WPIL Limited (505872) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to WPIL Limited Q2 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Taparia from Emkay Global. Thank you, and over to you, sir.

Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Prakash Agarwal, Managing Director; and Mr. K.K. Ganeriwala, Executive Director. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Thank you. Good evening, everyone. It is a pleasure to welcome you all to our earnings conference call for the second quarter and first half of financial year 2027. Let me first take you through the financial performance of the company, followed by the operational highlights. On a consolidated basis, revenue from operations for the quarter under review stood at INR 354 crores, a decline of 17% Y-o-Y. On a stand-alone basis, revenue for the quarter stood at INR 118 crores, down by 33% Y-o-Y. For the first half of financial year 2027, our consolidated revenue stood at INR 855 crores, a modest 6% increase Y-o-Y. EBITDA was at INR 123 crores, a decline of 5%. EBITDA margin stood at 14.33%, while PAT from continuing operation was at INR 93 crores, a marked increase of 20% Y-o-Y. PAT margins for the first half stood at 10.83%. The domestic business continued to face near-term execution challenges, particularly in the project division. However, our total domestic order book remains robust at INR 2,423 crores, providing a foundation for an improvement in performance during the second half of FY '27. The product division recorded revenues of approximately INR 62 crores in Q2 compared with INR 86 crores in the corresponding quarter last year. For H1, the revenues were INR 133 crores compared with INR 151 crores. The division's order backlog remains strong at approximately INR 500 crores, providing healthy business visibility. While a large number of dispatches to customers were deferred during the quarter, the overall outlook remains positive. We continue to focus on export growth alongside domestic opportunities, particularly in the power sector. The domestic project division remains subdued with revenues of approximately INR 57 crores in Q2 compared with INR 92 crores -- INR 90 crores in Q2 last year. Revenue for the first half was INR 100 crores versus INR 206 crores in the corresponding period. Our focus remains on commissioning ongoing projects and commencing operation and maintenance activities. As more projects are commissioned, O&M revenues are expected to improve during the second half of the year. On our international business, it continued to demonstrate resilience and remains an important growth driver for the company with total international order book of INR 2,686 crores. International revenue for the first half increased 38% to INR 626 crores compared with INR 458 crores in first half last year. The international business also continues to benefit from a healthy order pipeline across our product and project platforms. On the international project side, the business continues to benefit -- product side, it continues to benefit from opportunities across the MENA region, Australia and Southeast Asia. Gruppo Aturia is expecting a significant order from Kuwait Water Supply, which would further strengthen its position in the international water market. In Australia, the consolidating of the business is contributing to an improvement in the margin profile. Meanwhile, WPIL Thailand continues to see growth opportunities following the introduction of new products in the Thai drainage sector. Our product division order backlog stood at approximately INR 1,000 crores at the end of first half, providing visibility for the coming quarters. International orders account for nearly 52% of this backlog. We remain focused on expanding our export presence and capitalizing on opportunities across key international markets. The international project business execution momentum continues to improve across our subsidiaries. MISA Italy has successfully completed all legacy projects and booked important orders during the quarter, providing a stronger foundation for future growth. PCI Africa has commenced the execution of new projects, which are expected to gain further momentum towards the end of the financial year. We remain encouraged by the opportunities available in the South African water infrastructure market. Eigenbau has also strengthened its order book with repeat order from Riverton Water Works, reflecting continued customer engagement. The project division's order backlog stood at approximately INR 4,079 crores at the end of first half, providing substantial visibility for future execution. The international projects accounted for approximately 53% of this backlog, highlighting the growing contribution of overseas markets to our project business. Overall, we remain constructive on the international outlook, supported by a strong order book, improving project execution and opportunities across water infrastructure, drainage and industrial applications. Looking ahead, our priorities remain focused on strengthening execution, converting the existing order book into revenues and improving the performance of our domestic business. While domestic execution has remained subdued in the first half, we expect an improvement during the second half, supported by project commissioning, commencement of O&M activities and a recovery in the water infrastructure business. Our international operations continue to provide growth opportunities across both products and projects. Again, with a substantial order backlog and diversified global presence, we remain focused on improving execution and sustaining our growth momentum. With this, I'd like to take questions. Can we take questions now, please?

[Operator Instructions] The first question is from the line of Jainam Doshi from [ Kriis PMS ].

Sir, like Q2 of India is usually Q3 of Africa and usually, Q3 has a stronger execution in Africa. But here, we have seen a substantial dip in the project execution from the African business. So like can you help us with the reasons for such decline, like whether it was attributable to any labor shortages or kind of sourcing payments from South African government or there has been any spillover or delay in the execution?

