Analyst Meet / AGM - Analyst Meet
Expects to grow net sales by around 15% in FY 2016
The company is engaged in BOP activities and handling EPC related works in Power Projects of upto 800 MW. It also does the O&M activities involved for the plant.
Over the years, the company has also moved into EPC projects for Roads and Highways unto 4 lanes, EPC Projects of Buildings including hospitals, Government housing etc. Company is qualified for Road EPC Projects from NHAI and MORTH upto Rs 900 crore single project and is qualified for Rs 250 crore and more for Government Building single project.
There is a subsidiary company called SEAM Industries in which Sunil Hitech holds 88% stake and rest are with Promoters. The company is engaged in Railway slabs and fabrication activities. It is presently carrying on fabrication orders from BHEL and NTPC. Also the company has capacity for manufacturing the External parts of the railway bodies i.e. fabrication and other activities for external body of the coaches, on which the management is bullish and expects good orders in FY'16.
As on Mar'15, the company has total order book position of around Rs 3580 crore up by 10.4% on YoY basis. About 57% of order book relates to Power EPC projects, 22% from Buildings and 14% from Roads and rest 7% from other segments including T&D and its O&M activities of Rs 250 crore.
Orders are expected to be executed in around 24 months, thus providing revenue visibitly of about 2 years. Management does not expect any execution related issues in any of these projects. Almost all the contracts have price variation and escalation clause.
Order intake during FY 2015 was about Rs 2000 crore.
The average EBIDTA margin of the Order Book as a whole would be in the range of 10.5 - 11% for the coming years. The EBIDTA margins are in the range of 10.0-10.5 % in case of Civil and Structural works related to Power Plants and contracts relating to Boiler and Auxiliaries and Balance of Plants. The margins are above average in case of Building and EPC Road contracts.
With the renewed push of the Central Government to the Infra sector the company has identified Roads and Highways as a new area of growth along with Buildings and bridges of Governments and to gain a foothold in that area a couple of the initial contracts shall have marginally lower margins. The margins shall move up steadily as the company acquires necessary qualifications for larger projects.
During the period from 2009-10 to 2012-13 there were more than 20 bidders in the fray for any major project that came up for bidding. Due to stiff competition between established players the profit margins had shrunk to unsustainable levels. As a result many of these competitors burned their fingers in these projects and have virtually stopped bidding further. Consequently the number of genuine competitors has now come down below 10 and margins have also seen some improvement. Management expects the trend to continue further and margins shall reach healthy levels in next couple of years.
To mitigate the effect of lower margins the company is keeping off any BOT Projects and is undertaking projects on purely monthly billing, execution basis.
Management is confident of better execution of the orders and the order book in FY'16. While situation did not change in Q1 FY'16 as compared to Q4 FY'15, but there is a clear indication and based on preparation activities by the Government, execution and infrastructure will be the focus in H2 FY'16.
The company has reduced its working capital days of debtors from around 120 days to less than 90 days in FY'15. Management expects the synergies achieved in working capital management in FY'15 to remain going forward. Total debt as on Mar'15 stands around Rs 380 crore and BG/LC of around Rs 900 crore. Further management expects higher ratings, which in turn will help in reducing overall interest costs.
The company had incurred sufficient capacities and capex of about Rs 125 crore in past 4 years. There are no major Capex plans for FY 16 and FY 17 besides the regular addition of Heavy Equipments to our existing fleet. The need for addition of these equipments is based on the nature of contracts being executed during the concerned period and funding for them is done through Equipment finance route which are generally term loans from NBFCs for durations of 3-5 years.
The rise in other income has been on account of increase in Interest income from Fixed Deposits given as margin for enhanced Non-fund based limits and interest on advances given to sub-contractors. Also there is a component of grant received from Central Government under the Swarna Jayanti Gram Swaraj Yojana (SGSY) for the CSR initiative of the company.
Overall, management expects top line to rise by around 15 % in FY 16.
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