MTARTECHNSEQ3 FY23February 10, 2023

Mtar Technologies Limited

10,415words

112turns

12analyst exchanges

5executives

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Management on call

Srinivas Reddy

MD AND PROMOTER, MTAR TECHNOLOGIES LIMITED

Gunneswara Rao

CFO, MTAR TECHNOLOGIES LIMITED

Srilekha Jasthi

SENIOR MANAGER STRATEGY AND OPERATIONS, MTAR TECHNOLOGIES LIMITED

Irfan Raeen

ORIENT CAPITAL

Srinivas Reddy Sir

MD and Promoter; Mr. Gunneswara Rao

Key numbers — 40 extracted

Rs. 160 crore

ues to deliver strong growth in top line and bottomline. The Company has clocked the revenue of Rs. 160 crores with an EBITDA of Rs. 45 crores and PAT of Rs. 31 crores. I would like to give a brief overview

Rs. 45 crore

op line and bottomline. The Company has clocked the revenue of Rs. 160 crores with an EBITDA of Rs. 45 crores and PAT of Rs. 31 crores. I would like to give a brief overview on the third quarter performance

Rs. 31 crore

The Company has clocked the revenue of Rs. 160 crores with an EBITDA of Rs. 45 crores and PAT of Rs. 31 crores. I would like to give a brief overview on the third quarter performance and the future outlook o

Rs. 125 crore

d we have done much better than the previous quarter as well. We have generated revenues close to Rs. 125 crores in this segment. We have also commenced our operations as you all know in sheet metal assemblies

Rs. 25 crore

to get qualified for many SMBs moving forward as well. We have already dispatched close to about Rs. 25 crores of sheet metal assemblies and enclosures have been approved and dispatches are getting commenced

55%

hat we provided at this point of time. As I mentioned earlier, we had given a revenue guidance of 55% - 60% increase in revenuesand I would like to revise these efforts based on our very strong Q4 co

60%

provided at this point of time. As I mentioned earlier, we had given a revenue guidance of 55% - 60% increase in revenuesand I would like to revise these efforts based on our very strong Q4 coming u

Rs. 570 crore

would like to revise these efforts based on our very strong Q4 coming up with revenues of between Rs. 570 crores to Rs. 600 crores of revenues being generated for the entire year, this current financial year w

Rs. 600 crore

se these efforts based on our very strong Q4 coming up with revenues of between Rs. 570 crores to Rs. 600 crores of revenues being generated for the entire year, this current financial year which is a substant

29%

evious guidance what we have given and also having signs of maintaining the EBITDA margins around 29% with plus minus 50 basis points. We are also expecting our order book, which is very strong, clos

50 basis point

we have given and also having signs of maintaining the EBITDA margins around 29% with plus minus 50 basis points. We are also expecting our order book, which is very strong, closing order book of close to abou

Rs. 1,200 crore

We are also expecting our order book, which is very strong, closing order book of close to about Rs. 1,200 crores as against Rs. 1,000 crores what we had mentioned earlier. And one of the most positive update

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Guidance — 20 items

Srinivas Reddy

opening

“We are expecting to finalize various discussions with some of the leading MNC companies in US for the energy storage systems which will come into effect next year with substantial increase our revenue base completely defense sector on the clean energy segment.”

Srinivas Reddy

opening

“As I mentioned earlier, we had given a revenue guidance of 55% - 60% increase in revenuesand I would like to revise these efforts based on our very strong Q4 coming up with revenues of between Rs.”

Srinivas Reddy

opening

“600 crores of revenues being generated for the entire year, this current financial year which is a substantial increase compared to the previous guidance what we have given and also having signs of maintaining the EBITDA margins around 29% with plus minus 50 basis points.”

Srinivas Reddy

opening

“Moving forward to FY24, we would maintain very good growth momentum to the tune of 45% to 50% in the revenues and we will be sustaining our margins very comfortably.”

Gunneswara Rao

opening

“As informed by our MD, we will maintain our closing order book of around Rs.”

Deepak Krishnan

“140 crores order that we have said that we got this quarter, which segment and which client if you can highlight that and maybe just on your revised revenue guidance of Rs.”

Srinivas Reddy

“Now, coming to the revision on the guidance numbers based on what we have achieved with Q3 and what we are almost at the middle of February right now, we have a clear path in which in a confirm way, we can say that we will be able to achieve anywhere between Rs.”

