POWERINDIANSEQ2 FY23November 9, 2022

Hitachi Energy India Limited

7,125words
54turns
7analyst exchanges
3executives
Management on call
N. Venu
Managing Director & CEO, Hitachi
Ajay Singh
Chief Financial Officer, Hitachi
Poovanna Ammatanda
General Counsel &
Key numbers — 19 extracted
rs,
h I’m going to refer, already in BSE and NSE. For your benefit, I’m going to refer the slide numbers, in the next 20 - 30 minutes I will take you through our performance during the quarter ended Septe
1278 crore
ce and a stronger order pipeline. In this quarter ending 30th September, we received orders worth 1278 crores up 30.6percent year-on-year the continued order growth momentum was driven by key wins and ren
Rs.1815 crore
en driving this continuously, consistently for last several quarters. The revenue stood at Indian Rs.1815 crore up from 31 percent year-on-year. While PAT was up 8.3 percent year-on-year consistent focus on ex
4.75 gigawatt
t the orders from NTPC Renewable Energy Limited to supply power transformers for their upcoming 4.75 gigawatt renewable energy park in Gujarat. And once it’s completed, it’s going to be one of the largest re
INR 2000 crore
advisory for mining industries, etc. And the annual potential market for service averages around INR 2000 crores for Hitachi Energy in India. We are leveraging our install base to expand in exports and servi
1,278 crore
as reflected in Company’s performance in the short term, the Company booked orders worth around 1,278 crores up by 30.6 percent in comparison to the same quarter last year, and the profit before tax stood
50.2 crore
p by 30.6 percent in comparison to the same quarter last year, and the profit before tax stood at 50.2 crores and the profit after tax is 37.2 crores. I would like to bring your attention to the last column
37.2 crore
ame quarter last year, and the profit before tax stood at 50.2 crores and the profit after tax is 37.2 crores. I would like to bring your attention to the last column if you see the year-on-year comparison
Rs.7000 crore
eline. With a large orders of HVDC in Mumbai, which has been booked, order backlog crossed Indian Rs.7000 crore mark and provides as a revenue visibility of more than 20 months. And moving to the next slide, S
60.8 gigawatt
nd, data center and rail HVDC. The renewable market with present installed capacity of a solar at 60.8 gigawatt and wind energy at 41 gigawatt is priced for 5x and 3x growth respectively. To meet the commitmen
41 gigawatt
e renewable market with present installed capacity of a solar at 60.8 gigawatt and wind energy at 41 gigawatt is priced for 5x and 3x growth respectively. To meet the commitments of the governments in a ye
5x
esent installed capacity of a solar at 60.8 gigawatt and wind energy at 41 gigawatt is priced for 5x and 3x growth respectively. To meet the commitments of the governments in a year 2030 scenario, w
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Guidance — 20 items
N. Venu
opening
“We would be providing transformer manufacturer at our factory in Vadodara and this will be the single largest rating of transformer used for solar power evacuation in the country so far.”
N. Venu
opening
“This is the first for Hitachi Energy globally, and I am proud to share that from the product design to product engineering, our engineering team in Vadodara will be driving this project from design to manufacturing and commissioning.”
N. Venu
opening
“As you know, last year, we adopted an ambitious target under sustainability 2030 program to become carbon neutral in our own operations by 2030.”
N. Venu
opening
“From the top leadership to location heads and business leaders, everyone in the organization is committed to these goals and they have the target of monitoring on a month-on-month and quarter-on-quarter basis.”
N. Venu
opening
“Orders were heavier on products from end-user and evenly split between utilities and transport followed by industries in the sector, sectors transport and infra was stronger this quarter with the push towards the data localization regulations and data center policies, we expect healthy growth.”
N. Venu
opening
“Moving to the next slide, the Slide #13 which is an important slide to give you a little more information on how we are seeing our high growth segment focus going forward.”