No. I think these projects, primarily the big growth and jump in the last quarter, came from the start of the projects -- large projects of PCI. PCI's project's tenure is 48 months, 4 years. So it is a bit lumpy initially. And we expect this first year to have, say, about 15% of traction. And the main traction will pick up from next year. So I think there is no -- it's just related to execution progress considering a project for 4 years. That's the difficult time line for.

I understood. But like, sir, like...

Another clarification is the project business in South Africa is -- January to March is their largest quarter typically because the financial budgeting happens in post March.

Okay. Fair enough. Fair enough. And sir, like 2 of the African projects, which we won initially had already entered the engineering phase. So like the peak revenues from such projects will come from next year is what you wish to say?

Yes. I think the second year is the biggest year in these projects.

Okay. So what would be the annual like project execution target, which we are targeting in the international piece for the current year?

It's a bit fragmented. And I think we expect a pickup in the second half, as mentioned. But -- and I mentioned again that January to March is typically when the budget is to be exhausted. So I think you should see good growth in the second half and going into next year.

Understood. And sir, for both the entities like PCI and Eigenbau, like are we bidding for newer contracts? How is the pipeline there considering the current scenario, if you would like to allude on that part?

I think we are balancing. Both are having strong order. As I mentioned, Eigenbau just got a new contract reasonably large. So it strengthens their order book. Both have very strong order books of good margin business. And we expect to see traction. We are bidding, but I think our bidding aggression will pick up once traction on the existing contracts is improved.

Gross margins, like...

Yes, the pipeline remains very strong.

Understood. Understood. Sir, the gross margins, which have been impacted this quarter, facing any procurement challenges due to the ongoing geopolitical uncertainties...

Sorry, the line is breaking. Can you repeat yourself?

Mr. Doshi, we can't hear you properly.

Yes. Am I audible now?

Yes, please proceed.

Like also the gross margins have been impacted this quarter. So are we facing any procurement challenges due to the ongoing geopolitical uncertainties, like increase in freight costs or the increase in RM?

I think if you see, our gross margins have actually improved. The revenue is the challenge. There has been a slight dip in the revenue, which is -- but it's not the gross margin. So the gross margins are strong.

Understood. Understood, sir. And sir, like the margins in the product division have fallen, both Y-o-Y and Q-o-Q. So is it the mix change which has resulted in the dip or like the aftermarket? Or as you mentioned, there were certain dispatches which didn't happen in the domestic product. So was it due to that thing? Or how should we look at the -- like dispatches going ahead? Whether -- yes, yes.

Yes. I think the business should be understood that -- we have discussed in the past also, the gross margins -- we are happy that the gross margins of the business, and even at the EBITDA level remains strong. And the dip is -- the fluctuations are primarily due to revenue fluctuations through the year. End of the year, we are completely aligned and we are very confident of margins and revenue profile. So I think it's a bit of seasonality rather than anything else.

Understood. And sir, how are we seeing at these opportunities, like both in the domestic and the international piece going ahead? Like how is our strategy pertaining to the international piece, like in regions of MENA as well as U.S. as the oil and gas and various other infra is picking up. So how are we positioning ourselves into that space?

Firstly, we are very strong. I think our international business across the board is very strong. Just now we mentioned regarding Kuwait, where we are expecting a large order. Our Thai business is performing exceedingly well. Our Australian business is performing well, so is the South African business. The growth, I think, is a bit affected. Presently this quarter, as I mentioned, geopolitically, the Middle East remains an area of flux, and that is affecting new contract finalization, dispatches to that area to some extent. So I think we will know within the next few months how it plays out.

Got it. Got it. And sir, one more thing is like the dispatches of the product business, which we mentioned that got deferred. Can you quantify such deferment?

The product business, I think I don't want to quantify. It will even out. What our basic idea is that a large number of them are now -- should be dispatched. I think seasonally, September was a very heavy monsoon month. And therefore, the project sites did not accept the goods. So I think it will even out in this quarter and surely in the second half.

Understood. And sir, one last question from my end is like with respect to the JJM, so because of the deteriorating macroeconomic conditions, do we think the state has the funds currently to release for these JJM projects? Or like how are we seeing on that part?

I think we are personally -- we are seeing that there is a change in the mechanism in which they are focusing more on commissioning. So our company is fully aligned. We have been -- we slowed down order booking and then we focused on execution from the last 2 years. And now, our further, we are focusing on commissioning because they are relating fund release to commissioning of projects. And we are well positioned there. And we are seeing a couple of large projects got commissioned recently. O&Ms have started in a number of projects. So it's -- we are focusing on commissioning. And once that happens, I think the fund release are along the line. In West Bengal, where we have a considerable exposure, the fund of -- some amount of funds for smaller vendors was disbursed last month. We expect funds starting next week itself.

