Rajoo Engineers LtdQ1 FY21Industrial Manufacturing

Rajoo Engineers Ltd

Q1 FY21 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.

Full analysis

Revenue guidance

Category 3

Future Growth Expectations for Rajoo Engineers Limited: - Targeting sustainable growth of 12% to 15% annually rather than sharp spikes. - Current order book is healthy, with bookings for 5-6 months, expected to maintain or grow. - Maximum production capacity allows for top-line revenue up to Rs. 200-225 crores; currently operating at 65-70% capacity, optimally 80-85% utilization preferred. - Focus on expanding exports as a key growth driver, with increasing export markets and penetration in Southeast Asia, Africa, and new regions like Europe and the US. - Diversification into non-food packaging verticals like tarpaulin and woven sack (Raffia) segments to reduce dependence on food packaging. - Plans for expansion and CAPEX are being evaluated cautiously, dependent on pandemic stabilization. - Sustained demand for packaging driven by changed consumption trends post-COVID, supported by ongoing product innovation and international competitiveness.

Margin guidance

Category 3

→Rajoo Engineers aspires for sustainable growth of 12% to 15% in revenue over the next 2-3 years, focusing on steady expansion rather than sharp spikes.
→The company aims to sustain the improved ROCE figures achieved in the recent year into the next year.
→They expect improvement in profitability due to better export margins, as exports are generally more profitable than domestic sales.
→Despite raw material cost pressures and supply chain challenges, internal efficiencies have led to improved EBITDA margins.
→The net profit increased significantly from approx. ₹1.5 crore to ₹11 crore in FY ’21; efforts are ongoing to continue this profitability trajectory.
→Promoter holding dilution is not planned for at least the next three years, indicating stability in ownership.
→Cash flows have improved significantly due to advance orders and efficient operations, supporting future growth investments.
→Continued innovation and R&D investments are expected to strengthen global competitiveness and earnings growth.

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Fundraise plans

→Currently, Rajoo Engineers Limited is not utilizing any bank facility for finance (debt).
→No significant capital expenditure (CAPEX) was incurred during the last financial year, and future large CAPEX plans are under consideration but not yet finalized, contingent on stabilization of the pandemic situation.
→There was no mention or indication of planned equity dilution by promoters for at least the next three years.
→The company is primarily focusing on internal accruals (net profit plus depreciation) to fund operations and expansion, with cash flow from operations considered healthy due to advance order booking.
→Any future fundraising through debt or equity has not been explicitly mentioned or planned as of the call date (June 8, 2021).

Order book

Yes

→The company has a healthy order book position currently.
→Orders are booked up to five to six months in advance.
→The management hopes that the order momentum will continue at the same pace.
→The company is striving hard to maintain and even increase the current order book level.
→The order book supports a positive outlook for the next two quarters and beyond.
→The company follows a policy of receiving 30-40% advance on orders, aiding cash flow stability.
→Strong order booking with advances is resulting in improved cash flow and operational efficiency.

Capex plans

Yes

→No CAPEX was incurred during the last financial year.
→The company is currently working on an expansion project.
→A strong CAPEX plan is expected to be finalized and put in place by the next quarter.
→The timing of the CAPEX depends on the stabilization of the COVID-19 pandemic situation; the company is cautious to avoid risks.
→Land purchased in 2017-18 (around 3 crores) is planned to be developed as part of the expansion.
→The expansion plan will be concretized after assessing market sustainability and uncertainty around the next quarter.

How does Rajoo Engineers Ltd rank vs peers in Industrial Manufacturing?

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