Avantel LtdQ1 FY22Aerospace & Defense

Avantel Ltd

Q1 FY22 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 3

→Avantel expects a sales/revenue growth of approximately 25% this year and around 20% the following year.
→Profitability is anticipated to increase by 15-20%.
→The company plans to expand its product spectrum in defence electronics including satellite communication.
→Large orders include a railway order expected to be executed 50% in the current year and 50% in the next.
→Pending order book stands at around ₹240 crores with additional expected orders of ₹60-70 crores this year.
→Avantel aims to leverage opportunities in small satellites, expecting demand for thousands of such satellites annually and sees good growth potential.
→The medical devices segment (Imeds) is projected to contribute to revenue in the medium term, with a team expected to be fully operational by October-November.
→Supply chain challenges remain a risk factor but are actively managed.

Category 3

→The company expects a tentative 25% increase in sales (top line) and around 20% increase in profitability (bottom line).
→A profitability increase of 15 to 20% is also considered very likely.
→Expansion is planned in the Defence Electronics space with customized, innovative solutions and broadening the product spectrum.
→Growth is driven by new orders, including a significant Indian Railways order and anticipated orders from both defence and medical electronics sectors.
→The medical subsidiary, Imeds, is gearing up with a complete team by August and market launch expected around October-November, focusing on affordable healthcare products.
→Supply chain challenges exist but are being managed through design changes and proactive procurement.
→Listed plans include NSE listing in 2024, linked with equity and net worth milestones, to enhance liquidity and shareholder value.
→Overall, the outlook is optimistic, with strong emphasis on R&D, order pipeline, and market diversification.

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→The transcript does not mention any current or planned fundraising through debt or equity.
→There is no indication of any immediate plans for raising funds via loans or share issuance.
→The company is focusing on increasing net worth organically, aiming for over 75 crores to meet NSE listing eligibility by 2024.
→No strategic investments or tie-ups involving equity infusion from companies like L&T or Tata Bell are on the cards currently.
→The management emphasizes growth through internal accruals, increasing sales and profitability rather than external fundraising.

Yes

→As of the meeting dated 30-05-2022, the pending order book is around ₹240 crores.
→This includes ₹126 crores worth of Railway orders, with 50% to be executed in the current financial year and 50% in the next.
→Expected execution for the current year is ₹130-140 crores.
→An additional ₹60-70 crores worth of orders are anticipated during this financial year.
→By the end of the current year, the total orders in hand for the next year are expected to be ₹160-170 crores.
→Earlier, pending orders by July were roughly around ₹315 crores, but current figures are updated to ₹240 crores.
→Large orders like the Railway 6300 locomotive project and Defence-related contracts contribute significantly to the order book.

Yes

→The company is investing approximately 25 crores mostly towards small satellites, radars, and related facilities.
→Investment in the medical device segment (Imeds) is planned but will not be very significant compared to the satellite and radar facilities.
→Infrastructure for medical electronics is already set up at AMTZ Vizag, a world-class MedTech zone, with more than 100 crores invested in test facilities.
→The company is continuously working on design changes to counter supply chain disruptions, particularly for semiconductors and connectors.
→There is a focus on strategic, project-wise tie-ups with major companies like Bharat Electronics and L&T, and future collaboration possibility with the Tata group.
→No current long-term strategic investments from L&T or Tata Bell but supportive projects underway.
→Plans are in place to expand product range in Defence Electronics, satellite communication, and medical devices in the coming years.

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