Q1FY23 CONCALL NOTES:
• Expecting to cross Four thousand crores in revenue in FY.
• Why is growth lower QOQ? – From the last 15-20 years, revenues have followed the following pattern – 20-22% revenue of full FY in June, 25% in Q2, 25-27% in Q3 and 30% in Q4. So, that’s why the drop in revenue.
• COMPOSITE PRODUCTS (CNG + LPG): Very Robust demand for the composite products. 230cr of Sales in FY22. Expecting minimum 350cr in sales from composite products (Very conservative estimate).
550cr Order Book currently for CNG cascades + LPG cylinders. Full capacity booked. Going slow in order intake because of capacity constraints.
New capacities to come by end of FY23 – CNG Cascades expansion ongoing. Current capacity – 150cr, Order Book – 250cr. 125cr Capex, 400cr revenues possible on 125cr capex.
LPG Cylinders 1 million cylinders expansion (current capacity – 1 million) will be done based on expected order flow from other OMC’s.
• WHY THE RESTRUCTURING OF OVERSEAS BUSINESS? WHY NOW? – There’s too much opportunity in India for composite products. Need to invest in Capacities to fullfill current and upcoming demand.
Also, Value-added products have 20% Ebidta margins vs 13% for the overseas business and lower working capital requirements. Both of these factors will help in achieving the 19-20% ROCE goal set by management in the next three years.
Targeting 1000cr revenues from composite products itself in 2-3 years’ time.
• 50-60% of proceeds from restructuring will go towards debt repayment, 200-250cr for value-added products capex and remaining will be given as a special dividend or buyback to the shareholders.
• Company will continue to hold minority interest in the overseas operations. Management and personnel will continue to be the same.
• Will look to consolidate product mix and operations of Indian business as well.
• Currently in talks with 3- Wheeler companies for trial of Li-Ion batteries.
• Raw material prices are softening.
• Company has 1-month pricing mechanism for 50% of customers and 3-month pricing mechanism for 40% of customers. Thus, all the volatility of raw materials is passed on to the end customer, but with a little lag.
• Competition – 3 companies in TYPE-IV Cylinders. All of them are importing. TTPL is the only company to manufacture in India. Government preference for Made in India products.
Disclosure: Invested (Biggest holding of portfolio)
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