Skipper Limited Q2 FY25 Earnings Call Summary
Skipper Limited reported strong Q2 FY25 results, achieving its best ever second-quarter revenue of ₹1,190.5 crores, representing a 44% YoY growth. The company also delivered a record half-year revenue performance of ₹2,210 crores, demonstrating a 66% increase compared to H1 FY24. This impressive growth is attributed to robust execution in the Engineering and Infra segments.
Financial Performance
- Consolidated EBITDA for Q2 FY25 rose by 53% to ₹112 crores, while operating EBITDA margins improved to 10.1% from 9.5% in the previous year quarter. All segments experienced margin growth, with Engineering at 11.5%, Infrastructure at 6.5%, and Polymer at 4.6%. Management emphasized a continued focus on bottom-line improvement.
- Consolidated PBT for the quarter surged by 56% to ₹44.4 crores, resulting in a PBT margin of 4% compared to ₹28.6 crores in the previous year. Consolidated PAT also witnessed a significant increase of 66%, reaching ₹32.9 crores against ₹19.8 crores in the same period last year. PAT margins improved to 3%.
- Half-year export revenue grew by an impressive 233% to ₹410 crores, while consolidated PAT reached ₹65.4 crores, reflecting an 81% growth.
Segment Wise Information
- Engineering: This segment generated ₹845 crores in revenue, marking a 42% increase over the previous year quarter. The segment’s operating margin increased to 11.5%.
- Infrastructure: This segment achieved ₹160 crores in revenue, demonstrating a remarkable 149% surge. Notably, the segment’s operating margin significantly improved to 6.5% from 3.5% in the previous year quarter.
- Polymer: While the segment recorded a 7% decline in revenue, reaching ₹104 crores, its operating margin still saw an improvement to 4.6%. The management attributed this decline to channel partner destocking due to price volatility and a slowdown in water projects. They anticipate sales recovery in future quarters.
Growth Drivers
- Strong Domestic T&D Market: The company benefits from the robust growth of the Indian transmission sector, driven by government initiatives to expand renewable grid infrastructure and enhance electrification.
- Global Renewable Energy Trends: The worldwide shift towards renewable energy integration and carbon neutrality presents a significant long-term growth opportunity for Skipper Limited.
- Diversification: Skipper is expanding into new sectors like Telecom, Railway electrification, Water EPC, and Drip irrigation to strengthen its revenue streams.
- Capacity Expansion: The company’s ongoing 75,000-ton capacity expansion, expected to be commissioned by the end of the financial year, will enable it to capture growing demand.
Management’s Guidance for the Future
- The company expects continued growth in both top line and bottom line, supported by a strong order book and a favorable market environment.
- Management anticipates a 25% CAGR over the next three years and aims to reach a top line of ₹10,000 crores, potentially by FY29.
- While a specific target was not provided, the company aims to improve margins to around 11% over the next two to three years.
- Management emphasized a focus on securing higher-quality contracts, increasing export penetration, and implementing cost efficiency measures to enhance margins.
- Skipper Limited plans to further invest in capacity expansion, with a projected capital expenditure of ₹800 crores over the next four years. To fund this expansion, the company is considering raising ₹600 crores through equity or other instruments.
Key Risks
- Execution Challenges: The company’s ambitious growth plans are contingent on its ability to effectively execute projects, manage capacity expansion, and navigate potential supply chain disruptions.
- Competition: While Skipper Limited currently faces limited competition in the extra high voltage segment, new players entering the market could impact pricing and margins in the future.
- Raw Material Price Volatility: Fluctuations in raw material prices could affect profitability, particularly in the Polymer segment, which has already experienced some challenges.
- Dependence on Government Spending: The company’s growth is significantly tied to government investments in the power transmission sector. Delays or changes in government policies could impact its performance.
Industry Outlook
- The industry outlook remains highly positive. The Central Electricity Authority (CEA) projects an investment of ₹9.15 lakh crores in the power transmission sector by 2032. This significant investment is fueled by an anticipated 30% growth in interstate transmission line additions.
- This robust growth trajectory creates a favorable environment for Skipper Limited, positioning it to capitalize on the expanding demand and contribute to India’s energy infrastructure development.
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