TD Power Systems Limited (533553) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the TD Power Systems Limited Q2 and H1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nikhil Kumar, Managing Director from TD Power. Thank you, and over to you, sir.

Thank you. Good morning, everybody. Thank you once again for joining us on -- joining us today on our earnings call. I'll move straight to the financial performance for the 6 months ended 30th September 2023. For the standalone, our total income on a stand-alone basis for H1 was INR 4.94 billion versus INR 4.14 billion over the same period for previous year, an increase of 19%. EBITDA for H1 is 17.86%, including other income, and we will deliver the approximate same during the year versus 15.43% over the same period in the previous year. I would like to again mention that this calculation includes foreign exchange gains, but it does not include the sale of land to our treasury income. Profit after tax and comprehensive income for H1 is INR 600 million versus a profit of INR 388 million for the same period in the previous year, an increase of 55%. Order book for the Manufacturing segment is INR 13.23 billion, out of which INR 6.24 billion is our generator and motor business, INR 6.74 billion is railway business, and the [indiscernible] project business is now grouped as spares and aftermarket, which is INR 0.09 billion. Turkey business is INR 0.16 billion. Export and deemed exports, excluding the railway business is 48%. Over the past 1 year, TDPS missed customer for the railway business have been focusing on indigenization of raw materials using the motors for the pending order for the 12,000 horse power locomotive contract. This will give big cost reductions. And consequently, order value could significantly reduce in the region of INR 190 crores to INR 200 crores spread over the next 4.5 years. But we would like to clarify that this will not impact our margins. Price variation clauses as per the contract will be applicable over the next 4.5 years, and this will mitigate the reduction of the order value to a meaningful extent. This matter is under final consideration, and we will inform the market next quarter. I would like to reiterate there has been no loss of margins since the pass-through has been given only on the actual reduction of raw material costs. Order inflow statistics. Order inflow has increased by 28% over the previous year as follows: Currently, it was INR 4.93 billion. Last year, it was INR 3.84 billion. Order inflow from direct and deemed exports is INR 2.36 billion compared to INR 2.16 billion in the previous year. Strong order inflow momentum continued in October also. Exports and deemed exports is 48% of the total order inflow for H1. For Q2, the order inflow from the indirect exports as deemed exports was 58% of the total order inflow. Consolidated. Our total income on a consol basis was INR 5 billion versus INR 4.3 billion in the same period previous year, an increase of 16%. Profit after tax and comprehensive income for the first half of the year is INR 584 million versus a profit of INR 385 million, an increase of 52%. We continued to maintain a strong cash position of INR 2.01 billion. Order book, market situation, and guidance. TDPS has signed an agreement with BRUSH and Baker Hughes for production of BRUSH generator to the world market, and the second agreement for sale of TDPS Generator to Baker Hughes for the industrial markets worldwide. BRUSH is one of the most famous and well-known generator companies in the world with the focus on oil and gas, especially in the area of offshore platforms and LNG. TDPS and BRUSH intend to capitalize on the expansion of the investment taking place in LNG and oil and gas, which is being carried out worldwide to replace the Russian supplies. An announcement to this prospect has already been given to the exchanges. Now I'll come to each segment of our Generator business. Steam turbine, the domestic market continues to be very, very strong with robust order inflow from all segments of the market. In addition, we are also seeing strong traction from the international OEMs in the European market. This segment is providing a strong foundation for our growth for next year. Gas turbine, we have a very strong inquiry pipeline as well as orders from a U.S.-based customer. We would also like to announce the first new order for 2 to 16-megawatt units with Baker Hughes turbine. This is the first order in this segment with this OEM as part of the new agreement also, and we will continue to see larger orders in this segment in the next few quarters. Hydro. The incoming orders from Hydro has surpassed our expectations. Large investments are taking place in renewable energy and hydro projects that are coming up in a big way in Europe, Southeast Asia and Nepal. We expect net year to be the highest in terms of sales of hydro generators since the beginning of the company. Gas engines, there is some softness in the market being currently observed. However, both our engine customers have been optimistic and are optimistic about meeting the target for the next year. We expect growth to be muted for 1 or 2 quarters before picking up once again. There are some large orders under negotiation. And with some luck, we should be able to -- if we get them, the numbers would be much better than what we have earlier projected. Motors. We happily announced that TDPS was delivered and commissioned a 40 megawatts synchronous motor, which is a big achievement for us in this segment. Now with this reference, we have proved that we have the ability to deliver in this market. We've also recently booked large orders in this segment in the last quarter, and the pipeline for the next year is very strong. This business, Motor business, for us will continue to grow at a rapid pace. Railway. There's been a lack of action in the private sector tenders. Everything seems to be quiet, perhaps due to the upcoming elections next year. However, the Indian Railways has a big tender out for motors that are required for their own locomotive production, and we expect to do around 80 motors for the Indian Railways next year. After delivery of these motors, TDPS will be in the L1 category. They're currently in the L2 category. And the following year, we expect to do 200 motors. Now coming to guidance. We're on target with respect to our guidance for FY '24, around INR 1,000 crores top line on a consol basis with approximately INR 235 crores to INR 240 crores in Q3 and the balance in Q4, so that will be around INR 260 crore to INR 265 crores in Q4 on a consol basis. Margins will be in line with our H1 performance. We would like to reiterate that margins should be looked on an H1 basis rather than a Q1 to Q2 basis. We have reached around the halfway mark in H1, and we give guidance to hold on to our numbers in Q2 -- I'm sorry, in H2. We would like to now first give initial guidance for FY '25. Looking at the order inflow and looking at the pipeline that we currently have, we can expect a minimum growth of 70% to 20% for next year. As far as the legal case is concerned, there are no further updates on the ongoing legal matters other than what has been already disclosed for the company in various notifications to the exchanges. Since this matter is subjudice, I will not be able to discuss any further until the courts provide clarity on the ongoing disputes. New factory. The company has already paid Karnataka Industrial Development Board 30% of the land value based on the sanction letter for the industrial land. And the allotment letter for the land will be obtained in about a week. Construction for the new factory will start in January '24, and we are on track to bring the new plant into operations during the beginning of H2 FY '25. We are planning a very modern factory with automation, digitization, Kaizen 5S and other state-of-the-art manufacturing technologies. This brings me to the end of my initial remarks. I'll now be happy to address any queries that you may have. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.

