistic time line for scaling to like especially U.S. revenue to 10% of exports? And I just want to understand the cost structure between us and the Chinese competitors in bid for markets like Africa and Latin America side.

Yes. You are right that exports have seen a significant growth this quarter in terms of revenue execution. This year, overall, we have a target to double our export order inflow from previous year approximately INR 700 crores to INR 800 crores. We feel that we can take a target to double it to about INR 1,500 crores to INR 1,600 crores of new order inflows, which should definitely have a positive effect on execution. And as mentioned by Shivji in the opening remarks, because till last year, we were facing a capacity constraint. Now we don't have a capacity constraint with the new capacity coming online and further new capacity getting added. So we will be able to pick up short-term orders in the export market as well. With regard to the approval process, approval process is going in a steady manner. We have been obtaining new approvals in various utilities at a good pace. And recently, we also secured a strong engineering order from Middle East largest utility. So I would say that overall export, we are happy with the export progress. Regarding to our competitiveness against the Chinese, of course, the Chinese threat always remains and Chinese players from time to time are very aggressive in the market. But with the strength of our engineering and with the strength of our backward integration, we are able to match -- we are able to compete with the Chinese players also quite well.

Okay, sir. Sir, in the polymer segment side, we have seen a lot of order declines in Jaljevissan, whether this retail and distribution growth can completely offset this order declining side. And we're also shifting to the pumping side around 50% kind of mix, which is higher margins. Just want to understand what's the long-term target for nongovernment revenue share...

Yes, absolutely. So you see despite the Jal Jeevan projects not being there so much, we have reported a significant improvement in polymer revenue. The polymer revenue has grown by 34%. And we feel that a similar trend will be seen in the remaining quarters also where we will see greater business coming from pump plumbing segment, which will be better margin for the company also. So I think Polymer segment is also in the right direction.

Okay. Sir, my last question, around 75,000 metric tons capacity is right now operational. What is the utilization level right now? And we also planned additional 75,000 tonnes probably next few years. And how this CapEx time line, how we are going to execute this.

Yes. So the recent 75,000, which we have commissioned in quarter 1, right now, we are developing and we are getting the output of that. I think we should be able to get full output from that very soon within quarter 2 and quarter 3 itself. And further capacity expansion plan is taken on for another 75,000, which we hope to commission by end of this financial year.

The next question is from the line of Sheetal Sharma, an individual investor. As Sheetal mam has left the queue, we will take our next question. The next question is from the line of Hardik Dara from SP Dara.

I just wanted to understand what is the macro outlook of the sector going ahead for the next 4, 5 years? I mean, is there a long-term tailwind that we are expecting?

Yes, the macro position looks extremely good. there is a strong pipeline and strong tailwinds in our sector with the government investment of total INR 9 lakh crores in the power transmission sector up till 2032. And some reports I have read recently where the investment might be higher than INR 15 lakh crores also. So up to 2035. So I think we are looking at a long growth period for the power transmission business in India. And even in global markets, we are seeing good amount of demand in a number of markets. So I think as more and more countries are transitioning towards renewable power, grid investments are definitely -- we are seeing more and more of that. So I would say macro, certainly, there are strong tailwinds in our sector.

The next question is from the line of Mehul Punjan from [indiscernible].

Sir, I would like to know what is the revenue breakup between Engineering, Infrastructure and Polymer segments for the company.

It's -- if you're asking about quarter 1, in quarter 1, it is 82% is coming from Engineering segment and about 10% is coming from Polymer segment and 8% is coming from Infra.

Right, sir. So sir, what has led to a little bit of subdued quarter compared to quarter 4, which segment has...

No, in general, see, we have always maintained that our H1 revenue is 40% of the year and H2 revenue is always 60% of the year. So as it is a normal trend, which we have seen over last several years, you may compare the previous numbers also. If you compare our this year's quarter 1 performance to last year's quarter 1, which is the correct comparison, you will find close to about a 24% growth -- sorry, 15% growth over last year's quarter 1. So I think certainly, overall, we are quite confident and we have given a guidance also that the company is on track to deliver 25% overall revenue growth in this full financial year over last financial year.

Right, sir. Sir, my second question is regarding the Middle East order. So is it a first of kind order for us from the Middle East or we have been doing work in Middle East before as well?

