Krishca Strapping Solutions LtdQ3 FY24Industrial Products

Krishca Strapping Solutions Ltd

Q3 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 2

→The company targets consistent year-on-year top-line growth of around 25% as guided at the start of the year.
→Volume growth has been strong, with a 40% increase in tons in the first half, while revenue grew only 10% due to falling steel prices.
→Expected to achieve over 25% top-line growth this year, with sales volume continuing to scale up.
→New production lines and backward integration plans (cold rolling mill) will support growth and entry into new steel product markets.
→Packaging contracts pipeline worth approximately ₹962 crore with a 30-35% conversion ratio, potentially adding ₹250-300 crore in orders in the next six months.
→Expansion in packaging contracts will increase steel strapping consumption internally, driving further volume growth.
→New product introductions and incremental sales from smaller customers expected to expand revenue streams.
→Utilization of the new plant expected to improve from current 20-25% towards 40-50% by year-end.

Category 3

→The company expects more than 25% year-on-year top-line growth in the next financial year.
→EBITDA and net profit are expected to increase in the second half of the current financial year and the next year, following large order wins.
→EPS for H1 FY25 stood at Rs. 4.21, with profitability expected to improve as margins normalize post temporary inventory losses.
→Operating margins are projected to return to around 20% in H2 after the one-off dip caused by steel price declines.
→Expansion plans, including a special steel production facility and packaging contracts, are expected to drive volume growth and diversification.
→Full capacity utilization of the new plant will enhance revenue and margins over the medium term.
→Employee costs, currently elevated due to team expansion, are anticipated to stabilize as top-line increases reduce cost ratios.
→Overall, sustained volume growth and product diversification underpin confident future earnings and EPS growth.

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Yes

→The company is **not looking for any further equity dilution immediately**.
→Recently raised funds are expected to be sufficient for ongoing and planned CAPEX.
→If additional term loans are needed, it would be **limited to around 15-20 crores**, which is not significant.
→No mention of any immediate or large-scale new fundraising through debt or equity beyond what is already raised.

Yes

→Current order book pipeline: Approximately ₹962 crores.
→Expected conversion rate: Around 30%-35%, translating to ₹250-300 crores order wins expected within the next six months.
→Orders span long-term contracts (3 to 5 years) with some single orders sized between ₹50-100 crores per annum.
→Packing contracts order book: ₹45 crores currently.
→The company anticipates closure of the entire pipeline by end of March (next six months).
→Orders include both PSU and private sector bids, though specific segregation details are undisclosed.
→Focus is on steadily converting these order opportunities into confirmed contracts to drive revenue growth.

Yes

→Krishca Strapping Solutions is investing in a Special Steel Production Plant in Chennai, aimed at expanding production capabilities and diversifying product offerings.
→Planned CAPEX for the next 12 months is around ₹60-70 crore, over and above ₹20 crore reported as CWIP previously.
→New plant construction to start soon, expected operational by December 2025, with a capacity of 5,000 to 6,000 tons, including cold rolling capability for specialty steels.
→Approximately 40% of production will serve in-house strapping needs; 60% targeted for external specialty steel markets.
→Additional investments include machinery for seven to eight new product lines expected to generate ₹100 crore turnover over two years after reaching full capacity.
→Other projects on hold, including UAE plant and MIG welding plant, focusing resources on Indian CAPEX.
→The company is also planning a 2 MW solar plant (~₹10 crore) as part of CAPEX.
→Funding largely secured through recent equity issue; minimal incremental debt expected (up to ₹15-20 crore).

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