TIL LtdQ3 FY17Agricultural, Commercial & Construction Vehicles

TIL Ltd

Q3 FY17 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Revenue guidance

Category 2

→TIL aims to achieve a turnover of over Rs. 400 crores in the financial year 2017-18, up from Rs. 78 crores in Q1.
→Management expects quarterly billing of Rs. 70-80 crores in subsequent quarters, with better performance in Q3 and Q4.
→Order backlog is Rs. 180 crores as of June 2017; management expects this to grow beyond Rs. 250 crores by December 2017 to meet the turnover target.
→Customer support business targeted to grow from Rs. 66 crores last year to around Rs. 70-80 crores annually.
→Export revenue expected to grow to roughly 40% of total turnover by 2020, with new permissions granted for exports to Africa and the Middle East.
→New plant setup in Kharagpur with CAPEX of Rs. 50 crores planned for 2017-18 and an additional Rs. 30 crores in the following year to boost production capacity.
→Business model evolving to meet tighter contractor delivery timelines (3-6 months).
→Management views 2017-18 as a consolidation year before significant profit growth.

Category 3

→2017-2018 is expected to be a year of consolidation with no high profitability expectations due to previous losses.
→Post consolidation, significant profit growth is anticipated in subsequent years once stability is achieved.
→Historical crane division performance (2005-2009) showed strong profits, indicating potential if market dynamics are adhered to.
→Order backlog of Rs. 180 crores as of August 2017 supports a turnover target of Rs. 400 crores+ for FY 2017-18.
→Export business is expected to grow, potentially reaching 40% of total turnover by 2020, which should improve margins.
→Customer support business provides stable revenue and contributes to profitability even if product sales fluctuate.
→CAPEX of Rs. 50 crores (2017-18) + Rs. 30 crores spillover (2018-19) for capacity expansion suggests growth readiness.
→Cost control measures and reduced financing costs are expected to improve EBITDA and PBT, moving from modest profits to stronger earnings.

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→There is no explicit mention of any current or planned new fundraising through debt or equity in the transcript.
→The company has been focused on reducing debt, as evidenced by the sale of TIPL in 2016-17 which generated Rs. 350 crores used to repay debt.
→Financing cost has been reduced significantly from Rs. 44 crores to Rs. 21 crores.
→The company plans capital expenditure of about Rs. 50 crores in FY 2017-18 and Rs. 30 crores spillover in FY 2018-19, likely funded through internal accruals given no mention of fresh fund raising.
→The management is focused on consolidation and profitability rather than aggressive expansion requiring new equity or debt.
→No discussion on issuing new shares or raising debt during the call.

Yes

→Current order backlog is Rs. 180 crores as of June-August 2017.
→Order backlog includes:
→ - Rough terrain cranes: approx. Rs. 20 crores
→ - Truck cranes: approx. Rs. 35 crores
→ - Defense orders: approx. Rs. 40 crores (including missile handling systems)
→ - Reach stackers: approx. Rs. 40 crores (around 16 machines)
→Customer support orders are not included in this backlog as they are executed upon receipt.
→Expected order intake to reach Rs. 400 crores by the end of the financial year.
→Planned billing targets:
→ - Q2 billing expected between Rs. 70-80 crores
→ - Continuous flow of orders anticipated based on bullish market outlook
→Exports targeted to constitute about 40% of total turnover by 2020.
→CAPEX lined up includes Rs. 50 crores this year for new plant setup and Rs. 30 crores next year spillover.

Yes

→Rs. 50 crores CAPEX lined up for FY 2017-18 to set up a new plant in Kharagpur.
→Additional Rs. 30 crores expected as spillover CAPEX in FY 2018-19 for the same expansion.
→New Kharagpur factory to increase monthly production capacity to Rs. 30-35 crores.
→Plans to install a solar power plant at Kharagpur to reduce electricity costs, with discussions ongoing with strategic advisors.
→Intention to monetize about 21,000 square meters of land in Sahibabad, though progress depends on securing a suitable buyer.
→Focus on strengthening management bandwidth to support expansion into defense equipment manufacturing.

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