Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GE Power India Ltd (BOM:532309, Financial) reported a strong quarter for core services and FGD orders, with significant order intake.
- The company received an FGD order worth about INR775 crores from JP Nigrie and JP Bina.
- The backlog of orders increased to INR3,917 crores as of June 30, 2024, up from INR3,309 crores in March 2024.
- Revenue from operations for the quarter stood at INR430 crores, slightly up from INR424 crores in the corresponding quarter of the previous year.
- The company is focusing on margin-accretive, cash-accretive service business and lower-risk EP projects, aiming for double-digit EBITDA in two years.
Negative Points
- The company reported a loss before tax of INR11 crores for the current quarter, although this is an improvement from a loss of INR136 crores in the corresponding quarter of the previous year.
- The timeline for the installation of FGD equipment has been extended, creating uncertainty in the market.
- The company anticipates a decrease in demand for services from the Center of Excellence due to changes in GE Vernova Hydro Power's strategic focus.
- There is a potential risk of not meeting the 2026 and 2027 deadlines for FGD installations, which could impact future orders.
- The underutilization of the Durgapur facility continues to negatively impact the company's financials, although efforts are being made to improve its load and efficiency.
Q & A Highlights
Q: Can you provide an estimate of GE Power India Ltd's market share in the FGD market space over the next two to three years?
A: The market size for FGD is around INR 60,000 crores. We have had roughly about 8% to 9% market share in previous years. Moving forward, we aim to maintain a 5% to 7% market share, focusing on EP projects rather than EPC. We anticipate securing one or two orders per year, valued between INR 300 crores to INR 500 crores annually.
Q: Given the timeline for FGD implementation by 2027, is it feasible to complete these projects within the next three years?
A: It is practically impossible to complete all projects within the given timeline. We anticipate that developers might place orders within the timeline and then seek extensions from regulators, citing timely order placement to avoid penalties.
Q: Can you bifurcate the overall FGD opportunity between EP and EPC?
A: Approximately 30% of the FGD scope is for EP, which is the segment we are focusing on. The remaining 70% pertains to EPC.
Q: Are there plans to re-enter the boiler manufacturing market at the Durgapur facility?
A: Currently, our focus at the Durgapur facility is on parts and services, pressure vessels, and cryogenic applications. We are not planning to re-enter boiler manufacturing immediately but are evaluating opportunities in waste heat recovery and industrial applications.
Q: What is the revenue potential for the Durgapur facility based on the current strategy?
A: The primary goal is to eliminate the current loss of INR 25 crores to INR 40 crores due to underutilization. Achieving 200,000 to 250,000 hours of load will help us break even and generate positive margins. This strategy is not top-line focused but aims to improve overall profitability.
Q: Do you have the technology for cryogenic applications at the Durgapur facility?
A: We have a phased plan for entering the cryogenic market, starting with fabrication and gradually moving towards full technology integration. We are currently focusing on strategic tie-ups and market testing.
Q: How many manufacturing hours were clocked at the Durgapur facility in Q1?
A: In Q1, the Durgapur facility clocked approximately 40,000 hours.
Q: What is the impact of the hydro and gas business carve-out on the company's financials?
A: The carve-out will reduce net liabilities by INR 252 crores and unlock INR 700 crores of non-funded limits with banks. This will improve the company's net worth and working capital, setting us on a path to double-digit EBITDA within two years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
