Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales in Q1 FY25 grew by 13.6% to INR275 crores compared to the previous year.
- Profit Before Tax (PBT) increased by 53% to INR36 crores from INR23 crores in the previous year.
- Order book as of July 1, 2024, stands at INR1,618 crores, a 20% increase from the previous year.
- The company filed 15 Intellectual Property (IP) filings in Q1 FY25.
- The acquisition of Systems and Components India Private Limited is expected to enhance market access in the refrigeration segment.
Negative Points
- The air compressor business experienced only modest sales growth.
- Delays in compressor supplies from Europe, particularly from Howden, impacted project timelines.
- Offtake of CNG packages and Calana Booster was significantly below plan.
- Export growth is expected to be marginal, with a target of INR100 crores for the year.
- The company faced challenges due to an unusually warm summer and extended general election schedule, which slowed down project activities.
Q & A Highlights
Q: What is the update on the hydrogen compressor segment and what is the revenue potential and market size in India?
A: The hydrogen compressor segment is evolving, with significant interest in green hydrogen projects. The Indian government aims to produce 5 million metric tons of green hydrogen by 2030, requiring substantial investment. Compressor business could account for 2% to 5% of this investment.
Q: What is your deal with PDC machines? Is it an exclusive deal or any kind of other arrangements?
A: The arrangement with PDC Machines is exclusive for India and participative for the rest of the world. It involves importing diaphragm compressors from PDC USA, with design, engineering, and installation handled by Kirloskar Pneumatic.
Q: What percentage of the overall cost of setting up a CNG and a biogas station is for compressors?
A: The compressor package for a CNG pipeline is a small percentage of the total setup cost, primarily because the biggest investment is in setting up the gas pipeline itself.
Q: About the opportunity size for your products in India and the expected growth rate in the next two to three years?
A: The air compressor market in India is around INR5,000 crores, with Kirloskar Pneumatic holding a 5% to 10% share. The gas compression system market is between INR2,000 crores to INR4,000 crores, and the refrigeration segment market is at least INR2,000 crores. There is significant headroom for growth in all segments.
Q: How is the progress of installations of CNG compressors both for mother and daughter stations?
A: There is a pickup in installations, with more clearances expected. The focus is on daughter compressors or booster compressors due to ongoing pipeline installations. The company remains a duopoly in the CNG station business.
Q: What is the status of the road railer business?
A: The road railer business assets have been written down and are held for disposal. The business is not operative, and the company is seeking a buyer for the assets.
Q: Can you provide details on the Nasik forging plant and its impact on EBITDA margins?
A: The Nasik plant is used for internal manufacturing of forgings and fabrication, improving throughput time and margins. It contributes a couple of points to EBITDA margin improvement, with a focus on cost savings and faster execution.
Q: What is the outlook for Q2 FY25 and the expected growth rate?
A: Economic activity is picking up, and the company expects to deliver planned double-digit growth. The strong order book and focus on in-house manufacturing and IP creation will help achieve this growth.
Q: What is the impact of delays in compressor supplies from Howden on the refrigeration business?
A: Delays in compressor supplies from Howden have impacted project execution. The situation is expected to improve from the third quarter, with strong order inflow and new projects driving growth in the refrigeration segment.
Q: What is the status of the MOU with Systems and Components India Private Limited?
A: The MOU is for acquiring a majority stake in Systems and Components India Private Limited, a supplier of refrigeration packages. The acquisition will provide better access to the refrigeration market, particularly in the pharma, chemical, and food sectors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
