GOCL Corporation LtdQ3 FY17Chemicals & Petrochemicals

GOCL Corporation Ltd

Q3 FY17 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Order

Yes

Capex

Yes

2 of 5 growth signals are positive.

Full analysis

Revenue guidance

Category 3

- GOCL Corporation is on a positive growth path in its core explosives and energetics business. - New products developed have been well accepted and exports are expanding with new countries added. - Current order book stands at approximately Rs.700 Crores including Coal India and other large customers. - Licensed capacity is expected to increase by about 42-46%, supporting volume growth. - The domestic commercial explosives industry is projected to grow at 10-12%, with GOCL targeting a higher compounded growth of 18-20% over the next three years. - GOCL projects a 20% compounded growth in commercial explosive revenues over three years, outpacing the industry. - Demand drivers include growth in coal output (expected 13-15%), mining, road infrastructure, and housing. - Capex plans are underway but being calibrated carefully due to market shifts; around Rs.30 Crores capex expected by year-end. Overall, management is confident of sustained growth driven by R&D, quality, and technical services.

Margin guidance

Category 3

→The company is on a positive growth path in its core explosives and energetics business, with new products well accepted and exports growing.
→Orders in hand stand at around Rs.700 Crores, with an expected increase in licensed capacities by about 42-46%, enabling higher offtake.
→The domestic commercial explosives industry is projected to grow at 10-12%, with GOCL targeting 18-20% compounded growth over the next three years.
→GOCL projects 20% compounded growth in commercial explosives revenues over three years, outpacing industry growth.
→The company is cautious with capex, planning but awaiting clarity on market shifts before committing large investments.
→Improved operational efficiencies and marketing efforts are expected to support growth.
→Realty development may add value but is progressing slower than expected.
→Overall, growth in earnings, operating profits, and EPS is anticipated, aligned with capacity expansion and industry demand.

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Fundraise plans

→As per the discussion on pages 5 and 10, the company has not taken any new term loans recently, indicating no immediate new debt fundraising.
→The capex plan for the current year is progressing well with about Rs.30 Crores expected to be spent by year-end, funded through existing cash resources.
→There is no explicit mention of planned new equity fundraising in the provided transcript.
→The company is cautious about committing to large capex due to market shifts and intends to clarify future capex plans by May.
→Overall, no concrete plans for fresh debt or equity fundraising have been announced at this time; reliance appears to be on internal accruals and prudent capex management.

Order book

Yes

→Current order book is approximately Rs. 700 Crores, which includes:
→ - Rs. 680 Crores orders from Coal India and private sector.
→ - Rs. 320 Crores orders for year one (September 2017 - August 2018).
→ - Rs. 380 Crores orders for year two (September 2018 - August 2019).
→Coal India orders increased by about 25% in volume and 21% in value compared to the previous tender.
→Additional export orders contribute to the total order book.
→Order execution is well organized, with capacity increases expected to handle the volume rise.
→Licensed capacity for cartridge explosives expected to rise by 50%, from 50,000 to ~75,000 tonnes.
→Licensed capacity for bulk explosives expected to increase by about 42%, approximately 52,000 tonnes.
→Company confident of achieving at least 18% to 20% compound growth over next three years.

Capex plans

Yes

→The company plans to undertake capex but is cautious due to a market shift, wanting to understand it well before committing to large investments.
→Licensed capacities are expected to increase by about 42%, which will require capex; exact figures for the next 2-3 years are yet to be finalized.
→This year’s capex is progressing on schedule, with about Rs.30 Crores expected to be spent by year-end.
→Competitors are announcing capex of Rs.200-300 Crores over the next 2-3 years; GOCL plans to keep pace by utilizing existing capacities and planned expansions primarily at Hyderabad and Rourkela.
→There is a focus on modernization and expansion of existing capacity and exploring new locations.
→On the Realty side, active marketing and development efforts are ongoing, with approvals expected and work likely to start soon (e.g., Hyderabad development expected to break ground by March).
→No loans have been taken recently; the company maintains a good cash position for funding capex.

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