N. Venu
opening
“Over the next 8 to 10 years, we anticipate HVDC connections for utility scale solar generator at Badla, Leh, Kargil, etc., @Hitachi Energy HITACHI lnspire the Next The data center market in India is expected to add 45 data centers panning about 13 million square feet and more than 1000 megawatt of IT capacity over the next three years.”
N. Venu
opening
“They have already announced the various sizeable tenders for high density corridor or Mission Raftaar and also the 12000 HP LOCO Project and also the 9000 HP LOCO Project Hitachi Energy has been a longtime partner of Indian Railways and we see a huge opportunity here for our products and services directly as well as to the OEMs of this particular projects.”
N. Venu
opening
“We expect services to account for 10 percent to 15 percent of our orders similarly for exports without manufacturing, expansion of our footprint.”
N. Venu
opening
“We have been clocking a quarter of our orders from exports, over the last few quarters and expect to build on this trend going forward.”
Risks & concerns — 7 flagged
While PAT was up 8.3 percent year-on-year consistent focus on execution, close customer connect and various mitigation efforts tampering the impact of tight supply chain on earnings.
— N. Venu
As you can see from the table, the company’s efforts towards mitigating the impact of macroeconomic factors have been yielding benefits by @Hitachi Energy HITACHI lnspire the Next softening the impact of external challenges.
— N. Venu
So, naturally there is always a challenge from the supply and demand standpoint in that and we expect the similar kind of trend to continue in our other countries including India, even though we have a very robust capacity for the transformers.
— N. Venu
So, the semiconductor is a global challenge and we have been continuously working with there and taking a lot of mitigation actions as you have seen compared to last quarter and this quarter, various mitigation actions have come in play and then we have softened the impact due to that.
— N. Venu
So, this is basically an industry-wide situation and in my view, all players facing the similar challenge when it comes to semiconductor impacting their supplies in that.
— N. Venu
It is difficult to quantify because it depends upon the services that will take in, so gradually if you ask me we are trying to come out of your services.
— Ajay Singh
So, as a percentage it will be very difficult, we expect this to come in next six months or so, 2023 we are expecting it to come down.
— Ajay Singh
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Q&A — 7 exchanges
Q
As per recent media reports, there have been reports of transformers shortages in the North American market like utilities are facing transformer shortages, because of increase in electric vehicle charging infrastructure. Do you see similar trends in world over or in the Indian market. And second question is pertaining to are we into high- speed rail transformer business like the bullet train business. Is Hitachi Energy catering to that business. Thank you.
N. Venu
Yes. So, thank you for your question. If you really look at the North America market, you rightly said you’re right in the media so same is the case. And there is a huge amount of demand arising out of energy transition there. One is that, and also strengthening the grids and resilience of the grids, all those things are creating a huge amount of demand for lots of products and in addition to that, as you rightly said the electrical vehicles is also another growth segments. So, some of the components which go into the multiple segments since the demand has come up in a same time. So, naturally
Q
My first question sir is on the data center as we mentioned that there is a potential of 1000 megawatt data has built up how much is our addressable kind of product which we have been supplying, out of the total CAPEX?
N. Venu
Thank you for the question. We have been telling that our portfolio goes into grid connection and then over evacuation and the strengthening of that particular things and automation and then high voltage and then dry tech transformers, etc., in that So, all these things put into depending upon the size of the data center whether hyperscale or not. So, it in the range of 15percent to 20percent is our addressable market. Okay, thanks sir. With respect to exports, as you mentioned we are targeting the range of around 25 percent of orders in coming year also. So, could you elaborate more with geog
Q
Sorry, I missed your opening remarks, but I just wanted to know what is a sustainable margin going forward over the next two -three years. What kind of synergies we will get into because you are into currently scaling up your business? So, what could be sustainable margin over the next two, three years we would like to achieve?
