MIDHANINSENovember 21, 2022

Mishra Dhatu Nigam Limited

7,884words
118turns
11analyst exchanges
2executives
Management on call
Sanjay Kumar Jha
CHAIRMAN AND MANAGING
Amit Dixit
ICICI SECURITIES
Key numbers — 35 extracted
41%
our Q2 report is VOP, there is a significant increase compared from the last year's VOP of around 41%. And also we had, in spite of having a lot of additional expenditure coming out from due to highe
2.6%
e first half. We have got kept the profit at the level of similar level. Almost the PBT is around 2.6% higher only compared to the last year. And considering that, only of the path is slightly on th
INR 800 crore
seeing the corresponding increase in sales. And as a result, our inventory has moved from around INR 800 crores in -- at the end of financial year '21 to maybe INR 1,091 crore at the end of financial year '22
INR 1,091 crore
inventory has moved from around INR 800 crores in -- at the end of financial year '21 to maybe INR 1,091 crore at the end of financial year '22, and it has moved to INR 1,280 crores for this half year. So sir
INR 1,280 crore
financial year '21 to maybe INR 1,091 crore at the end of financial year '22, and it has moved to INR 1,280 crores for this half year. So sir, when do we expect that we are able to build this inventory that we h
INR 1,000 crore
t kind of sales growth are we expecting by internal targets? Sanjay Jha: Our internal target is INR 1,000 crores. Aditya Deorah: Is it the value of production or the sales? Sanjay Jha: I'm not talking ab
2x
Q2 F '22 conference call, the management had talked about having a fixed asset turnover of about 2x from projects such as the wide plate mill and the Rohtak plant. However, later on, it was changed
INR 500 crore
wide plate mill and the Rohtak plant. However, later on, it was changed to potential revenues of INR 500 crores from wide plate mill and INR 100 crores from Rohtak plant, which results in a fixed asset turnov
INR 100 crore
owever, later on, it was changed to potential revenues of INR 500 crores from wide plate mill and INR 100 crores from Rohtak plant, which results in a fixed asset turnover of 1x. So can you throw some light on
1x
wide plate mill and INR 100 crores from Rohtak plant, which results in a fixed asset turnover of 1x. So can you throw some light on this discrepancy? And help us understand this better? Sanjay Jh
500 crore
repancy? And help us understand this better? Sanjay Jha: You said that management has projected 500 crores of revenue in current financial year? Ankit Shah: No, last year in one of the calls, managemen
rs,
e to get the proper price as well as seven terms also. We have a number of vendors outside customers, they are asking for almost a grade based supply system. -- grade-based supply systems is not accep
Guidance — 20 items
Aditya Deorah
qa
“So sir, when do we expect that we are able to build this inventory that we have built up?”
Sanjay Jha
qa
“Our internal target is INR 1,000 crores.”
Sanjay Jha
qa
“What we have projected that once this mill is established fully, we can expect the revenue of around INR 500 crores from the wide plate mill.”
Sanjay Jha
qa
“Once we go to the full scale of because any project, you cannot get the full scale of operation in the first year of itself, sir.”
Sanjay Jha
qa
“So this year, we will be seeing like trials are getting conducted.”
Sanjay Jha
qa
“So these things are moving on now and that increase will be there.”
Ankit Shah
qa
“Sir, the peak revenues from these two plants will be INR 500 crores and INR 100 crores or it be higher?”
Ankit Shah
qa
“So by when can we expect to get the certification?”
Sanjay Jha
qa
“So based on our outcome and the cost of production, the order will be placed on MIDHANI.”
Sanjay Jha
qa
“So right now, these values are difficult to predict because their project also, there is no clarity that how much of the equipment they are going to get the orders from the services.”
Risks & concerns — 7 flagged
So right now, these values are difficult to predict because their project also, there is no clarity that how much of the equipment they are going to get the orders from the services.
— Sanjay Jha
And with the current world scenario, which we see in the -- that like in the aftermath of Ukraine and Russian conflicts, there is definitely very much pressure on the supply chain of this material.
— Sanjay Jha
But this technology is slightly difficult.
— Sanjay Jha
So there is a pressure on the price as of today also.
— Sanjay Jha
So definitely it is going to give pressure on our margin.
— Sanjay Jha
Yes, I believe at the end I tell you this quarter two has been very, very difficult for us because the prices have gone up for all the commodities.
