Servotech Renewable Power System LtdQ2 FY23Electrical Equipment

Servotech Renewable Power System Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 1

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Full analysis

Revenue guidance

Category 1

→The company aims to double revenue, targeting 500-600 crores in the near term, with about 65% from EV chargers and the rest from solar products. (Page 15)
→Expecting 90-110% growth in revenue this year, reflecting aggressive expansion ambitions. (Page 15)
→The EV charger market in India is projected to be over Rs. 1.5 lakh crores in the next 6-7 years. (Page 12)
→The company has bid for tenders worth over 2,000 crores, expecting to capture 15-20% share, translating to potential revenues of 500-600 crores. (Page 14)
→Production capacity to increase 2.5 times current turnover with new factories planned to be operational by FY 2025-2026. (Page 23)
→Investment of more than Rs. 300 crores planned for expansion in EV chargers and technology capacity. (Page 17 & 21)
→Internal accruals and debt will primarily finance growth, with modest equity dilution possible from September onwards. (Page 21)

Margin guidance

Category 3

→EBITDA saw a significant improvement, increasing by 415.3% from ₹1.4 crores in Q1 FY23 to ₹7.1 crores in Q1 FY24; margin improved from 4.3% to 8.9%.
→PAT improved sharply from ₹36 lakhs in Q1 FY23 to ₹4.1 crores in Q1 FY24; margin rose from 1.1% to 5.1%.
→The company expects continued margin expansion driven by higher value-added products and increasing scale of operations.
→Revenue grew substantially by 148.9% from ₹32.07 crores in Q1 FY23 to ₹79.81 crores in Q1 FY24, fueled by strong demand for EV and LED products.
→Management targets doubling turnover with strong order book and contracts valued around ₹2000 crores, with about ₹500-600 crores potentially realizable.
→Planned capex for FY25-26 aims to increase capacity 2.5 times, supporting future growth in EV chargers and other verticals.
→The company intends to maintain debt-to-equity ratio below 50-60% and may consider minor equity dilution if needed.
→Strategic focus remains on niche, high-margin products rather than commodity LED segments.

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Fundraise plans

Yes

→The company’s planned investment of around ₹300 crore will be executed in three phases.
→The first phase of investment is already done.
→Funding so far includes some debt from banks and internal accruals.
→There is no major equity dilution planned currently.
→However, a small equity dilution might happen from September onwards.
→The company aims to keep the debt-to-equity ratio below 50-60% of total equity.
→Overall, financing will primarily be through internal accruals and debt.
→No large-scale equity fundraising is planned at this stage.

Order book

Yes

→Current fixed order book through channel sales and digital e-commerce is around Rs. 60-70 crores (Page 6).
→For the next quarter, contracts worth about Rs. 90 crores are expected to be received (Page 6).
→The company has bid for contracts worth Rs. 2000 crores in total (Page 7).
→Taking a conservative estimate of 20% conversion, expected order inflow could be around Rs. 500-600 crores (Page 7).
→Completed orders worth Rs. 80 crores have been mentioned recently (Page 14).
→Orders include supply, installation, commissioning, and maintenance of EV chargers (Page 7).
→The company maintains that until a confirmed order is received, it cannot be considered as an order (Page 19).

Capex plans

Yes

→Servotech is planning a major capex of around Rs. 300 crore over three phases.
→The first phase has already been invested, including some debt taken from banks.
→There might be small equity dilution from September onward but no major dilution planned currently.
→The new factories are planned for FY 2025-2026 and targeted to be operational before October.
→Current production capacity can handle approximately 2.5 times last year’s turnover.
→The company is focusing on backward integration, manufacturing components in-house to strengthen technology grip.
→Investment in technology and capacity expansion aligns with ambitions to rank among the top 2-3 companies in EV chargers.
→Internal accrual and debt will be the major financing sources for expansion; debt-equity ratio aimed not to exceed 50-60%.

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