EMS LtdQ2 FY24Other Utilities

EMS Ltd

Q2 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Order

Yes

Capex

Yes

2 of 5 growth signals are positive.

Revenue guidance

Category 2

→EMS Limited expects continued growth driven by infrastructure development, especially in water supply and sewage sectors.
→The company aims for around 30% to 35% top-line growth, targeting revenue near Rs. 1100 crores in FY25.
→Current order book stands at over Rs. 1800 crores, executable over the next 2 to 2.5 years.
→Long-term aspiration includes reaching Rs. 2000 crores in execution by FY28, depending on expanding into roads and building sectors without compromising margins.
→The company is actively bidding on projects worth over Rs. 4000 crores with a win rate of 10-15%, expecting significant order inflow in 1-2 months.
→EMS plans to maintain a 70%-80% focus on the water sector in the order book while expanding footprint in real estate EPC and road projects for growth.
→Top-line growth in the current fiscal shows 49.5% rise in revenue and 63.12% increase in net profit for Q1 FY25, indicating strong momentum.

Category 3

→EMS Limited expects continued growth in infrastructure development, especially in water supply and sewage sectors, enhancing urban living and connectivity (Page 2).
→The company reported strong Q1 FY25 growth: 49.50% revenue increase, 63.12% net profit growth, and 57.13% EBITDA growth compared to last year (Page 2).
→Guidance is to achieve around 30% revenue growth for FY25, targeting approximately Rs. 1100 crores revenue (Page 11).
→Order book of Rs. 1800+ crores suggests execution over next 2-2.5 years, supporting sustained profit margins of 24%-26% (Page 5).
→EMS aims to grow to Rs. 1500-1600 crores revenue focusing on water sector; with road and building segments growth, Rs. 2000+ crores possible by FY28 (Page 10).
→Margins are expected to be maintained at 25%-26% due to low overheads and strong engineering execution (Pages 6, 11).
→Cash flow from operations expected to improve going forward (Page 11).

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→The company currently does not have any long-term borrowings except for one or two vehicle loans.
→There is no immediate requirement for fundraising through debt as working capital is sufficient.
→Regarding future fundraising, Ashish Tomar mentioned that it depends on how many projects get converted, but as of now, no requirement for additional funds.
→There was clarification that any borrowing increase mentioned may be a misunderstanding.
→For project guarantees, the company acquires properties as collateral rather than relying solely on fixed deposits.
→No mention of plans for raising equity or preferential shares was made in the call.

Yes

→Current order book stands at over ₹1,800 crore of unexecuted work, expected to be executed over 2 to 2.5 years.
→The company has participated in bids valued at more than ₹4,000 crore recently.
→Considering a success ratio of 10% to 15%, these bids are expected to convert into orders within 1-2 months.
→Among recent orders won, a project from UP Jal Nigam was mentioned, with EMS’s share being ₹120 crore of the total order.
→The geographic mix indicates majority of work currently comes from Uttarakhand, followed by Rajasthan, Maharashtra, UP, and Bihar, with new orders potentially changing this mix.
→The company anticipates significant new water sector orders from government entities following recent elections and government budget comments.

Yes

→EMS Limited has acquired a significant asset in the manufacturing sector, specifically a paper pulp project (Brijbihari Pulp and Paper Private Limited), with a 75% stake for around Rs. 50-60 crores.
→This acquisition is primarily for collateral purposes to support banking facilities and performance guarantees rather than operational expansion.
→Manufacturing (flex paper) is still ongoing in that property but is expected to be shut down by December, with future use focused on collateral to secure bank guarantees.
→The company is also exploring entry into the real estate sector as an EPC developer, involved in joint development projects, such as a Rs. 325 crore housing colony project with the RBI in Mumbai.
→EMS plans to invest in property assets to serve as collateral to increase banking limits and performance guarantees for project financing.
→No long-term borrowings currently; capex is mostly strategic asset acquisition to support financial structuring rather than heavy operational capex.

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