— Sanjay Jha
In this situation maintaining the profitability has been a big challenge, but again I appreciate your patience and the customer's confidence that we are able to get this type of performance at present.
— Sanjay Jha
Q&A — 11 exchanges
Q
Sir, you had mentioned in your opening remarks also that the value of production has gone up for this half year. And I guess, even for the last financial year also, the value of production has gone up. But sir, we are not seeing the corresponding increase in sales. And as a result, our inventory has moved from around INR 800 crores in -- at the end of financial year '21 to maybe INR 1,091 crore at the end of financial year '22, and it has moved to INR 1,280 crores for this half year. So sir, when do we expect that we are able to build this inventory that we have built up?
Sanjay Jha
The inventory is a very important part and important issues, which we are dealing with a day- to-day basis. But the major reason for the inventory increase build up in inventory is mainly because of raw material also, because the raw material costs have gone up. So we have to also stock some of the requirements coming out required for the nickel-based alloys. And earlier, our production of nickel-based alloy are very less. Now the requirement has gone up for super alloy production. So therefore, it adds to the inventory in a very high value material and which is nickel. This is the one first p
Q
In Q2 F '22 conference call, the management had talked about having a fixed asset turnover of about 2x from projects such as the wide plate mill and the Rohtak plant. However, later on, it was changed to potential revenues of INR 500 crores from wide plate mill and INR 100 crores from Rohtak plant, which results in a fixed asset turnover of 1x. So can you throw some light on this discrepancy? And help us understand this better?
Sanjay Jha
You said that management has projected 500 crores of revenue in current financial year? No, last year in one of the calls, management has said that we will have a fixed asset turnover of two times from wide plate mill and Rohtak plant? I understood the question. What we have projected that once this mill is established fully, we can expect the revenue of around INR 500 crores from the wide plate mill. And now this mill is still under on trial, trial means that we are making the products one by one, we are moving towards. Once we go to the full scale of because any project, you cannot get the f
Q
My question is on what is the kind of opportunity size our company can target over the next four to five years. So broadly, both in terms of domestic as well as exports? And is there a company that we can benchmark ourselves with globally, who is in the same space and who will probably at a significant scale or something just for comparison?
Sanjay Jha
This question is very apt question you have asked and already as far as the bench marking is concerned, it was done earlier, and it was seen that MIDHANI far as profit percentage and all is matching with some of the leading international manufacturer in the similar domain. But the volume-wise, our volume is very less. So the volume depends on that how your domestic industry is growing, and you have rightly all about next four, five years. I see next four, five years, scenario is very good for the entire engine industry, which is operating in the area of defence manufacturing. Because of the va
Q
Sir, I just want to understand a couple of things. One is on your titanium business. So can you just explain this business? I mean, what kind of products you make? What is the process? What are the raw material sources, some bit of margin outlook and everything on this particular part of the business?
Sanjay Jha
Now this is a very fundamental question you ask titanium. So let me tell you, first, titanium is called a wonder metal. Why it is called a wonder metal? Because it has a very wide especially because of its light weight and high strength ratio, it is a lightweight and high strength. We had a tremendous application in the area of aerospace and other side also, it has a very good corrosion resistance, especially against the seawater. So if you see that this material can work on the – above the ground in the aerospace and other side, under seawater. So if I'm clear about the application, then I ca
Q
Sir, congrats on good execution, though the top to bottom line is a bit stretched. So just wanted to understand because this, as we look at the broad commodity prices have come down. So was there any inventory-related readjustment in the income statement this quarter because the prices have come down?
Sanjay Jha
Prices. So I don't think anything has come down so far. Commercial steel prices have come down, not the special steel Yes, only like MS where the price...
Q
What we are not using that commodity steel in our manufacturing. So what we are talking about the price is those areas where the prices have come down. We are also -- I tell you that prices -- our raw materials are mainly nickel, cobalt, moly, tantalum and iodine. So there, the prices have not come down, in fact. So there is a pressure on the price as of today also. So I don't see any reason there that we have adjusted because of that. And so I think that is -- will be given or any other where you want to make...
