Texmaco Rail & Engineering LtdQ2 FY23
Texmaco Rail & Engineering Ltd Q2 FY23 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹112P/E: 24.0Market Cap: ₹4.7K CrSector: Industrial Manufacturing
Management growth scorecard
Revenue
Category 2
Margin
Category 3
Fundraise
Yes
Order
Yes
Capex
Yes
3 of 5 growth signals are positive.
Full analysisRevenue guidance
Category 2- →The company expects a brighter future with stepped-up organization and capacity improvements.
- →Rail EPC divisions are anticipated to perform much better going forward.
- →Production capacity targets around 450-500 wagons per month for Indian Railways, aiming to consistently meet or exceed this.
- →Plans to ramp up production potentially up to 700-800 wagons per month by end of FY '24.
- →Expected significant share (20-25%) in upcoming large wagon orders (40,000-50,000 wagons).
- →Focus on high-margin orders and better resource allocation away from low-margin track laying.
- →Expansion into new areas like component business for railways, considered a substantial future revenue stream.
- →Export markets (Africa, Europe, Sri Lanka, Bangladesh) seen as growth opportunities.
- →Steady growth in Bright Power division, aiming to more than double its scale.
- →Overall focus on capacity enhancement, cost reduction, and tapping new market areas to drive revenue and volume growth.
Margin guidance
Category 3- →Texmaco Rail & Engineering is optimistic about a brighter future with expected improvement in capacity, cost reduction, and entry into new business areas such as components (Page 16).
- →The company aims to consolidate and strategically expand in EPC and electrification segments, focusing on profitable opportunities rather than aggressive market coverage (Page 17).
- →Production capacity for wagons is ramping up to around 500 wagons/month with plans to grow further, aiming to meet or surpass Indian Railways’ requirements, potentially increasing revenues (Page 5, 7).
- →Margins are expected to improve with better efficiency, capacity enhancements, and targeted order selection focused on higher-margin business (Page 14, 17).
- →The company is preparing for large upcoming railway wagon orders (40,000-50,000 wagons) and targets a 20-25% share, indicating significant future order book expansion (Page 13).
- →Fundraising plans are in place to support working capital, expansion, and debt reduction, facilitating profit growth (Page 11).
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Fundraise plans
Yes- →Texmaco Rail & Engineering Limited has received in-principle board approval to raise up to INR 500 crores in one or more tranches.
- →The company is currently in discussions with financial advisers to decide the mode of raising the capital (debt or equity).
- →The raised funds will be primarily used for:
- → - Working capital requirements for Heavy Engineering and Steel Foundry divisions.
- → - Rail EPC division needs.
- → - Reduction of high-cost borrowings.
- → - Capital expenditures planned by the company.
- →As per management, no additional fundraise will be required in the near term to handle incremental orders such as new wagon tenders expected within 18 months.
- →Equity infusion will also help in reducing high-cost debt.
Order book
Yes- →Current order book stands at approximately INR 8,000 crores.
- → - Rolling stock orders: INR 5,400 crores.
- → - Rail EPC - Kalindee division: INR 1,000 crores.
- → - Bright Power overhead electrification division: INR 550 crores.
- → - Hydromechanical and Bridges division: INR 100 crores.
- → - Steel Foundry: INR 500 crores.
- → - Other subsidiaries/joint ventures: INR 450 crores.
- →Recent quarters saw order intake of around 1,500–1,600 wagons, primarily from private sector.
- →Upcoming major tender from Indian Railways expected for 40,000 to 50,000 wagons.
- →Texmaco targets approximately 20-30% share in new railway tenders (about 10,000 to 12,500 wagons).
- →Orders currently executing include a prior 20,000+ wagon order with staggered tranches.
- →Additional private rake orders of around 200 rakes expected in the market.
Capex plans
Yes- →The company plans to invest further capex in the steel foundry segment, with production expected to increase in the next 3 months (Page 13).
- →Funds from a proposed capital raise of INR 400-500 crores will be used primarily for:
- → - Working capital requirements for Heavy Engineering and Steel Foundry divisions.
- → - Supporting the Rail EPC division.
- → - Reducing high-cost borrowings.
- → - Capital expenditures as required for business growth (Page 10-11).
- →The approach to growth is selective and well-structured, focusing on parts of EPC and electrification businesses that fit future strategy and offer good profitability, rather than expanding indiscriminately (Page 17).
- →The company is preparing to enter the passenger movement segment steadily but cautiously, to avoid losses and ensure sustainable business entry (Page 9).
How does Texmaco Rail & Engineering Ltd rank vs peers in Industrial Manufacturing?
Pro feature1Texmaco Rail & Engineering Ltd
Rev 2Mar 3
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