The next question is from the line of Deepak from Svan Investment.

Sir, firstly, on the product division, like we mentioned about the Gruppo Aturia, we are expecting a large order from the Kuwait Water Supply project. Can you please share further details about it? What could be the size and how -- what are the project opportunities?

Yes. It's just to show that the traction is there. I think it is -- it just shows that the business is aligned and moving well. I don't want to share numbers here. It's a product order, so it's not that impactful on the overall picture.

Okay. And sir, we also mentioned that we are looking opportunity in the power division. So if you can share the further detail. I think we also -- in one of the comments -- in the opening remarks, we also mentioned we are exploring opportunity in the power division.

Well, we see good opportunities. I think a large number of thermal power plants are -- orders are going to be placed. So that's a big segment for us, and we expect to get a good share out of this.

Okay. Okay. That would be on the domestic side of the pipeline where we are...

Domestic side, yes, sorry. On the domestic thermal side.

Okay. Okay. And then, sir, now moving to this project business. On the domestic market side, if I were to look into your order book, I mean, it's a INR 1,900-odd crores. If I remove the O&M, it's INR 1,400-odd crores kind of order book we have the project. Now this quarter, if I can see there is also a reduction, some kind of improvement in the receivable as well. So would it be fair to say we have started receiving the JJM payment and collection and then now the execution should pick up in the H2? Is it a correct understanding?

Yes. Our major contracts to execute are in West Bengal. And we have been waiting for the West Bengal funds. And that should be, as I mentioned, to the smaller vendors was released about 15, 20 days ago and should be released to us starting next week. So I think we are anxiously waiting to get that funds and start accelerating supplies itself. So very quickly, you should see results.

Okay. And sir, from the second half perspective, see, I mean, to be very honest, in the first half from the domestic project business, we have done INR 100-odd crores. And now we have the sizable order book of INR 1,400-odd crores. So from that perspective, how should we see the execution pacing up once we start receiving the payment?

I think we'll be able to give a clearer picture in the next call because by that time, we wanted to get the funds first before we comment on that. But we have plans to accelerate rapidly, and the client is also very keen that we rapidly accelerate. And also the weather is good. I think this is peak construction period. So all things aligned, things should pick up, as I said, from next week, and we'll be able to give a clearer picture next call.

Okay. Okay. And on the international market, especially on the South African region, if you can share the perspective, I mean, you did mention about the execution to pick up. But just wanted to check it out, this drop is a seasonally weak drop because last time we had INR 216 crores kind of execution in the African project, and now this has certainly dropped down. Is there any challenges or just a normal project...

The South African execution will be lumpy, and it will gain traction, as we have always mentioned from FY '27. It's lumpy. That means the big payments at one time. It's not civil construction steady run rate projects. So as you have mentioned, the major traction will pick up FY '27 starting from the first quarter itself. I forgot, sorry, calendar year '27.

Okay. Okay. And also, I don't know...

I don't think it should be read quarter-on-quarter. The order book and the margin profile are the 2 keys for us. The execution will go through some seasonality or cyclicality.

And secondly, sir, just wanted to check it out on the price mechanism there, especially in the context of a sudden sharp rises in the raw material prices. Is it a pass-through in major of these contracts? Or how does the margin shape up over a period of time on these, especially international project?

All our projects are margin -- cost pass-through. So there are cost variation clauses in every contract.

Okay. So from that context, margin profile would be the same in a similar state?

Yes, we are not worried about the margin.

Okay. And thirdly, sir, just wanted to check it out on the Thailand project. See, in the annual report, we have mentioned we did a THB 1 billion revenues. And if I were to look into your profitability there, last year, we -- on the 30% share, we did INR 8.9 crores. This time in the first half itself, we have done INR 11 crores, INR 12 crores kind of bottom line, which implies execution of INR 400-plus crores in the INR terms for the H1 itself. So if you can share in terms of the overall perspective for the Thailand business, how -- what are the kind of opportunity we are seeing? What is current order book? And how that should shape up over the next 2, 3-year perspective, that would be really helpful.

Actually, it's really accelerating very well. It's one of our strongest performing businesses. As you correctly pointed out, the first half has been very good there. Unfortunately, we don't consolidate it. Otherwise, it would directly impact our numbers. And however, the traction is very good. And opportunity, you saw that there was a huge flooding this year in Bangkok. So I think this is going to be another bigger year for us going forward. Their financial year starts in September, so it will gain traction now.