Renjith Sivaram
When I read your annual report, you have this R&D tied with Carborundum for ceramic-based armor plates. So what -- how large is that opportunity? Will everything will shift to ceramic? And like what is the status of that? Will that be manufactured in Carborundum facility and the Rohtak? Or will... This is Carborundum I have seen in context with one of our products called our bulletproof jackets. With Carborundum, we are trying to see only the silicon carbide tiles, we wanted to procure and see that -- with using that tiles, we wanted to make the bulletproof jackets. So this is still in the R&D
Q
Sir, my first question is regarding overall order inflow scenario, maybe the tenders, which you would be seeing in the pipeline. If you can tell us in terms of how defense segment would see the growth space and nuclear, are we seeing good pipeline building up? That's my first question.
Sanjay Jha
Yes, order flow, we are expecting that whatever order position is there as on today are INR 1,500 crores, order book will remain after the closing of this assessment year also, this is our expectation. And we are also trying to see that how we can get the other product also in our fold, which includes the export, which includes certain things require from our Wide Plate Mill as it progresses, if we get converted into some of the products into the large volumes then that also expected. But these things are all a future for which our team MIDHANI is working very hard. And as we progress, as we g
Q
On the precious metals scam that we shared the last quarter, can you update us on the progress on that? And as a follow-up, are we looking at appointing some better internal auditor, ENY or anybody else to strengthen our internal controls?
Sanjay Jha
We have already our internal auditor it is there, and they are already taking care of our auditing system and all. You know that we are having a quarterly review of the audit results. It's being monitored by several independent directors are there on our Board. The systems are well placed. Requirement of the consultants arises when we have some specific problems. So for which also recently ministry has appointed certain consultants and they have submitted the report on our business growth plan and which we are considering and we are trying to see that how it can be implemented. Okay. And updat
Q
So three or four questions. The first one, you're saying that Q3 and Q4, you will see a pickup, and that is slightly a bit of bullish commentary to reach INR 1,000 crores. So sir, what are the factors that will cause this? One, it is because there is a slight change in the product mix or is it because of the short cycle kind of orders that you have? Or is it because of the absolute ramp- up that we see in the plant?
Sanjay Jha
Both the things are not required in our case. Our conversion cycle time is slightly on the longer one, because we are dealing with the very precious materials. So the number of steps required for processing those materials are quite large. And that's why you will see that whatever we produce, let's say in the first quarter, I will sometime able to do supply in the second quarter or in third quarter. Because the gestation time for the materials from manufacturing to supply runs in the average almost seven to eight months. So this is the reason for precisely for getting up so much the WIP. Nothi
Q
Yes. Thanks, moderator. I would like to thank everyone for attending this call and a fruitful discussion that we had this afternoon. I would now like to hand over the call to Dr. Jha for any closing comments. Over to you, sir.
Sanjay Jha
Yes, I believe at the end I tell you this quarter two has been very, very difficult for us because the prices have gone up for all the commodities. In this situation maintaining the profitability has been a big challenge, but again I appreciate your patience and the customer's confidence that we are able to get this type of performance at present. But definitely we will try to see that our performance improves further and we can establish MIDHANI as one of the important company where investors will have interest. And also now we are entering our 50th year of our formation. So this is the golde
Q
Thank you.
Management
Speaking time
Sanjay Jha
52
Ankit Shah
17
Moderator
12
Charanjit Singh
9
Renjith Sivaram
6
Rohit
6
Management
5
Romil
4
Aditya Deorah
3
Amit Dixit
2
Opening remarks
Amit Dixit
Yes. Good afternoon, everyone. On behalf of ICICI Securities, I welcome all the participants for MIDHANI Limited Q2 FY '23 con call. At the outset, I would like to thank the management for giving us an opportunity to host this call. From the management side, we have with us Dr. Sanjay Kumar Jha, Chairman and Managing Director, and Shri. N Gowri Sankara Rao, Director Finance. Without much ado, I would hand over the call to Dr. Jha to take the forward. Over to you, sir.
Sanjay Jha
Good afternoon to all investors joining for this meeting. And before proceeding for your questions, I'll just try to give overview of what we have achieved in this up to the quarter two. And Q2 results already it is out. And the major significant outcome of our Q2 report is VOP, there is a significant increase compared from the last year's VOP of around 41%. And also we had, in spite of having a lot of additional expenditure coming out from due to higher cost of the raw material power. The company has maintained the profit almost similar to whatever the like previous year. And also, we had -- if you can see our digital, even though the sales is slightly marginally on the lower side, I am talking about in the first half. We have got kept the profit at the level of similar level. Almost the PBT is around 2.6% higher only compared to the last year. And considering that, only of the path is slightly on the lower side, very less difference. So these things are -- their data is available, in
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