Congratulations on a very, very good set of numbers. My first question is, sir, is it possible to portrait the potential of the tie-up which you announced today? Related question is how does the pricing matters for the suppliers margin expectation? And do you need to make any investment for supplying the motor and generators?

First, I'll take the last question first. So we don't have to make any major investments. We have -- it's basically the generator product. We have all the manufacturing equipment with us. There are some small modifications in the way that they make their machines compared to what we do. So a small investment has to be made, but it's not significant. So when it comes to the business potential, of course, this is a very good question, I think this is the first question everybody will ask, I think there is a -- I would like to broadly say that there is a potential for -- on a conservative basis, there is a broad potential for about EUR 20 million of business in this segment for us. And it will not come overnight. It will take around 3 years time to fructify, but we will see orders ramping up. We already had the first order from them, over about INR 10 crores. And they're bidding with -- of course, there are a number of projects in the pipeline where now they're bidding with TDPS manufactured generators. There is a large, fairly detailed approval process that we have to go through, which is quite very, very important for us. Actually, this is -- we will have to get approved by all the oil majors like Exxon, British Petroleum, Shell, Saudi Aramco, Qatar Gas. These are all the major oil companies in the world. So the approval process also will take a little bit of time. But eventually, this business will put TDPS into a very, I would say, at the top end of the market as far as generators are concerned, and we're really -- we are excited about this relationship, working with BRUSH in this particular segment. The LNG market and the oil exploration markets are booming. Investments are at all-time high. This is expected to carry on for at least 5 to 7 years. So we are at the right time in this relationship and the demand for products are extremely high right now. So the -- we expect a sustained increase of business over the next 2 to 3 years and then reaching a peak, say, 4 to 5 years from now. So this is extremely important, I would say, a new line of business for TDPS, I would say, new sector, the oil and gas offshore market and LNG market. And I just want to add, margins also, margins are going to be in line with what we currently have. So it's going to be a good business for TDPS.

