MTARTECHNSEQ2 FY2023November 03, 2022

Mtar Technologies Limited

11,848words

52turns

12analyst exchanges

4executives

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Management on call

Irfan Raeen

ORIENT CAPITAL

Srinivas Reddy

MANAGING DIRECTOR AND PROMOTER - MTAR TECHNOLOGIES LIMITED

Gunneswara Rao

CHIEF FINANCIAL OFFICER - MTAR TECHNOLOGIES LIMITED

Srilekha Jasthi

MANAGER, STRATEGY AND OPERATIONS - MTAR TECHNOLOGIES LIMITED

Key numbers — 40 extracted

Rs.126.2 Crore

ar in the history of MTAR with highest ever revenue and PAT. The company has clocked a revenue of Rs.126.2 Crores with an EBITDA of Rs.34.9 Crores and a PAT of 24.7 Crores. Further, I would like to give a bri

Rs.34.9 Crore

st ever revenue and PAT. The company has clocked a revenue of Rs.126.2 Crores with an EBITDA of Rs.34.9 Crores and a PAT of 24.7 Crores. Further, I would like to give a brief overview on sectorial performanc

24.7 Crore

he company has clocked a revenue of Rs.126.2 Crores with an EBITDA of Rs.34.9 Crores and a PAT of 24.7 Crores. Further, I would like to give a brief overview on sectorial performance and outlook. The co

99 Crore

hich is enabling the company to grow even at much higher levels. We have generated close to about 99 Crores from clean energy, which includes fuel cells, hydel and other related sales that we have done

Rs.650 Crore

As I mentioned earlier, we have received substantial orders this quarter which his close to about Rs.650 Crores plus which includes orders from nuclear segment, space, clean energy all put together. The com

Rs. 1,288 Crore

orage systems. Our closing order book as I mentioned as of 30th September has been to a tune of Rs. 1,288 Crores with an order inflow of Rs.643.5 Crores and where exceptional increase to receive the kind of or

Rs.643.5 Crore

s I mentioned as of 30th September has been to a tune of Rs. 1,288 Crores with an order inflow of Rs.643.5 Crores and where exceptional increase to receive the kind of orders that we are looking at from vario

55%

t innovations that we have done recently. We are on track to achieve our given annual guidance of 55% to 60% growth in revenues with an EBITDA of 30% plus, minus 100 basis points and as I mentioned

60%

ations that we have done recently. We are on track to achieve our given annual guidance of 55% to 60% growth in revenues with an EBITDA of 30% plus, minus 100 basis points and as I mentioned earlie

30%

on track to achieve our given annual guidance of 55% to 60% growth in revenues with an EBITDA of 30% plus, minus 100 basis points and as I mentioned earlier, the second half is going to be much st

100 basis point

ieve our given annual guidance of 55% to 60% growth in revenues with an EBITDA of 30% plus, minus 100 basis points and as I mentioned earlier, the second half is going to be much stronger than the first half. So

Rs.126 Crore

er book ever in the history of MTAR. Regarding the financials: Revenue from operations stood at Rs.126 Crores in quarter two FY2023 as against Rs.91.3 Crores in Q2 FY2022 which translates a 38% increase i

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Guidance — 20 items

Irfan Raeen

opening

“We are on track to achieve our given annual guidance of 55% to 60% growth in revenues with an EBITDA of 30% plus, minus 100 basis points and as I mentioned earlier, the second half is going to be much stronger than the first half.”

Irfan Raeen

opening

“So the EBITDA levels we would be able to catch up on that, and achieve the guidance what we have given in the past.”

Regarding the financials

opening

“So our target is 200 days by end of this financial year, and our ramp up in revenue since expected to reduce our fixed cost and thereby improving our margins as envisaged by us.”

Srinivas Reddy

“Sandeep Tulsiyan: Anything on the hydrogen boxes in terms of volumes that we can expect next year.”