Srinivas Reddy

“Yes, we would probably maintain around 29% plus minus 50 basis points at the end of the financial year because we will be getting sales coming in from nuclear and space as well in this quarter and based on the revenue that we generate for the first quarter we are pretty confident that we will be able to have this kind of margins for the entire year.”

Gunneswara Rao

“As of today, we are 248 days and looking at the higher guidance given by our MD, so definitely I think we can be able to maintain the working capital days around 225 days by end of this financial year.”

Gunneswara Rao

“We are doing lot of steps in terms of reduction of working capital, but as you know we are working on the long cycle project for which there is made to order scenario we are working, we need to maintain the WIP because operating cycle is very high and looking at the next year growth also, I think our MD has given the percentages already.”

Risks & concerns — 3 flagged

So, what I am trying to say there is that this Company was built over 15 years and the technology has evolved and they are competing with the great power, so I don’t see any kind of risk for the Company as such, but that doesn’t mean we are stopping at that point.

— Srinivas Reddy

So, I don’t see that as any kind of risk strategically, but we are working towards various ways to enhance our customer base in the long run.

— Srinivas Reddy

It is difficult to quantify the share because the numbers from government are never given to us, so we can only say what all we can contribute.

— Srinivas Reddy

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Q&A — 12 exchanges

Congratulations on a good set of numbers, I just wanted to first understand this additional Rs. 140 crores order that we have said that we got this quarter, which segment and which client if you can highlight that and maybe just on your revised revenue guidance of Rs. 570 crores that implies a deal of the low run of 77%, so what is really driving this growth and which is the segment that really stands out in Q4?

Srinivas Reddy

Thanks, Deepak. As I said earlier, this Rs. 140 crores which actually I should have mentioned in my earlier speech, one good news is that in our product portfolio division, we had got qualified for the ASPs which one of our products which we are working on and based on the qualification and the initial batch production, we have received an order for Rs. 100 crores for this product itself. Technically, it is about a requirement of Rs. 130 crores per year, this is a great addition to our revenue base and I would really congratulate my R&D team for being able to achieve this in hardly about 4 to

Sir, my first question is, how do you see the order inflow for FY24 and revenues stacking up?

Srinivas Reddy

The order inflow as I said we have received orders until December, close to I think Rs. 893 or Rs. 900 crores and for the end of the year, we should have a closing order book close to about Rs. 1,200 crores is what we are expecting. So, I think we will have a very strong order book position. We earlier said Rs. 1,000 crores, but now it should end up around Rs. 1,200 crores is what we are expecting right now. My question is more about FY24, 12 to 18 months, how is this order inflow? FY24, obviously, we will be expecting lot more orders in FY24. We are working on various products as I said, so o

Congrats for the wonderful set of numbers, sir, one quick question on where do you see yourself in the defense sector in next 3-4 years and what are all the steps that you are taking as you see that current contribution to revenue from defense sector is around 5%, I believe, so how are you seeing to have a good share of that sector?

Srinivas Reddy

Defense, basically we are working on lot of projects that defense lacks right now which we have been doing for number of years, but we obviously would like to become a defense a prime for Air Force, Navy things like that, so we are working towards that. It is all about technology in terms of working with various MNCs in a joint manner based on the Make in India concept or the Buy India concept that we have with 50% of production happening in India for all key projects. So, we are in touch with number of companies abroad as well, so you will hear from us very shortly what steps we are taking to

Sir, I have just two questions, first in your presentation you have mentioned that you have started to work on ceramic assemblies for Bloom, so if you can give some perspective on what are these products and they will be associated with the Keeylockoo range of the electrolyzers which end product of Bloom and how are we looking at growth in this market? Also for ceramics, are we doing any particular CAPEX at the moment or not?

Srinivas Reddy

No ceramic assemblies, we don’t need any CAPEX at this time because it is the kind of a product which we are actively we are importing it from US at this point of time. So, as we have done earlier, the number of bought-outs we have indigenized and localized everything in entire extent that is how our spends Bloom has gone from step to step. So, the ceramic assemblies go in all the systems whether it is in Keeylocko or whether it is in Yuma or within the Electrolyzers as well. So, we are in the process of getting qualified for that and probably it takes a quarter also if we get qualified. Our e

Congrats on good set of numbers, sir, one thing which we wanted to understand is that like what is our strategy in terms of if you want we were also planning to derisk ourselves from the dependency on Bloom, so currently you also had mentioned last time that we are looking at Voith and other kind of hydropower and other things, so in a 3-year perspective, if you look at it like how much will be Bloom’s contribution in your overall topline given the ramp up in the other segments which you are expecting?