We have been doing work in Middle East. However, this is Middle East's largest utility, Saudi Electric company. So they have recently given us an engineering order. So that is the first from us because they are the most significant utility in Middle East. So that is why we have reported it separately. Otherwise, we have been working in various other utilities in the Middle East for last several years.

Sir, can you please briefly summarize what is the design about for this company, what we are designing?

We are designing and testing transmission towers for them.

Okay. Okay. And how large is the order, if you can share?

It's about INR 25 crores.

INR 25 crores. And sir, what is the time line for completion?

About 8 months, 8 months to 10 months.

The next question is from the line of Abhijit Singh from Systematix.

Sir, good to see a very strong set of results, both operationally and the work that you have done on the interest cost front. That is really heartening to see. And the first question is on the domestic T&D business [indiscernible]

Mr. Abhijit you are not audible, can you please repeat your question?

The first question on the domestic T&D business. I mean we all have talked about a very strong long-term outlook on the macro front, which is also talked about in the NEP. But in terms of the last 3, 4 months, what has been the momentum in terms of the tendering from our end customers like PGCIL and other players? So have we seen some change in the momentum of tendering from these players? That's the first question.

No, the tendering is quite consistent and tenders are coming out at a good pace. And we are also participating in our order bid pipeline has also been growing. So as this quarter itself, we have secured about INR 1,900 crores of orders, which is quite significant. And so I would say that both the bidding pipeline, new tenders, et cetera, are coming out in a very consistent manner.

Right. So I mean, given the momentum and expectation for the rest of 9 months of this fiscal, we can expect a double-digit kind of growth in order inflows. That is what it looks like right now?

Yes, absolutely. We expect that our total order inflow for this year should be in the range of INR 6,500 crores to INR 7,000...

All right. Sir, and you mentioned in the press release [indiscernible] across 3 geographies. Could you please [indiscernible] on what is the objective here? Are we planning to set up manufacturing also abroad? Or how will this work? If you can elaborate a little bit on this?

See, currently, we have only obtained Board approval for setting up of these subsidiaries. And now the management shall evaluate the feasibility of setting up these subsidiaries and eventually manufacturing facilities, if possible. I would say that manufacturing facilities, probably there are no plans in the short to medium term. Long term, there may be such plans. But however, our objective right now is just to be closer to the market and to be able to service our customers better as because we are looking at good growth in the international order inflows in the years to come, and the opportunity is also quite strong.

Right. So no substantial investment in the near term in these geographies?

No immediate plans. Right now, the objective is just to be closer to the customer and to be able to service the customer better.

Got it. And sir, if you can also talk about the impact of tariffs. They are held at the current level of 25%. So I mean, versus last quarter, how has the outlook changed for exports to U.S.

Sure. So the -- I would say that the U.S. market makes up less than 1% of our order book. So it's not very significant for us. The impact of tariffs has to be seen because the situation is, I would believe, quite dynamic where the tariff numbers keep changing very fast. sometimes it's 10%, sometimes it's 25%, sometimes it's 50%. So honestly, we will have to wait for some clarity to emerge from this. However, net-net, the company has opportunities in several other markets apart from the U.S. also. So I would say that we would adopt a wait-and-watch policy to see how the situation finally emerges in the U.S.

Right. So sir, I mean, currently, I think if I'm not wrong, export contribution revenue is about 20% or in that range. So what is the major geography in here that is already -- that we are doing business in?

Yes. So the export revenue in this quarter was about 30% of engineering -- or 30% of engineering products. And I think overall, it was about I think 20%, 25%, maybe 20% on an overall basis. So the majority -- the major geographies where currently we are executing projects are Middle East and a little bit in the Africa and LatAm region. That's where the major orders are going right now.

Right, right. So I mean, I think INR 30 crore revenue we have booked in the exports in Q1. And so let's say, I mean, even if we do about INR 2,000 crores of INR 300 crores of order inflow, still there's a lot of scope to expand only in Middle East because Middle East itself supposedly is a big market.

Yes, yes. Of course. Look, we have -- we are present in more than 70 countries worldwide. So of course, Middle East is a very promising market, but we are seeing good opportunities in other markets also.

And sir, lastly, any guidance for FY '26 in terms of revenue and profit growth?

Yes. I think in terms of revenue, we are quite confident that looking at our order book strength, we are confident of delivering a 25% plus revenue growth for FY '26. And in terms of margins, we have seen some margin improvement in this quarter also as because now in the execution, it is more T&D contracts compared to non-T&D and better quality contracts are also coming. So we are quite confident that we should be able to deliver at least a 50 basis point improvement in EBITDA margins over last year.