Srinivas Reddy

“Srinivas Reddy: Yes, ultimately the electrolyzers and the hydrogen that particular products would really do extremely well, they will ramp up very high, in fact probably we are looking at little bit more time but probably by next year the ramping up should happen in a big way.”

Srinivas Reddy

“Probably by end of FY2024 we will see a very good ramp up happening in those where it will be even bigger than the Yuma and Keeylocko verticals as well as units.”

Srinivas Reddy

“We have orders for enclosures for about I think 700 sets were to supply in this year which we will be doing that that is about $3 million then we have another order which we have received for inflows for 2450 sets so purely based on our qualification and quality the customer has released order even for the next financial year, next calendar year in fact.”

Rajamohan V

“Considering that various levels that MTAR has in terms of increased wallet share or increasing wallet share and constantly driving higher product efficiencies does not it arithmetically translate to us growing higher than this 35% CAGR for Bloom, does MTAR management have any internal assessments to share of the growth prospects of the Bloom business over the next ten years that will be 40%, 45%, 50%.”

Rajamohan V

“Srinivas Reddy: No, do not look at ten years but what is most important is two aspects here how long we have been doing in the last one year, how are we doing in the next year or next three to five years from now.”

Rajamohan V

“Yes, the growth of Bloom has been very encouraging we have a clear forecast during the next three, five years the way things are going right now and that is why we are proactively ensuring that we have enough capacities, enough developmental activities that we are doing to ensure that we are right up there in terms of deliverables for Bloom as year-on-year basis.”

Risks & concerns — 1 flagged

So that itself leading to a gross margin decline of 600 basis points, there is a commodity impact as well here if you can clarify that.

— Nitin Arora

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Q&A — 12 exchanges

See electrolyzers we are considering to do a batch production right now and the next year the initial orders which they said of at least about 200 numbers and probably that number would go up as and when the time passes by over the next two quarters, but we are right on track in terms of this 4000 and 7000 units all that is right on track in terms of our execution level, which you must has seen in this quarter as well and even in the next quarter the numbers are much higher so we are right on track in terms of executing these orders and the numbers what we have mentioned earlier. Sandeep Tulsi

Management

Thanks for taking my question. Sir the first question is on your new client which you talked about GE Renewable can you throw some light how big this can become what are they ramping up and eventually it is the Yuma boxes only which you are supplying. If you can throw some light on this new client addition.

Srinivas Reddy

See GE Renewable is basically on the hydel sector. So they given us the initial order where the new customer for us for our Adibatla plant for about Rs.5 Crores that is a starting point, but based on our commissioning of the machining facilities in Adibatla by end of this calendar year, obviously this is going to grow bigger and bigger. It is not only GE Renewable we are working with Voith as well, Andtriz as well. So a lot of these companies are approaching us to execute the projects, so we are hoping that this would become much larger Volume moving forward over the next one year, two years.

See already the sheet metal plant is doing really well in terms of shipments happening to the tune of 12 Crores and odd I guess 11.7-12 Crores. We have orders for enclosures for about I think 700 sets were to supply in this year which we will be doing that that is about $3 million then we have another order which we have received for inflows for 2450 sets so purely based on our qualification and quality the customer has released order even for the next financial year, next calendar year in fact. So all these things are adding up in to moving MTAR into a more like to fully integrated system lev

Management

Good morning sir. I just have two questions. First if you can help us give an update on how have been the new product development proceedings and by when do we see the commercialization of some of these new products in our order backlog in terms of firm orders and second with respect to new client additions on the clean energy are we looking at other technology partners on temp side and if yes if you can just share any updates if any that we have here. Thank you. Srinivas Reddy: Basically the new product development the first thing is the ASP the fueling systems in the clean energy segment we

Renu Baid

Thanks so much and all the best sir.

