Deep Industries Ltd Q1 FY24 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 2
Margin
Category 3
Fundraise
N/A
Order
Yes
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 2- The company provides conservative revenue growth guidance of around 20% for FY24 and the next 2-3 years.
- Current order book is strong and growing consistently for 9 quarters, providing good visibility for revenue over next 2.5-3 years.
- New JVs targeting higher-capacity drilling rigs and EPC business expected to contribute positively to growth.
- Revenue from Dolphin Offshore is expected to start from the second half of FY24, estimated between Rs. 30-50 crore this year.
- The bidding pipeline is robust with over Rs. 500 crore worth bids expected to convert into orders soon.
- The 2000 HP drilling rigs and higher-capacity contracts will open larger market opportunities adding to growth.
- Conservative approach maintained on guidance despite potential for higher growth.
- Overall, strong market demand driven by government focus on increasing natural gas usage and related infrastructure expansion supports growth.
See what Deep Industries Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
- There is no explicit mention of any current or future planned fundraising through debt or equity in the provided transcript.
- The company mentioned having net cash on hand of around Rs. 100 crore as of now.
- CAPEX plans are primarily funded through confirmed orders, with no indication of needing additional debt or equity.
- For Dolphin Offshore, CAPEX of around Rs. 35 crore is currently ongoing, but working capital requirements and funding details are still early to determine.
- The company prefers an asset-light model in some areas, which might reduce capital intensity and funding needs.
- Overall, the company has not indicated any intent to raise debt or equity funds imminently or in the near future.
See what Deep Industries Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- The company plans CAPEX of around Rs. 80-90 crore for the current financial year, driven by confirmed orders (Page 9).
- CAPEX includes around Rs. 40 crore for one drilling rig (Rs. 130 crore order) and about Rs. 20 crore for the compression segment; remaining depends on new awards (Page 16).
- Rs. 35 crore CAPEX is ongoing for refurbishment of Dolphin Offshore assets; this will be capitalized (Pages 12, 17).
- For Dolphin acquisition, CAPEX is currently focused on reviving existing equipment before operation commencement (Page 12).
- Additional future CAPEX will be planned post winning new orders; asset-heavy business with CAPEX closely tied to order confirmations (Pages 9, 6).
- The company is exploring asset-light models like leasing rigs to improve ROCE but balancing margin impact (Page 15).
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Margin guidance
Category 3- The company conservatively guides for a **20% revenue growth** for FY24 but acknowledges potential for higher growth given a strong order book and bidding pipeline.
- EBITDA margins are expected to remain strong, **above 40%**, with possibilities of slight improvement.
- Dolphin Offshore is expected to start contributing revenue from the second half of FY24, estimated between **Rs. 30 crore to 50 crore** this year.
- Synergies from recent JVs (with Focus Energy and Euro Gas) are expected to contribute positively, though exact margin improvement is not yet quantified.
- The company aims to improve ROCE (currently ~12%) via asset-light models in the next 2-3 years, potentially enhancing profitability.
- Order book conversions and new orders in JV segments (contracts typically Rs. 150-250 crore) should drive revenue and profit growth.
- Operating performance and margin improvements are on track with historically strong execution and order flow.
Order book
Yes- Deep Industries' order book stands at Rs. 1,160 crore, marking a 52% year-on-year increase and an 8% quarter-on-quarter increase.
- The company has consistently increased its order book for 9 consecutive quarters.
- A significant recent order includes a Rs. 130 crore contract from ONGC for charter hiring of a 90 metric ton mobile drilling rig.
- Order book execution timeline spans 2.5 to 3 years with about 48-50 different ongoing contracts.
- Segment-wise order book breakup: Gas compression ~46%, rigs ~42%, and the remainder from integrated project management and gas dehydration.
- Bidding pipeline exceeds Rs. 500 crore with expected conversion into orders within a quarter.
- JV contracts typically range from Rs. 150 to 250 crore per contract with positive wins expected during the year.
- Mobilization for new orders is expected to take more than 6 months.
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What Deep Industries Ltd's management said in earlier quarters
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