Understood, sir. My second question is, you said about H2 order inflow likely to be -- can surprise us on the positive because large negotiations are happening. Is it right to assume that they are mostly in railways? Or is it in the fairly diversified segment?

No. I said that the order inflow will be -- for the railways, it will be limited, right? So I said there's no action taking place in the private sector tenders as far as the Indian Railways are concerned, we're not seeing anything happening in the market right now. We're not hearing anything about these new tenders for 9,000 horsepower locomotives or 12,000 horsepower locomotive. Everything seems to have gone very quiet. So the only thing which is happening in the railway market right now is whatever the Indian Railways themselves need for production of their own locomotives, and we are conservatively putting a number something like 80 to 100 motors for next year. And the following year, we have a target of 200. We will do 80 to 100 for next year, for sure. And as far as the other businesses are concerned -- other verticals are concerned, the order inflow is extremely strong, and that is the reason why it gives me confidence to give the market an initial guidance for FY '25.

[Operator Instructions] The next question is from the line of Himanshu Upadhyay from O3 PMS.

Congratulations on good set of numbers. We've got the new orders of, let's say, this INR 493 crores in first half, can we assume that the percentage of steam run turbines will be less than 50% of incremental orders and it is far more diversified than what it was 5 years back? Or do you think orders have again started or majorly from coal-based generators only? Some thoughts on that.

Vinay, I'll take this question and then I'll ask you to add a little bit of comment on this. Look, in India, as I said, the market is highly diversified, so they're getting orders from all segments. Some of them would be, I would say, baseload captive power plants, but there's a lot of ordering taking place in steel and cement, which is all renewable in terms of heat recovery and ways to heat energy basically. So I am not able to give you the numbers break up, but I would say there's still a large amount of business which is coming from the renewable sector, even from the Indian market for the steam turbines. And regarding the ratio and mix, I leave the question to my colleague, Vinay. Vinay, maybe you can answer what do you expect to be in H2 for the mix of orders being gas, hydro? Where do you see the mix to be?

For H2, the mix to be mainly between the steam turbine and hydro turbine orders. Indian steam turbine market is still booming, and we are getting lots of orders from Indian OEM, and also for exports from the Indian OEMs, and we are also getting good orders from our export customers for direct export to countries like U.K., Germany, Portugal, Argentina and all these countries. So steam -- sorry hydro turbine, also 2 markets are really booming mainly Vietnam and Nepal. So as Nikhil told, next year is going to be the highest level sales turnover for hydro segment. And we have very strong pipeline of orders both in hydro and steam segment. These 2 segments have the major push in the order book for the...

Sorry to interrupt Vinay sir. We are not able to hear you clearly.

Can you connect me through the phone, if possible.

Sure, sir. Give me a minute.

Okay, but we can continue with the questions on the call meanwhile.

Can I ask the second question then?

Yes, yes, Himanshu, please go ahead.

So in the last quarter, we said that our railway is a large customer, okay? It has won a Train 18 aluminum frame, okay? And the requirement of motors can be INR 275 crore and the competition will be there. So has that order been floated by our major customer? And what percentage of business have we won from them?

Inquires in the market right now, Himanshu, is under discussion. We are actively participating in this negotiation. But it's not yet come to a stage where we can say that we know when it's going to close. It should close soon. But probably, I would say -- I can't give an exact time frame, but it's in under negotiation.

The competition is between you 2 player only? No third player is there in the market?

As far as I know it is this, but I can't really give you 100% information on this because there could be some other parties also, which we don't know of, but what we believe is what we have mentioned earlier.

Okay. And one last thing, then I'll join back in queue. Can you also give some idea on what is the level of complexity in generators, which are used on large cargo ships? And how big is that market? Because we did some generators for our naval vessel, and we expected it to be a big opportunity for us, and Make in India is happening. So we see a lot of ordering for naval ships is happening or government has given orders in last few quarters. So are we getting any larger business from that segment or opportunities in that segment? Some idea on that. And again, for cargo ships, is that an opportunity or not?

Yes. So the commercial marine market for generators is a large market. TDPS doesn't have a big penetration in this market. It's not a big potential growth business for TDPS, right? So we are -- we need to have more references, but this is another big potential growth area for TDPS, talking about the commercial marine generator market. Now when it comes to the Navy business in India -- Vinay, are you back on the call?

