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Jai Balaji Industries Limited Q1 FY25 Earnings Call Summary
Key Highlights • Date of Call: July 31, 2024 • Submission Date: August 3, 2024 • Adjusted EBITDA: INR 325 crores (highest ever) with a margin of 19% • Revenue Growth: 16% increase to INR 1,718 crores • Net Profit After Tax (PAT): Grew by 23% to INR 209 crores
Strategic Focus • Production Expansion: • Targeting increased production of value-added products (DI pipes and ferro alloys). • Aiming to raise contribution from 45%-50% to 80%. • Debt Management: • Plans to become net-debt free within 12 months. • Capex of INR 1,000 crores funded through internal accruals.
Operational Performance • Production and Sales: • Year-on-year increases in TMT bars, ferro alloys, and DI pipes. • Volume Guidance: • 400,000 to 450,000 tons for DI pipes. • 190,000 tons for ferro alloys.
Market Conditions • Raw Material Prices: • Potential impact from iron ore and coking coal prices, but mitigated by inventory and stable order book. • Demand for DI Pipes: • Driven by Jal Jeevan Mission; demand exceeds supply. • No immediate concerns about overcapacity despite increased competition.
Financial Metrics • EBITDA Margins: • 18.5% for ferro alloys, aligning with guidance of 18-20%. • Return on Equity (ROE) and Return on Capital (ROC): • Both exceeding 40-45%.
Future Outlook • Demand Projections: • Strong demand for DI pipes expected to continue. • Anticipated production increase to 6 lakh tons by FY '26. • Export Potential: • Viable export market for DI pipes, with Indian products well-accepted internationally.
Management Insights • Concerns Addressed: • OPVC pipes pose a niche threat but not significant to DI pipes. • Confidence in maintaining margins despite raw material price fluctuations. • Inventory Management: • 4-5 month inventory for coking coal and iron ore to manage volatility.
Conclusion • Management expressed confidence in growth potential and financial stability, inviting further inquiries from investors.
Submission Details • Date: May 2, 2024 • Submitted to: National Stock Exchange of India and BSE Limited • Signed by: Ajay Kumar Tantia, Company Secretary • Call Date: April 29, 2024 • Moderated by: Sana Kapoor, Go India Advisors
Key Financial Highlights • Record Revenues: INR 6,414 crores (5% YoY increase) • Profit After Tax (PAT): INR 880 crores (up 1422% YoY) • Net Debt Reduction: 54% to INR 398 crores; goal to be net debt-free in 15 months • Revenue Growth Projection: 25% to 30% for FY '25
Operational Insights • Capacity Expansion: Focus on ductile iron pipes and ferroalloys • Market Share Goals: Increase from 9-10% to 18-20% • Production Targets: 4 lakh tons of ductile iron and 1.5 lakh tons of ferroalloys in FY '25
EBITDA Performance • Current Margins: 20-25% for ductile pipes, 25% for ferroalloys • Cost Efficiency: Integrated production facility to sustain margins
Special Grade Ferroalloys • Market Demand: Increased focus on Special Grade Ferroalloys, 80% growth in market share • Export Expansion: Currently exporting to 40 countries
Capital Expenditure • Planned Capex: INR 1000 crores over the next 15 months • Current Projects: No new investments until existing projects are completed
Financial Performance Discussion • Margins Stability: 13%-14% despite other income reversals • Tax Rate Expectation: 9%-10% for FY '25 due to carry-forward losses
Order Book and Market Focus • Current Order Book: 10-12 months of ductile iron pipe capacity, 35% from government orders • Export Plans: Focus on domestic demand before expanding to Africa
Green Energy Initiatives • New BFG Boiler: Estimated cost of INR 30 crores to increase green power production
Future Operating Margins • Projected Margins: Steady-state margins of 18%-20% over the next 15-18 months
Financial Implications • Impact of Other Income: Non-cash impact of INR 137 crores on EBITDA • Trade Payables: Anticipated decrease in upcoming quarters
Value-Added Products • Integration of Units: Shift towards value-added products expected to constitute 80%-85% of sales in 1.5 years • Capital Expenditure for DI Pipe Expansion: Around INR 300 crores for the current financial year
Deferred Tax Assets • Carry Forward Losses: INR 1,000 crores; no cash tax outflow until utilized
Growth Projections • VIP Segment Capacity: Expected increase from 35 lakh tons to 45 lakh tons in two years • Government Initiatives: Strong demand driven by JAL JEEVAN mission and AMRUT scheme
Conclusion • Raw Material Price Fluctuations: No significant variations expected in the near term • Further Inquiries: Management invites questions through investor relations team.
Jai Balaji Industries Limited Earnings Conference Call Summary
Call Overview • Date: January 17, 2024 • Submission: Transcript submitted on January 19, 2024, to NSE and BSE. • Host: GoIndia Advisors • Key Executives: • Mr. Aditya Jajodia (Chairman and Managing Director) • Mr. Raj Kumar Sharma (CFO) • Mr. Vijay Kumar Bagri (President of Finance) • Purpose: Discuss Q3 and nine-month FY24 results, including a Q&A session.
Company Highlights • 24-Year Journey: Transitioned into a leading manufacturer of value-added products, especially ductile iron (DI) pipes and specialized ferroalloys. • Revenue Contribution: DI pipes currently account for 30% of revenues, expected to rise to 45-50%. • Capacity Expansion: Plans to increase DI pipe capacity by 175% and ferroalloy capacity by 46% in 18 months. • Financial Performance: Record revenues and profits for Q3 FY24, with a 756% increase in PAT year-over-year.
Financial Strategy • Debt Management: Current debt of approximately 560 crores; aim to be net debt-free within 18 months. • Revenue Mix Shift: Increased share of value-added products from 30% to 50-55%, improving EBITDA margins from 7-8% to 15%. • Future Projections: Anticipate EBITDA margins reaching 18-20% as value-added products grow to 80%.
Production and Sales Guidance • Production Outlook: Slight decrease in some product outputs but overall expected increase in turnover and profitability. • Competitive Positioning: Commitment to remain a low-cost producer in the ductile iron pipe market.
Market and Client Insights • Export Plans: Increase DI pipe export capacity from 2% to 10%, targeting Middle East and Africa. • Client Base: Key government and private sector customers in DI pipes and ferroalloys.
Capacity Expansion Plans • Future Capacity Goals: Increase ferroalloy capacity by 50,000 tons and DI pipe capacity by 200,000 tons, targeting 90% utilization by FY26. • Revenue Potential: Projected revenue of Rs. 9,500 to Rs. 10,000 crores at optimal capacity utilization.
Cost Management and Logistics • Cost Savings: New iron ore beneficiation plant and railway sidings expected to save Rs. 1,000 per ton. • Logistics Advantages: Benefits of rail transport over road transport, including reduced costs and minimal pilferage.
Product Pricing and Market Position • Price Realization: Increase in prices for value-added products, with ferroalloy prices rising from Rs. 140,000 to Rs. 170,000 per ton. • Revenue Contribution: Ductile pipes and ferroalloys expected to contribute approximately 80% to overall revenue.
Competitive Edge • Low-Cost Production: Backward integration and logistical advantages position the company favorably in the market. • De-Commoditization Strategy: Focus on value-added products to enhance profitability and market differentiation.