Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Solar Industries India Ltd (BOM:532725, Financial) reported a robust 27% year-on-year growth in Q2 FY25.
- The company achieved its highest-ever quarterly EBITDA and profit after tax, with a PAT growth of 45% year-on-year.
- Defense segment revenue grew by 204% year-on-year, significantly contributing to the company's performance.
- The order book is strong, with recent orders from Srini and defense products consolidating it to over INR 5,700 crore.
- The company has revised its annual CapEx guidance upward from INR 800 crore to INR 1,200 crore, indicating confidence in future growth opportunities.
Negative Points
- Subdued domestic demand due to elections and heavy monsoon impacted mining and infrastructure activities.
- The company's working capital has increased, with inventory and receivables rising due to muted domestic demand.
- There is a delay in receiving expected Pinaka orders, which were anticipated in the previous month.
- Raw material prices have been flat, which could impact margins if they rise unexpectedly.
- The company faces challenges in international markets, with hyperinflationary conditions in countries like Ghana, Turkey, and Zimbabwe affecting operations.
Q & A Highlights
Q: Can you explain the correlation between volume sold and profitability, especially in relation to defense and international business?
A: (Unidentified_4, CEO) The profitability is more correlated to the business mix rather than just volume. The defense and international segments, which have higher margins, are contributing significantly to our improved EBITDA margins. Previously, investments in infrastructure and product development led to higher overheads, but now these investments are yielding better margins and profits.
Q: What is the status of new explosive products developed for the Navy, and are there any updates on the Pinaka orders?
A: (Unidentified_4, CEO) The new explosive products are undergoing testing and will be added to our product list soon. As for Pinaka, we expect to receive orders shortly, which will be a significant milestone. International interest, such as from France, indicates potential export opportunities.
Q: Could you provide a breakdown of the current order book between defense and non-defense sectors?
A: (Unidentified_8, CFO) The total order book is INR 5,757 crores, with INR 3,336 crores allocated to defense and INR 2,424 crores to explosives.
Q: How have raw material prices, particularly ammonium nitrate, moved over the past year?
A: (Unidentified_8, CFO) Year-on-year, raw material prices have been relatively flat, with a slight 2% decrease in realization. Prices have stabilized recently.
Q: What is the outlook for the defense segment in terms of revenue and order book over the next few years?
A: (Unidentified_4, CEO) We aim for defense sales of INR 1,500 crores this fiscal year, up from INR 500 crores last year. Once we secure more orders, including Pinaka, we will provide guidance for future years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