The next question is from the line of Manish Ostwal from Nirmal Bang.

In terms of the current non-T&D business, so what kind of operating margin we are generating?

Non-T&D is about roughly 14% of our order book right now. I would not be able to pinpoint an exact margin, but typically, historically, non-T&D has been about 2% lower margin compared to T&D business.

Okay. The second thing, sir, we have seen a good improvement in our interest expense as a percentage of revenue reduction in this quarter. And you commented in the presentation, it will further reduce. So any indicative number we can hit by exit of FY '26?

Yes. I think our target is that we should be close to 4%. That is what our -- we think we can reasonably achieve by the end of FY '26.

And lastly, sir, in terms of domestic market, whatever orders we have got during this quarter against the bid, so what is the bid percentage we are having and -- or whether we have increased some market share also? Can you talk about that thing?

We have been maintaining about 20% to 25% hit rate from our order book. So if I look at our bidding pipeline right now is about INR 30,000 crores. So which is why we are quite confident that INR 6,500 crores to INR 7,000 crores should be quite possible for us to get as an order inflow against this bidding pipeline.

And sir, your comment of 25% growth for the full year. So in terms of domestic business versus export business, the trajectory will be very similar or export will have a much larger share in coming quarters and years?

See, exports in terms of order book is only 10% for us right now because till last year, we did not really have capacity -- spare capacity available. So we were conservative in picking up the export orders. However, now I would say that now we have sufficient amount of capacity available, and we are going for a new capacity expansion also. So I think we will have the greater ability to pick up short-term export orders also. So we will have to see what the final export execution revenue will be. But I'm quite confident that in terms of order inflow of export, we will definitely see a significant improvement. We have been on an average, taking INR 700 crores to INR 800 crores of export orders every year. That we should double to INR 1,500 crores this year for sure.

And margin profile in export order versus domestic business, what is the difference, sir?

Exports typically come with about 2% -- 1% to 2% better margins across geographies.

The next question is from the line of Ishan Verma from InCred Equities.

I wanted to understand like what is our view on the infra segment wherein we see that for the past 3 quarters, we are seeing a degrowth in that segment. So how are we focusing and what are -- what would be the guidance for this full year for that segment? And is it the case that it is lower margin, that is why we are not focusing on that or some update on...

No, it's not that. Actually -- yes, actually it depends on contract execution. So see, certain infra is completely dependent on the contracts that are due to be executed. And there may be variances across quarters. However, despite that, we are confident that even in Infra segment over the full year basis, we will be able to deliver 20% to 25% growth in the Infra segment also in line with our company's revenue growth aspiration.

Okay, sir. And we won a substation EPC order in last quarter. So is there any other order that we are bidding for the [indiscernible] status for that?

Sorry, could you repeat that question. I'm not able to hear you very clearly. Could you just repeat?

Yes, sure. So we won a substation EPC order in last quarter, right, when we entered substation segment. So what kind of opportunity we see going forward in this segment because this is a better margin orders, right?

Substation is obviously a very significant opportunity. We -- out of the total INR 9 lakh crores that is to be invested in transmission sector, we expect that the split will be 50-50, 50% in transmission lines, which is our traditional addressable segment and 50% in substation, which is a new segment for us. So I would say, yes, there are very significant opportunities. However, we are a new player in the segment. So it will take time for us to ramp up our order inflow and revenue in this segment. But I would say that we have started in a positive note, and we have secured good contract. And yes, we are expecting more contracts to come in that segment in this year also.

Sir, in the Engineering Products segment, we major orders from PGCL, right? Going forward, other players of concern that in the market wherein ordering is -- tendering is happening on [indiscernible] being reduced to 50% and 50% tenders are being won by the private players. So is there any impact on our business due to lower order win from PGCL?

No, not at all. I would say that PGCIL, it's not that we are only getting orders from PGCIL. We have been working actively with the private developers also and a number of private developers like Sterlite, Adani, the new developers like GR Infra, DRA IPL, we are working with pretty much all players across the segment. Of course, our major business comes from PGCIL. And PGCIL has the largest market share in the transmission segment compared to all the private players also. So I would say that really, it's -- we are agnostic between which developer gets the business. We will be actively supporting all the developers as EPC and manufacturers.

Okay. And one last question, sir. What are our volumes for the polymer segment?