I keep referring to the Q3FY23 earnings call as the source of a lot of my forward-looking information about the company. I figured I would share my notes from this call with you as well. Please see below:
• The sheet metal business is in full swing. Company has gotten qualified for 67 sheet metal assemblies and enclosures during Q1 in the Clean Energy segment. Supplied ₹24.6 cr worth of sheet metal orders for the Clean Energy segment YTD (till 31 Dec 2022)
• Energy storage systems are a new opportunity that the company is exploring. It will open up a whole host of new opportunities. Discussions are ongoing with multiple MNCs in the US.
• The company is guiding for ₹575-600 cr of revenue for FY23, compared to ₹322 cr in FY22. This is significantly higher than the previous 55-60% revenue growth guidance. At the lower end of this guidance, revenue growth would be 78.6%.
• Company intends to maintain EBITDA margins in the 29% ballpark.
• Aiming to have a FY end closing order book of ₹1200 cr. Bear in mind that the company initially had a closing order book target of ₹1000 cr before reporting Q2FY23 results.
• Appointed a new COO, Raja Sheker Bollampally. He has worked in an interesting list of companies including Bloom Energy (a huge client of MTAR’s), Ohmium (a large electrolyzer design and manufacturing company, with operations in India), and Ford Motors.
• Management, with a track record of being slightly conservative, has guided for FY24 revenue growth of 45-50%.
• Though I didn’t catch the exact working capital days, it was higher than expected owing to a payment that didn’t get processed over the Christmas holiday season. The goal remains to get working capital days to 220 (aiming for 225 by FY end).
• ASP (anode supported planar) assemblies in fuel cells are set to be a ₹100 cr revenue item in calendar year 2023.
• For FY24, management is expecting a material addition to the order book from a variety of sources, including fuel cells, the hydroelectric sector, sheet metal, and ISRO (keen to triple capacity). While discussions around energy storage systems are preliminary, management expects revenue from these systems to rival the revenue coming from Bloom Energy today in a couple of years.
• The company is continuing down its path of identifying favourable backward integration and import substitution opportunities (heater assemblies, roller screws, etc.).
• The electronics manufacturing services push is yielding positive results. The company has a land and expand strategy, beginning with cable harnesses, and then moving into PCBs and other opportunities.
• When asked about a three-year perspective on the percentage of revenue coming from Bloom Energy, management made it clear that there is no exclusivity with Bloom Energy, and that they could work with anyone. Bloom Energy is a market leader when it comes to setting up fuel cell systems at scale, and competitors like Plug Power still have work to do to catch up. MTAR is professionally run and knows how to protect client IP when working with two clients in the same sector.
• In the space division, the company expects its own launch vehicle to be ready by FY26. When asked about who will provide the engine, it was made clear that MTAR will be designing the engine. This is a clear example of how MTAR has made the move from providing individual parts, to providing systems and subsystems for its clients, all the way to making its own products.
• Management boasted about the company being the only Indian cryogenic engine supplier to ISRO.
• It noted that ISRO wants to become more of an R&D heavy organization, with other players brought in as partners to do the heavy lifting in terms of manufacturing, etc.
• The company’s internal R&D costs are not expected to grow linearly as the company pursues opportunities in new areas. Management intends to leverage the capabilities of the existing team as much as possible.
• Management mentioned that about ₹80 cr of capex was incurred in the first 9 months of FY23, with ₹72 cr of CWIP, with no final decision made on when to expense that amount. Capex in FY24 is expected to be lower in the ₹50-60 cr range.
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