Q1FY25 Concall Summary
Business Updates
- Highest ever Q1 sales recorded during Q1FY25. The first quarter of last year had pre buy included and thus 6% yoy growth over that quarter is great because if that effect is negated growth on a yoy basis is 18% in Q1FY25
- On the power gen side the CPCB IV plus capacity has been ramped up effectively and the company has also got approval for natural gas nodes
- In the B2C segment the relocation of manufacturing facility is happening as per plans
- The AUM in ARKA stood at 5768 crores as on June 2024
- Over the past 2 years the business has been restructured and cultivated a strong company culture which will prepare the company for the long part that lies ahead
- The idea is to change the company from an engine manufacturer to a power and energy solutions provider
- The path for next five years is to be a $2billion enterprise by 2030 and the levers that will be used to achieve this are to manufacture more, the new plant on the B2C side and the company is an engineering company which will continue to invest behind R&D
- The company will evaluate inorganic opportunities only in areas which are core to the company and its operations
- The net cash as on end of Q1FY25 was around Rs 400 crores
- The long term debt rating has been upgraded by CRISIL
Participants
Sancheti Family Office
DSP
Subhkam Ventures
Edelweiss
Macquarie
One up Financial
Motilal Oswal
Oaklane Capital
QnA
- The data centers buy a various type of power backups and power gensets are critical for a data center. The company is developing a range that will allow them to be aggressive in this segment along with maintenance contracts for the same which brings in annuity business
- The life of a genset is 15 years
- The annuity contracts associated with maintenance varies according to scope of work and can vary but the idea is to help keep 24×7 uptime
- From an end customer standpoint not seeing any varied signals and demand continues to be strong without any challenge or softening
- The service channel is being ramped up and capabilities are being built so that after market can be serviced and growth can be maintained
- The 5 year target is an ambition and not a clear number with areas of focus already outlined and most of the growth that will be achieved will be on the B2B side
- On the international business identifying open space where the company can win and working on what kind of channel and distribution network will be needed
- Currently the capital adequacy in “ARKA” is adequate and there are no considerations for new capital addition as the company is not leveraged to that extent
- In power generation the company currently has a market share of 30% and in CPCB IV Plus it has a product range across both diesel and natural gas segment
- On margin front expectation will be to remain in double digits without a firm commitment on any certain number
- The demand is stronger across construction and infrastructure sector. Across railway and defense there are stronger opportunities
- The focus is currently on augmenting capacity of high horsepower gensets and bulk of the execution of this capacity will happen over next 2-3 years
- The company has received the patent for India for hydrogen internal combustion engine gensets
- In the B2C business very close to double digit margins on an annualized basis and idea is to maintain double digit levels going forward as well
- The big improvement in margins in CPCB IV Plus will come from aftermarket and services which will commence once the warranties get over for the products
- The Rs 700 crore capex that the company will incur is a fresh investment over and above the normal capex that the company will incur over the next 2-3 years
- At this point channel will focus on CPCB IV Plus products as the industry has moved to that era
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