N. Venu
So, we have various levers, for example we have taken several initiatives upfront and then our go to market strategies are very solid, we have a focus on the various high growth segments, all those things are enabling us to grow higher than the market and in addition to that, we also have an exports, we have exports as well as service strategies to take us where we would like to do that. So, basis which we have also told last time that our midterm strategy is to bring the EBITDA margin to a 10 percent level by 2025 is what have said that and we still committed to that, and we believe that, tha
Q
I am referring to the Slide #13 which we have just shared on the service income, where we have mentioned that annual potential market of 2000 crores. Now is this with the target annual revenue, which we are looking at for Hitachi Energy, because right now we are clocking about 10 percent to 15 percent of our revenues from services which could be to the order of INR 400 to INR 500 crores. So, is the understanding correct, that we’re looking at a significant increase over time next three to five years?
N. Venu
Yes. So, thank you Mr. Mohan for your question. And so, what we are saying is that, with more and more digitalizing of our networks of the power system, so the service potential is going to grow based on our installed base calculation. Because of all the installed base we have in our system, we estimate that 2000 crores will be annual service potential in that. So, it won’t happen overnight to reach that level is that so, definitely it will take couple of more years. So, but we are estimating that with so much of digitalization, so much of advance services like your asset management, asset per
Q
Just a clarification, what is the current royalty and technology even making for the parent?
Management
Sorry, if you can repeat there was a bit echo. I wanted to know what is the royalty and technology fee pay out that we are doing to the parent. Thank you for this question. As you are aware that we are a group company and we are very much dependent upon the technical knowhow of the group company so currently, the royalty that is going off payout is approx. around 3.5 percent that we’re doing at the moment. But also, we need to understand that this is extremely important for us because the whole energy systems are undergoing a tremendous transformation. This needs a lot of investments from the
Q
Sir, we are localizing heavily in the country. On top of that we are also introducing new products from time-to-time. So, could you throw some light on what are our CAPEX plans for the rest of the year, which is the second half of FY23 and for the full year FY24?
N. Venu
So, we have been discussing this in the last two years. We have been investing here because we believe that we need to bring a lot of products and to meet the local requirements we need to locally manufacture not only for the local market, but also for the market outside of that, because we have a huge footprint here. We have a huge opportunity to leverage the existing talent, existing engineering base, existing manufacturing base to do that. We have been continuously upgrading Greenfield power quality facility, for example, I talked about we have doubled our capacity of existing power quality
Q
Thank you once again for your interest and active participation. I am really looking forward to host you physically in our state-of-the-art world-class Hitachi Energy Experience Center and our world-class factories in Baroda. I hope that we will work out a suitable date, all of you can join us. With that, once again thank you, please take care and if you need any more information do not hesitate to reach out to us and we are happy to provide whatever information you are looking forward. Please take care and stay safe. Thank you.
Management
Speaking time
N. Venu
15
Moderator
9
Management
7
Mahesh Bendre
6
Alisha Mahawla
5
Harshit Patel
5
Amit Anwani
3
Ajay Singh
2
Dinesh Mahajan
1
Mohan Krishnaswamy
1
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Opening remarks
N. Venu
Thank you operator. Good evening, ladies and gentlemen. Thank you for joining us for the call. And I hope you’re all doing well, taking care of yourselves and your families. Last year around this time, if you recall, we unveiled our new identity rebranding ourselves by the Hitachi Energy. This name reflects the breadth of opportunities where we can contribute our competency, expertise and solutions portfolio and support the acceleration towards sustainable energy future and societies. Through our first year, we invested in capabilities to cater to the evolving energy landscape; strengthening our foundation of talent, expanding our manufacturing footprint and building a brand that we all know today. As Hitachi Energy turns one, we will continue and deliver results with strategic expansion to drive high growth segments. We have uploaded this presentation which I’m going to refer, already in BSE and NSE. For your benefit, I’m going to refer the slide numbers, in the next 20 - 30 minutes I
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