See the market space is very huge we are not going to look at the market the market is too big for us to look at it, the market is not the issue, the issue is with the technology right. So they are right up there in terms of technology and this has to improve over the next four, five years that is where we are. We have to start somewhere to end somewhere. So that is what it is happening right now. So market is not the issue, market is very huge for that right now and we need to focus more on the technology to make it more viable for everyone so that is what we are saying and that is the kind o

Srinivas Reddy

See I said the way it works is if you look at different countries every country every government has been subsidizing this whole green hydrogen projects in a big way because that is where the whole world needs to be in, the way we are having the climate changes happening all over the place so that is the priority. Now that being the case lot of companies are focusing on how to build a technology and how to make it very viable over the next five, six years that is what we are going to see. If you look at electric cars and all that ten years back, you would not be think about it right now we are

Thank you for the opportunity. Congratulations on the results and phenomenal order bagging. Question largely on clean energy, broadly Bloom if you looking at the 30% to 35% growth over the next ten years aided by growth in SOS as well as electrolyzers. Considering that various levels that MTAR has in terms of increased wallet share or increasing wallet share and constantly driving higher product efficiencies does not it arithmetically translate to us growing higher than this 35% CAGR for Bloom, does MTAR management have any internal assessments to share of the growth prospects of the Bloom bus

Rajamohan V

Yes, understand, but Bloom generally supposed to be as you yourself have indicated and bloom themselves have much more efficient in their products 20%-30% more attrition sees in their products and competitors. So when Bloom itself says it will grow at 35% CAGR arithmetically I was looking at you growing forward with higher wallet share in this. Anyway that is something which we should take in our estimates. As we finish half year this year do we have visibility to guide on FY2024 revenues especially based on Bloom’s budgets like we have orders worth Rs.868 Crores in clean energy which we have

I cannot give you the exact breakup but whatever we have said earlier the way we have the monitoring system we are on track with that whatever numbers we have whatever we have given I do not have the exact figures right now but we are on track with those projects being execute in the second half of the year for sure. So that is not be an issue at all. Now as far as clean energy is concerned obviously we have done more than 1000 units of Yuma boxes this quarter itself and the coming quarter we are looking at about 1600 plus so we are right on track with the kind of numbers the way it growing th

Management

Thanks for the opportunity. I just wanted to get the management’s view on your defence segment and how you see this shaping up going forward in the next couple of years and was currently contribute by about 3% to the business but do you see this number growing or do you see it staying at a similar level. Srinivas Reddy: As I said even in the past like I am not looking at the percentage number in domestic because of clean energy numbers are really growing very high so we should talk more on the absolute numbers in terms of how we are growing year-on-year basis in terms of absolute numbers. So y

Shirom Kapur

And just another question to understand your domestic versus exports. So as clean energy given so just to understand this most of the non- clean energy domestic focus business and clean energy mainly extra focus is that understanding correct. Srinivas Reddy: Can you repeat that question. Just to understand your domestic versus export revenues so as majority of the non-clean energy business primarily serving in the domestic market or is there an export a large export opportunity in that as well. Srinivas Reddy: No, it is primarily the domestic market because nuclear space basically it is on the

Sir you have mentioned about establishing the EMS full-fledged facility so if you can give us some sense of what is the plan what are the investments is possible and second question is on the Seneca engine side space side you have talked about delivering in Q4 one product if you can give us some sense thereof and you are talking about as a new product I understand there will be a long lead-time in terms of R&D but you can give us some sense of what should be the phase I of that how long will be the timeline in terms of developing that product thanks. Srinivas Reddy: Basically the EMS as I said

Amish Kanani

And any idea for the market opportunity addressable market opportunity in engine versus SSLV some value I know the numbers could be very initial and… Srinivas Reddy: Yes, it is too premature but the numbers are going to be very large but the 80% of the world market is on the Small Satellite Launch Vehicles so that is what we are looking at. So that is the reason why we have taken up this project and it is something which our entire R&D and the entire team is working on this so this will be something which is we are going to see the fruits of this in the three, three and a half years from now b

It is a combination of both I think MNCs that they are working on it is a combination of what they require there and what offset probably that they have here. But offset is technically out of the window more now right now because all about Make in India. So the government is pushing for all these companies to actually manufacture in India under joint venture so that is the future in what we are looking at. Akshay Kothari: But they must have pending offset obligations which they need to fulfill in next five to seven years. Srinivas Reddy: Yes, that will be done for sure but I am saying moving f