Srinivas Reddy

Let me answer this question to you in a different way. We definitely do have a strong strategy moving forward over the next 3 years to 5 years, so the entire work is in different segments. It is not only in fuel cell, but we are also now into Hydel, wind, we are also into nuclear programs, space and all that. So, if you look at Bloom, today Bloom is the number one leading Company in the world in fuel cell technology crossing a million dollar turnover. If you look at the latest UBS report on Bloom, there is going to be $3 billion revenue from the next 2 years. So, what I am trying to say there

Sir, is it possible to quantify some of the new products, you quantified ASP assemblies, sheet metal, of course you have done better than we had guided for the year in the 9 months itself, but for next financial year, FY24, if you could quantify what would be the sale you could derive from these areas like sheet metals, enclosures as well as the new electrolyzer parts that you mentioned you would be indigenizing?

Srinivas Reddy

As I said the ASPs which we have developed and we received the order for Rs. 100 crores, it is the annual requirement it is the same product if we talk about in terms of numbers, each of the ASP is about $55 and it is close to about Rs. 130 crores of requirement which we grow year-on- year basis based on the number of hot boxes which you grow every year. When it comes to enclosures, we are looking at almost 3000 numbers of enclosures moving forward in the next financial year because we are all geared for that. There has been certain lead time on various parts, bought-outs which are going in to

I had three questions, first is, say for the FY23 revenue is about Rs. 550 to Rs. 600 crores, what would be the annuity portion for that going ahead because you obviously mentioned that in the ASP Rs. 130 crores would be something that would recur every year, so just wanted to understand the annuity portion of the business and how that has increased? That is my first question, the second question is in terms of as we indigenize the products or start to make production, would that mean increase in margins or would that mean that the R&D expenses would also increase for us? That is question numb

Srinivas Reddy

As I said earlier, obviously as we have revised the guidance based on what we can clearly see right now something in a range of between Rs. 575 to Rs. 600 crores of revenues coming in for this year and moving forward, I have said that for next year FY24, we are looking at 45 to 50% revenue growth compared to the current financial year, now the growth is happening in terms of products what we have developed plus also the growth in the fuel cell segments, also in the hydel segment as well and growth is also equally coming also from the nuclear programs where we are in advanced stage of execution

Congratulations on a great set of numbers. So, just speaking up from one of the previous questions was on CAPEX, so what is the CAPEX that we have done so far in the 9 months, what is the target for FY23 and how do we look at it for FY24?

Gunneswara Rao

I will answer this question. I think for the last 9 months, we have actually CAPEX around Rs. 80 crores we have done it and there is a capital work in progress of around Rs. 72 crores is there, so which we will capitalize over a period of time, maybe in this quarter, something will slip over to next quarter. This is because last year we have actually constructed one new facility in Adibatla where our sheet metal and fabrication set up we have done. So, something was spill over from the last year around Rs. 40 crores to this year and also around Rs. 45 crores we are spending for augmenting our

My first question is on the disclosure you had talked in the last call about Fluence Energy order and we were expecting around Rs. 300 to Rs. 500 crores in one to one-and-a-half years, so sir if I correlate this with our guidance on that Rs. 600 crore topline that we are aspiring to achieve in FY23, 50% growth is around Rs. 300 crores, but are you not taking into account any revenue coming from this Fluence Energy orders or is there any delay which we are saying if you can give an update on Fluence Energy and tie up with the revenue guidance?

Srinivas Reddy

Any organization like Fluence Energy or any other Company, EnerVenue or any Company for this matter, first you need to do the first articles, you need to do the batch production, it is a process cycle. So, continuing those numbers for the next year doesn’t make any sense to me. So, whatever numbers are generated from that is something which is a small update to it, but real ramp up will happen by end of next year once they implement everything, so probably you look at major numbers coming in, moving forward for FY25, that is how it works. And you think this can be like you talked about as big

Sir, my first question, recently, MoU signed with the IN-SPACe can you share more color and opportunity size in next 1 to 3 years? And second question, furthermore promoter stake sales in your cart?