Yes, yes. I'm back. Can you hear me.

Okay. Navy, you can explain if there is any inquiries and what role Indian Navy planning to do.

Yes. So the close set of 10 machines what we supplied to Vizag for the Indian Navy, all the machines got successfully commissioned and now it is running. All the trial runs are over. And now we are bidding for one more job. See, these are not a regular kind of business. This is kind of on and off. Whenever there's a tender, we have to participate. And now we are participating on tender, which is fairly a good number of machines, and this is going to get finalized maybe in the last month of this year. So whenever there is a tender, now we know all the customers we are approved by the Indian Navy. So we can participate in all the tenders. There is one [ SP ] tender we are participating currently. And I think by the last quarter, we should get some names on that.

[Operator Instructions] The next question is from the line of Nikhil from SiMPL.

Congrats on a good set of numbers. I hope I'm audible?

Yes, yes. Very audible.

Just one question. See, some of the capital goods player have started talking about some caution on the domestic order book because of the upcoming elections and the things related -- and while we've talked about a good guidance for '25. If you have to understand for the domestic piece, how do you see this election as a speed breaker in terms of order book growth? And if you can just share over last 10 years, 12 years, have you seen like a slowdown which happens at the sector level? Just some idea how you are looking at it.

I think that the market is as far as here, I think what for -- there is a lot of momentum in the market right now in terms of investments. People are taking investments based on economic reasons and now political reasons. And there's expansion taking place in steel, cement, paper, fertilizer chemicals across the country. And in my opinion, these things are going to carry on regardless of political outcomes for the next 1 or 2 years. Then, of course, whichever government comes to power and the policies will guide the direction for the country as a whole for the time beyond that. But for the short term, next 1 to 2 years, I don't see any slowing down with the momentum.

Okay. And second was on the refurbishments. How is the pipeline growing for the refurbishment part of the business? We had few that this business can become around 8% to 10%. So are we on that journey? Or any change in the outlook there?

I never committed 8% to 10%. I've always said around 6% to 7% to maintain that. We will deliver on those numbers.

The next question is from the line of Shyam Maheshwari from Aditya Birla Mutual Fund.

Congratulations on a good set of numbers. Just had a few clarificatory question to this new order from BRUSH. Is it a $20 million opportunity over a period of years? Or is it like an annual opportunity? And by when do you expect the revenues from this to start flowing?

Sorry, I think your voice is breaking up, I am not able to hear you clearly. Could you repeat your question, please?

Yes. Am I audible now?

It's patchy, but please continue.

Yes. No, I just wanted some clarification on the BRUSH order. I wanted to understand if this is a $20 million opportunity over a period of years? Or is it like an annual kind of a number that is potentially possible?

No, it will be an annual business, but it will take -- as I said, it will take some time to reach that level. It will keep growing, but it will take, let's say, 3 years or so to reach that level. But it's an annual business.

Understood. And when do you expect this to start flowing? I mean is it possible that some revenues might come this year...

I already said, we already had the first order. So it's already started.

Understood. Sir, my next question was on the Indian Railways. So as you mentioned, you're seeing some sort of slowdown on the private side...

Yes. It's really bad, and I can't hear. I really can't understand what you're saying because the line is really, really bad.

Can you hear me now?

A little better.

Yes. Is it better now.

[Operator Instructions]. Sir, could you now repeat your question.

Yes, am I audible.

Yes, much better.

Perfect. I just wanted to understand the Indian Railways opportunity. So for the next year, is our target market just the Indian Railways, the 80 motors that you are mentioning? Or is there any other potential orders also that would go to the Indian Railways?

Look, there have been a lot of discussions, a lot of talks, I mean a lot of things about the pipeline for other tenders, for Vande Bharat trains and the freight locomotive trains. So if those things do come up for ordering next year, then the pie will -- the opportunity will increase for us because we have all been waiting for these things to come into the market. But as of now, we don't know when anything is going to come to the market as of now, although all these things are there in the pipeline. So I'm saying that what we can see right now is this and what we can't see right now, we can't commit, and that's where it is.