Akshay Kothari

I am just asking that do we foresee for next five years also any we get offset opportunity from these customers as well because they have a huge offset obligation currently. Srinivas Reddy: Yes, they have a lot of offset obligations yes there will be residual offset obligations coming over the next four, five years as well that will continue apart from that for all the new projects it is more of Make in India kind of a concept that they have to do a joint venture with any qualified Indian company to take the projects more. Akshay Kothari: Thanks a lot.

See as of FY2024 we have capacity for 9000 units so we have signed with that but the way it is growing probably for FY2025 we need to proactively see how we can increase even beyond that but how the electrolyzers vertical really perform which is going to really ramp up much bigger and all the new products that we are launching for next calendar year so we have to evaluate all that and that is the reason will be taken by end of this calendar year. Deepak Krishnan: And just maybe one clarification so largely the domestic projects right now saying that you do not book revenue and a lot of it is s

Srinivas Reddy

It is mostly in the nuclear and also for some projects likes space like semi-cryo for example they are in advance stage of the winning but primarily it is in the nuclear business. Deepak Krishnan: So but once we deliver the product there should not be any problem on the receivables anyway because that government bagged Srinivas Reddy: Yes, absolutely we never had any issues with receivables with any of these organizations till date, so there is no that situation will come. Deepak Krishnan: Sure sir those were my questions thank you for the opportunity and best of luck to you.

I would like to thank everyone for joining us today. It has been a very good quarter for us and even moving forward as I mentioned the second half is going to be very exciting for us and even for the next year as well and moving forward for the future years we are doing lot of work in terms of innovation and in terms of adding the various customers, increasing the wallet share within the customers and adding new capabilities we will try to work more towards these areas and obviously people talk about the working capital number of days but that is something which we are working on but it is mor

Management

Speaking time

Moderator

Srinivas Reddy

Rajamohan V

Shirom Kapur

Amish Kanani

Nitin Arora

Jitin Arora

Renu Baid

Irfan Raeen

Regarding the financials

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Opening remarks

Irfan Raeen

Thank you, Mitchell. Good morning, everyone. Myself, Irfan Raeen from Orient Capital. We are an investor relation advisor to the company. I hope that all of you and your families are safe and healthy. On behalf of MTAR Technologies Limited, I extend a very warm welcome to all participants on Q2 & H1 FY2023 Financial results discussion call. Today on the call we have Mr. Srinivas Reddy, sir, Managing Director and Promoter; Mr. Gunneswara Rao, sir, CFO and Ms. Srilekha Jasthi, Manager Strategy and Operations. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded yesterday on exchanges and on the company's website. I would like to give a short disclaimer before we start this call. This call may contain some of the forward-looking statements which are completely based up on our beliefs, opinion and expectation as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With

Regarding the financials

Revenue from operations stood at Rs.126 Crores in quarter two FY2023 as against Rs.91.3 Crores in Q2 FY2022 which translates a 38% increase in year-on-year. EBITDA reported at Rs.34.9 Crores in Q2 FY2023 as compared to Rs.29.4 Crores in Q2 FY2022 which is a 19% increase on year-on-year basis. Profit before tax stands at Rs.33 Crores in Q2 FY2023 as against Rs.27.1 Crores in Q2 FY2022. This is 22% increase on year-on-year basis. Profit after tax was Rs.24.7 Crores in Q2 FY2023 as against Rs.19.1 Crores in Q2 FY2022, which is 30% increase on year-on-year basis. Our diluted EPS stands at 8.03 for Q2 FY2023 as against 6.2 for Q2 FY2022. Our net working capital days as on 30th September is 263 days which includes 93 days are due to work in progress. We have some long lead time projects are there, which require to maintain inventory, so the work in progress is inherent in nature in our business, so we need to have this working capital, this is meant for future sales. We are also working on r

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