Srinivas Reddy

That is what I said, like MoU signed for a joint working together to build and launch vehicle by and large, completely independent of ISRO, but with the enough support from ISRO in various areas, that is what Government of India wants to do, while using the launch pad facilities, etc., so this will come into effect 3 years from now. Once we build the launch vehicle, then we do the developmental launches and then the commercial launches, so we are looking at about a 3 to 4 years’ timeframe for us, but that is going to be a big game changer for the Company. Furthermore promoter stake sales in yo

Sir firstly, I would like to understand since the demand prospects are high in clean energy segments, so what is the exact order book for clean energy segment and how it will be executed in FY24 and 25?

Srinivas Reddy

See, the order book for clean energy segment, I don’t have the exact number, but probably beyond Rs. 600 crores plus. So, all these orders are executable by December of next year and that is what it is and it is going at such similar phase year-on-year basis. We are going to add further products to it as I have explained earlier. So, we are in a great space on that, there is nothing to…. And second question is, how we like project the revenue inflow from this particular segment, because not all that we are executing will be converted into revenue in that time period, so your comments on that?

Thank you and I would like to thank everyone for sparing their time to join today’s earnings call. I would like to say the growth numbers will come in the case of MTAR, but I would love to say that I would like to thank all my engineers and the R&D team for building such fabulous products which are generating good set of numbers just a biproduct of that. So, we will continue to do that moving forward as well and thank you so much for all of you for your support. Thank you.

Management

Speaking time

Srinivas Reddy

Moderator

Gunneswara Rao

Renu Baid

Jonas Bhutta

Aman Vij

Deepak Krishnan

Sandeep Tulsiyan

Mohit Kumar

Anika Mittal

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Opening remarks

Irfan Raeen

Thank you, Mitchell. Good morning everyone, myself, Irfan Raeen from Orient Capital. We are Investor Relation Advisor to the Company. I hope all of you and your families are safe and healthy. On behalf of MTAR Technologies, I extend a very warm welcome to all participants on Q3 and 9-month FY23 Financial Discussion call. Today, on the call, we have Mr. Srinivas Reddy sir – MD 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 Company’s website. I would like to give a short disclaimer before we start the call. The call may contain some of the forward-looking statements which are completely based upon our belief and opinion and expectation as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, I hand over the call to Srini

Srinivas Reddy

Thank you, Irfan, hello and good morning to everyone. Thank you for taking the time to join us today. Today, on the call, I am joined by Mr. Gunneswara Rao – Chief Financial Officer; Ms. Srilekha Jasthi – Senior Manager, Strategy and Operations and Orient Capital, our Investor Relation partners. We have uploaded our updated Investor Deck, press release and results highlights on stock exchanges and Company website. I hope everybody had an opportunity to go through the same. I am pleased to inform you all that the Company continues to deliver strong growth in top line and bottomline. The Company has clocked the revenue of Rs. 160 crores with an EBITDA of Rs. 45 crores and PAT of Rs. 31 crores. I would like to give a brief overview on the third quarter performance and the future outlook of the Company. The Company registered a very significant growth in clean energy vertical which is definitely as expected and we have done much better than the previous quarter as well. We have generated r

Gunneswara Rao

Thank you, Mr. Srinivas Reddy. Good morning everyone and warm welcome to our earnings call today. I will take you through the financial performance post which we will open the floor for the question and answers. Coming to our revenue, the revenue for the 9 months period of Rs. 377 crores which is higher than the last entire financial year revenue of Rs. 322 crores. So, we have surpassed the revenue, EBITDA, PAT, everything in terms of absolute numbers compared to entire financial year numbers. Our revenue from operations for this quarter is Rs. 160 crores as against Rs. 126 crores in Q2 FY23 which is 27% increase on quarter-on-quarter basis. EBITDA reported at Rs. 45 crores in Q3 FY23 as compared to Rs. 35 crores in Q2 FY23 which is 29% increase on quarter-on-quarter. Profit before tax stands at Rs. 42 crores in Q3 FY23 as against Rs. 33 crores in Q2 FY23 which is 27% increase on quarter-on-quarter basis. Profit after tax was at Rs. 31 crores in Q3 FY23 as against Rs. 25 crores in Q2 F

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