Usha Martin LtdQ3 FY23Industrial Products

Usha Martin Ltd

Q3 FY23 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.

Revenue guidance

Category 3

→The company expects higher volumes in H2 FY24 for both wire rope and LRPC segments due to the end of the monsoon season and improved demand from infrastructure projects.
→Revenue growth of approximately 15% per annum is targeted over the next two to three years, driven by ramp-up in LRPC and wire sales along with increased market share in international markets like Europe and the US.
→Phase 1 capex expansion at Ranchi is expected to become operational by Q4 FY24, contributing to volume growth from subsequent quarters.
→Value-added product segments, especially wire ropes, are expected to drive margin improvement and revenue growth.
→The company is confident about ramping up capacity utilization within three to four quarters, supported by strong order books and new customer acquisitions internationally.
→Overall, management aims for sustained volume and revenue growth, balancing volume increases with profitability via enhanced product mix.

Category 3

→Management expects better volumes in H2 FY24 for wire rope and LRPC segments due to seasonal recovery post-monsoon and demand uptick from infrastructure projects.
→Revenue growth rate targeted at ~15% p.a., though 1.3% growth in H1 FY24 reflects headwinds, with optimism for acceleration in H2 and beyond.
→EBITDA margins expected to be sustained or improve gradually, dependent on product mix and growth of higher margin wire rope segment.
→Phase 1 capex at Ranchi to be commissioned by Q4 FY24, driving volume and margin expansion, particularly in high value-added wire ropes.
→Focus on absolute profit growth by balancing volume and value; LRPC and wire segments to normalize volumes over next three quarters supporting top line.
→Improving share of value-added products (70% in wire rope) to support margin resilience and EPS growth.
→Company aims to maintain robust cash flow generation, enabling value creation and shareholder returns.

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→No new fundraising through debt or equity has been mentioned for the current or future period.
→The company has ongoing capex plans of INR 310 crore (Phase 1) and an additional INR 220 crore planned over the next two years, funded through existing cash flows.
→Net debt remains low, with a Net Debt-to-Equity ratio of 0.06x as of September 2023, indicating comfortable leverage.
→Management emphasized the company is highly deleveraged and will focus on managing working capital and generating free cash flows.
→There is no indication of plans for fresh borrowings or equity issuance beyond routine capex and ongoing investment commitments.
→Discussions focused more on optimizing profits, capex completion, and dividend payout rather than new fundraising activities.

Yes

→Usha Martin has a decent order book currently, bolstered by repeat orders especially in the oil offshore and wind energy sectors in Europe, South America, and Australia.
→The Company is witnessing a good pipeline of inquiries, particularly for specialized, value-added ropes.
→The strong order book is primarily driven by long-term supply contracts, especially with European customers through Brunton Shaw.
→Logistics and supply integration between Indian and European operations play a crucial role in maintaining order fulfillment.
→Management expects order volumes and revenues to improve in H2 FY24 and beyond, with the full benefits of capex expansions starting in Q4 FY24.
→While no specific numeric order book figure is shared, the tone indicates confidence in order inflow and execution in near to medium term.

Yes

→Phase 1 expansion at Ranchi plant is underway, focused on brownfield expansion with additional manufacturing equipment and enhanced patenting capacity.
→Expected completion and capitalization of Phase 1 capex by Q4 FY24, at INR 300-310 crore.
→Additional announced capex includes INR 160 crore in India and INR 60 crore in Thailand planned over the next two years.
→Beyond the announced capex, only routine maintenance capex is expected for the next 2-3 years.
→Capex spend in H1 FY24 was around INR 136 crore, mostly on ongoing programs including Ranchi expansion.
→No immediate plans for major acquisitions, but the company remains open to opportunities, especially in Europe.
→Capex designed to increase volumes and higher value-added products in domestic and international markets, supporting growth beyond Q4 FY24.

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