Okay. Okay. And sir, if you can also share your thought -- see, I mean, even in this JV, we have 30% share. And also in the lot of subsidiary, we have 50% to 70% kind of share. So if you can share your thoughts on the consolidation of stake on various subsidiaries. How should we look from the medium-term perspective on that part?

In Thailand, we have a 49% share in the JV because it's mandatorily required by Thai law for the local partner can only participate in government tenders. So that now -- we are restricted there. So 49% is the stake we own through our international subsidiary.

Okay. And sir, what about the other subsidiaries, especially African?

So I think we are improving. We just improved. I think we will be giving more details later. But we're improving our holding in the African subsidiaries. We are trying to restructure and improve there. And in the -- we have another JV in Clyde, which is a 60-40 JV. So these are the 3 prominent JVs here. And in Africa, in PCI Africa, we have a 3-year period after which we will be moving from 55% to 100%. I think 1 year is going to be over. So...

The next question is from the line of Balu Lamkhade from Parami Financial Services.

My question is regarding we had sold Rutschi business and some tax provision was done. And we were -- the tax advisers had advised us that we will get the majority of the money back. So what is the status on that, if you can update, please?

Yes. So the process is that we paid the tax and then have gone for a claim, and that is legally proceeding. We will get the -- but it's a 2-year process minimum for that. It will go through different levels like in India, similar to India. First is the department level and then at the appeal level and then the courts. So I think presently, we have moving -- we will have our first feedback sometime this quarter.

And what is the tentative amount, Mr. Agarwal, on this?

About EUR 6.8 million, I think, EUR 6.87 million.

Okay. Also on the -- in this quarter, the margins have -- as I heard you, you said that margins are not a problem this quarter. The sales have been a problem. But the margins have dipped a little. What can you attribute that to?

The gross -- the revenue itself, so if you take the cost structure on the revenue, so the revenues will have been lowered. We should be at a typically INR 450 crores, INR 500 crores, so INR 350 crores. So -- but the gross profit levels are good. And the revenue pickup will -- so you will see a margin jump in the future quarters on EBITDA level.

And also, my last question was from the tracking, which we do, the JJM, West Bengal, especially, they have released quite some money, about around INR 4,000 crores approximately.

So that money is lying with the department. The money is lying with the department. They have not disbursed it yet.

And we are expecting that to start receiving from coming week only, you are saying?

Correct, correct.

And I think we have large money stuck with the West Bengal government, approximately INR 300 crores plus.

Yes.

The next question is from the line of Nikunj from Carnelian Capital.

So if we see the segment-wise margins, so we see a very high volatility in the margins. So in the product business, we saw margins of around 31% in Q1 and a dip to around 16% in Q2. And if you also compare it Y-o-Y, it was 27% in Q2 FY '26. So is there any particular reason for this dip in percent this quarter?

No, no reason. Some dispatches got postponed if you add a significant -- so we'll a -- had a revenue loss. We are monitoring at the gross. One is at the gross profit and then on the structure expenses. So we are not worried. You will see the jump. We are consistently in our 15% to 20%. If you see the first half itself, we are at 14% on a consolidated basis. We should be up to between 15% to 20%. I think 17%, 18% is our target.

Okay. And what do you do to the margin -- sorry?

Sorry, I'm saying that the margin is that -- revenue is our -- order book and our margin profile is what we monitor very closely. The revenue is -- moves up and down a bit depending on certain periods. So as I mentioned, September this year, this one was a bit worse because of the strong monsoons. So I think some clients postponed that.

Yes. And also on the project execution which we are seeing in the future, so what would be the guidance for FY '27 and '28 revenue?

I think it's strong on all the factors we've mentioned. We need to -- we see a good strong second half building traction. And going forward, we will further see the South African revenues improve as the execution improves in calendar year '27. Product business is very strong. The order book is INR 450 crores, now it's INR 500 crores. So a lot of traction in various areas.

[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor & Co.

Sir, firstly, in terms of the restoration of the EBITDA margin, if I could understand from you, that -- and [ year-end ] as a whole, we should be looking our EBITDA margin trajectory back to that 17%, 18% band. That is what our target has been earlier. And just to take into account even the blips that we have seen for the first half, are we confident to reach and post those numbers with H2 in execution?

Yes, yes.

Okay. So overall, there should be margin improvement to those numbers?

Yes.

Secondly, sir, when you mentioned in your presentation that there was some deferment of product -- from deferment of product schedule from the clients. When we look at our stand-alone numbers, those numbers on Q-on-Q basis are looking better. So if you could just explain what exactly has happened? And then you mentioned that our order booking has improved. So I did not get your point. When our orders were not dispatched, so the order book remains the same for the domestic operations, I think so. So if you could just explain what exactly went wrong in terms of dispatches?