Makes sense. And could you just quantify for us maybe what could be the quantum of these 80 motors kind of that you would be supplying? What would be the quantum of...

The values keep changing from order to order. It's not very large, but it's around -- it varies between, say, around INR 25 lakhs per motor. So all public information anyway, so it's not a secret.

Got it. Got it. And just one last question was on some of the new areas that we have entered on your new products, the synchronous motor, submersible motors. Could you give us a sense of how these products have been accepted? Are you seeing increased inquiry pipelines for some of these projects?

Yes. I did talk a little bit about this in the opening speech. So we have delivered and commissioned the first 40-megawatt synchronous motor is doing well. The market is now fully aware that TDPS has got the capabilities, they have proven it, and we have recently taken a big order for a project in Karnataka. And there are a number of synchronous motor projects in the pipeline right now. There are also new tenders being issued by Nuclear Power Corporation. We are participating in those tenders. This CapEx cycle in India also is generating huge -- large number of inquiries for other large size induction motors. So the motor market is very, very active right now. It's got big potential. We are very active. We are bidding across the board. It will do really well next year, for sure. The exact numbers will be given a little bit later. But as a motor segment, we'll report it separately later, but it's doing really well.

[Operator Instructions] The next question is from the line of Kuber Chauhan from Anand Rathi.

Congratulations for the good set of numbers. Sir, my question was on the Turkey business. So can you give some -- can you throw some light on our Turkey business? Where are we and what sort of strategy we will be adopting? And second question was on guidance. I missed the guidance for FY '25.

The Turkey business, there's not much more to report. It's -- there are a few limited orders which we have taken, where market is still very subdued. We will still use that facility more as a service center rather than for new machine production. This works for us for the moment and we are going to continue with this strategy at least for next year. And we will again review the situation next year to see what we want to do for the following year. That's where we are taking this decision year-on-year. And we still expect this market to come back, so let's see how it develops. And for the guidance for FY '25, I've given the first guidance that our consol numbers would have a growth of around 17% to 20%.

And any sort of CapEx which you are doing?

Yes, we have started the CapEx, and it will be on stream within the beginning of H2 next year.

Okay. Okay. And any ballpark number for that CapEx?

We have given. Varalakshmi has given the guidance for that right in the earlier -- through some stock market notification.

Around INR 120 crores will be the CapEx.

The next question is from the line of Praveen Motwani from BOI Mutual Fund.

Sir, my first question is, if you can just share the domestic and exports revenue for this quarter and for Q2 FY '23?

No, we don't give that split up. Do we get the split up, Varalakshmi, the export revenue and...

No.

We don't give it.

At least some indication which market like reported good growth for you in this quarter or grown higher at higher rate for...

No, we don't look at -- we supply our generators all over the world. And sometimes we get good orders from a particular country or we get -- sometimes we get from a particular regions. Different verticals of our business have opportunities coming from different parts of the world. So for example, for hydro, we could have large orders coming from Vietnam or from Norway or from other countries in Europe. We could have big gas engine generator orders coming from Ireland. So we don't -- it's very difficult for us to say there is one country or one thing which is giving us a big growth in our business. It's very, very widespread and which is good because it's providing stability for our business.

Okay. Okay. And sir, the last question is, you reported 29% growth on year-on-year basis. So how much you attribute to the price and how much you attribute to the volume?

So now it's all volume.

It's all volumes. Okay. Great.

There has been no price increase for the past 1 year. So it is all volumes.

The next question is from the line of Dhruvesh Sanghvi from Prospero Tree.

Thank you for performing so well, and you have been guiding and constantly giving us surprises on the slightly positive side with order book and all. Second is, sir, what can go wrong now considering the things that -- things are so good right now, and that makes me ask this question over the next 3 to 4 years. What are the potential risks that we face in the next 3, 4 years for achieving a 15%, 20% growth? That's the only question.

Well, that's a really good question. I mean geopolitical events would be a big risk always. And that will-- and this is always will be something that no one's going to be able to read so far into the future. So what we can all see is something like we can see a 1 year, 1.5 year horizon, clearly. But beyond that, if you're talking about large risk, which could have system effects, then I'm not in a position to answer that question. I'm sorry, it's really hard to say what could be...

Just some thoughts around it, but if there is nothing which comes, maybe that's the answer.

No. As I said, geopolitical events were things like that or political change and those kinds of things that are -- events that drive the change, which affects the economies and drives changes. So that is hard to predict. And if those things happen, those risks will always be there. And eventually, all of us will find a way to work around everything and life will go on.

Sure. Okay. Let me -- I mean, one thought which comes is, in the past, a lot of people, including myself, used to worry about the potential change towards the renewable energy and the need for fossil-based ecosystem. Now I mean, because the performance of almost all companies are coming, nobody is asking those things, but are there any thoughts which have got updated? Or that is not at all a worry over a 5-, 7-year period also? Or something around that area?

5-, 7-year period, definitely, I think that the renewable business is not going to make a big dent in the traditional power market. All this talk about hydrogen and even talking about wind, looking at the way the sector manufacturers and getting into periods of -- getting into weakness on their own financials, that's going to affect the supply situation. Eventually, prices of equipment is going to go up, and that's going to then again lead to higher prices of power production. So I think that there is no doubt that while renewables also will grow, it will not grow at the rate which it used to grow earlier. And I think that we will see the traditional fossil-based fuel still dominating the power industry for years to come. This is my prediction.

We'll move on to the next question that is from the line of Dhwanil Desai from Turtle Capital.

Congratulations for a fantastic number.

Sorry to interrupt, Mr. Desai. We are not able to hear you clearly.

Okay. Is it better?

Sir, can you give the handset mode? And can you speak a bit louder? We have lost the line to the current participant. We'll move on to the next, that is from the line of Karthi Keyan from Suyash Advisors.

Congrats on this very interesting deal with BRUSH. This is my first interaction with you on that topic. So if you don't mind, can I ask you a slightly detailed question?

Of course.

Yes, great. Sir, the way the agreement is structured is very interesting, which is a 3 plus 2-year kind of a tenure. So is the thinking from their point of view that they will top up their capacities with some additional capacity from you? Why hasn't this been structured as a perpetual arrangement? Why can't you be their, shall I say, back office? Why was this structured this way?

Nobody enters into perpetual agreements, but it's not a top-up thing. There is a certain line of products, something like below 50 megawatt where we will be the primary producer of that equipment or the, I would say, the predominant, maybe 90% plus producer of that particular size of machines and BRUSH will focus on the larger machines. That's the plan. And large corporations have their own policies and how they would like to structure the agreements. And I think our agreement is in line with their corporate policy. And I don't think it has anything to do. We have a long-term view of this business and so do they. And -- but they have a policy on how they structure agreements, and this agreement falls in line with that policy. I don't think we should read too much into it, and perpetual agreements don't exist. So I'm not expecting -- we do -- if we deliver good machines and we do good business, this will go on for a long time.

Right. Great. I'm extending my luck. Are there other such agreements on the pipeline?

Not like this. I mean, these things don't come up. We are -- as much as possible, we try to do the -- our strategy is to do the business by ourselves and to get into various markets with our own brand name and by ourselves. In this particular instance, this particular sector of these -- the oil and gas market is a very large market. You can't -- the upstream, the downstream. But this particular segment of the market, which is more on the exploration side, on the drilling exploration side, that's where BRUSH is very, very strong. And that, as I said, there's a lot of investment taking place right now in the oil and gas segment to replace Russian supplies, both on the gas side as well as the oil side. And so there's a boom taking place in this segment, so both LNG as well as oil. And we will be -- demand is very strong for the product, and we are in the right place at the right time. This is the general thinking behind this agreement.

Yes. And so are you replacing another facility, sir? Or is this a fresh arrangement?

No. We are replacing a European-based facility.

Interesting. And if I may ask you, would there be a substantial cost saving to BRUSH by sourcing from you?

I think there would be some savings. I'm not sure how much.

The next question is from the line of Ankur Kumar from Alpha Capital.

Sir, my question is actually a reverse of what Dhruvesh was asking. He was asking about long-term 15% to 20% growth. I was trying to ask, why are we not growing faster because market is growing so well and there are people like Triveni turbines who are growing 30%, 35%, in this time, why are we even guiding for 17% to 20% growth only for the next year?

I can't compare myself with others in the market. I can only talk about what we can do and what growth we can deliver. And as I said, I'm trying to deliver realistic numbers and trying to do a little bit better than what we deliver. And that's where we are, and that's where this is the track that we are on.

Got it, sir. And sir, on margin side, is there any scope for improvement for the next year? Or you think these 17%, 18%...

There's going to be no price increases largely and no substantial price increases, which are going to affect the margins. So the EBITDA margin improvement will take place from operational leverage. But we are putting in a third plant, as we said, H2 next year. So we might not see huge improvement taking place on operational leverage because of the third plant also coming in. Fixed cost associated with that also will contribute. Will not give us such a big bump in the big upward bump in the EBITDA numbers from where we are right now. So holding it at this level is the target. Can improve by 50 basis points or something, it will be good for us. 17%, 18% is I think it's going to be.

Sure, sir. And last question. This quarter, we did INR 270-odd crores. But you talked about Q3, Q4 being lower than this number. So was that conservative? Or is there any delays in...

We said that we will do around INR 1,000 crores for the year. We've done around INR 494 crores. So we will do another around INR 500 crores. And we said, the breakup will be INR 235 crores to INR 240 crores in Q3; and INR 260 crores, INR 265 crores in Q4. And that's where it's going to be. We're in November, already in the middle of November. We don't see any fresh order booking taking place in this financial year where we can improve the numbers significantly. So more or less, the order booking is already fixed for this year. And so this is the performance we're going to deliver.

The next question is from the line of Himanshu Upadhyay from O3 PMS.

See, it is a basic question. In capital goods, there are certain companies, which get advances from customers also, okay? What type of companies do get advances from customers and, let's say, substantial 10%, 15%? And how far are we -- or what can we do to get such businesses? The question is basically that my working capital gets better and better. Obviously, our sales to gross profit has been always good. But are you thinking about in those terms? And are we getting the newer businesses, where my receivables and cash cycle is much better than what the historical business we were doing always? Some thoughts on that.

Vinay, you want to take this question on the advances, what kind of markets we are getting advances and -- yes, please.

Yes. So basically, our business is not like B2C. We don't supply our machines to the end customer, but we supply our products largely to the OEMs. So in our cases, in most of the cases, we take advances, like -- in all the cases, we take advances. And all our payments are secured. And in terms of special projects, we also have age-wise advances and that is called progressive payment. So it mainly depends on the customer to customer and also depending on the volume of the business they give, so all the payment terms differ from each customer or each segment. But definitely, we also have a system of taking the advance from almost all the customers.

Can you be that we are able to reduce working capital days in double digits overall, means inventory plus receivables to that much? Or do you think working capital...

I think we can try to reduce inventory by operational efficiency. Receivables is more of a market-driven situation. So we don't see so much change taking place on the receivable side. As Vinay said, payments have secured, payments will come. We don't have a problem of bad debt. So what we can try to improve is the operational efficiency, reducing cycle time. Those projects are always underway in the factory, but those improvements are incremental.

Okay. And then one last thing. We will be making generators and motors only for oil and gas market? But the customer, which is BRUSH SEM, it is stated that they need turbo generators for power, marine. In our press release itself, we have stated, okay, power, petrochemical and marine, et cetera, where we will not cater to it. Is this the right understanding? Means our business...

I think that we have 2 agreements with them. One is making the BRUSH generator for them, and there is another agreement where we're making the TDPS generator for them. So the Brush generator is primarily used in the oil and gas market. And it's, of course, is used in other areas also, but primarily it's used over there. And it's more expensive than the TDPS machine. So in other applications like industrial use or marine or other applications, the idea is to use our generator wherever there is more cost efficiency required from the market side. And so we have both the products then in play, and this gives a chance for us to look at a wider range of markets because we have both the TDPS product and the BRUSH product in the kitty.

Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

Thank you for joining our conference call. If you have any further questions, please feel free to get in touch with our Investor Relations team. We look forward to interacting with you at the end of next quarter or meeting you personally at some investor conference in the next few months. Thank you.

Thank you members of the management team.

Thank you.

Ladies and gentlemen, on behalf of TD Power Systems Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.