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Maharashtra Seamless Limited Q1 FY25 Earnings Conference Call Summary
Date and Context • Date of Call: July 30, 2024 • Announcement Date: August 4, 2024 • Moderator: PhillipCapital • Speaker: Mr. Kaushal Bengani, Deputy General Manager of Investor Relations and Finance
Key Performance Highlights • Revenue: Declined by 4% • EBITDA: Decreased by 54% • PAT: Down by 40% • Dispatches: Slight decline noted • Order Book: Increased to Rs. 1812 crores • Treasury: Improved, contributing positively to earnings
Challenges Faced • Sales Realization: Lower due to increased competition and raw material price drops • Maintenance Shutdown: Affected production and earnings • Pricing Pressures: Concerns raised about future pricing trends and impacts from Chinese imports
Sector Insights • Demand: Strong in capital goods and oil & gas sectors • Exports: Slow, particularly in the US and Canada; no specific market size provided • High-Value Products: Better margin profile for cylinder pipes compared to regular pipes
Capital Expenditure and Future Outlook • CAPEX Timeline: Delays noted for Telangana unit; most spending expected in FY26 • Inventory Recovery: Potential for reversing markdowns as high-value orders are executed • Confidence: Positive outlook for future performance despite current challenges
Additional Inquiries and Responses • Production Loss: 15,000-tonne loss from maintenance shutdown discussed • ERW Pipe Segment: No plans for expansion; focus remains on seamless pipes • Industry Trends: Large diameter welded pipes gaining traction, but demand for low diameter seamless pipes persists in the automotive sector
Conclusion • Overall Operations: Sound despite temporary impacts on earnings • Future Normalization: Confidence expressed in recovery and improved performance moving forward
Maharashtra Seamless Limited Q4 FY24 Earnings Conference Call Summary
Key Financial Highlights • Record Performance: Despite a 4% revenue decline, the company achieved: • 18% increase in EBITDA to INR 1,223 crores • 23% rise in profit after tax to INR 975 crores • 23% increase in earnings per share to INR 73 • Order Book: Stood at INR 1,753 crores, primarily from ONGC and Oil India.
Operational Insights • Production Decline: Lower production in Q4 attributed to a delayed large order; long-term performance unaffected. • Capex Plans: • Telangana facility expected to generate INR 800 crores in revenue. • Minimal spending in FY '24; projected INR 200 crores for FY '25.
Market and Demand • Seamless Pipes Market: Strong demand driven by capital expenditure in the oil and gas sector. • Export Performance: Approximately 5-6% of total dispatches.
Margin and Pricing Discussions • EBITDA per Ton: Decline noted from INR 30,475 in Q3 to INR 21,619; expected to stabilize above INR 15,000. • Impact of Raw Material Prices: Rising billet prices have not significantly affected margins due to secured order book.
Future Outlook • Inorganic Opportunities: Company is conserving cash for potential acquisitions but has not found suitable options. • Production Adjustments: Anticipated loss of 15,000 tons due to preventive maintenance shutdown.
Competitive Positioning • Market Share: Majority market share in subsea sour service seamless pipes despite competition. • International Market Focus: Prioritizing profit maximization over expansion in less profitable markets.
Conclusion • Shareholder Assurance: Strong market position and commitment to corporate governance and dividends, despite some quarterly disappointments.
Communication Details • Date of communication: February 3, 2024 • Earnings call date: January 30, 2024 • Hosted by: PhillipCapital India Private Limited • Key participants: Chairman D.P. Jindal, Deputy General Manager Kaushal Bengani • Transcript link provided for stakeholders • Signed by: Ram Ji Nigam, Company Secretary
Financial Performance Highlights • Revenue increased by 8% YoY • EBITDA up by 51% YoY • PAT rose by 67% YoY • EPS grew by 62% YoY • Company remains debt-free with liquid investments of INR 1,500 crores • Capital expenditure planned in Telangana, completion expected by December 2024 • Strong demand for seamless pipes, particularly in oil and gas sector • Healthy order book of INR 1,563 crores • Foreign institutional investor holdings increased from 2.84% to 10.5%
Cost Control and Operational Efficiency • Improved cost control led to lower administration and selling expenses • Significant reduction in other expenses • Order levels from Oil India and ONGC decreased from INR 1,800 crores to INR 500-600 crores
Growth Opportunities • Antidumping duty in place until October 2026 supports domestic production • Plans to enhance production capacity at Telangana unit with new finishing line operational by January 2025 • Focus on maximizing profits over production volume
Market Outlook and Margins • Operating margins remain strong due to favorable domestic conditions and reduced raw material prices • Most orders backed by hedged raw material • Anticipated increase in seamless production with new finishing line
Export Market Focus • Emphasis on export market despite recent declines in export revenues • Revenue recognized upon dispatch; prioritizing domestic demand over exports
Shareholder Concerns and Future Plans • Discussion on liquidity issues and potential further share splits • Plans to increase promoter shareholding to 75% • Order book visibility decreased to 3-4 months • Operating at 70-75% capacity with plans to target exports for additional capacity
Conclusion • Management committed to strategic path and value creation • Acknowledgment of shareholder concerns and gratitude expressed by management • Call concluded with thanks from both Jindal and the moderator
Maharashtra Seamless Limited Q2 FY24 Earnings Conference Call Summary
Financial Performance • Revenue Growth: • 25% increase from Q1 FY24 • 9% increase compared to Q2 FY23 • Debt Status: Achieved 100% gross debt-free status with significant liquid investments.
Key Developments • New Facility: Capital expenditure commenced for a new facility in Telangana. • Market Index Inclusion: Included in the Morgan Stanley Capital Invest India Domestic Small Cap Index. • Market Demand: Strong demand in capital goods and infrastructure sectors.
Operational Highlights • Seamless Pipes Segment: Largest contributor to EBITDA; expected strong margins due to favorable market conditions. • Order Pipeline: • 325 crores in pending orders not yet in the order book. • Significant orders from IOCL valued between 100 to 125 crores expected to complete this quarter.
Sales and Growth Guidance • Sales Growth: Maintained 5% sales growth guidance for FY '24. • Production Delays: New finishing line activation delayed due to land procurement; production expected before December 2024.
Capital Expenditures • Projects: • 350 crore project in Nagothane delayed but does not require new land. • Joint venture discussions in the premium thread segment expected to complete within the financial year.
Market Share and Stake • Market Share: 55% in the Seamless division, competing with Jindal Saw and ISMT. • Promoter Stake: Increased from 63% to 68%, aiming for 75%.
Sector Exposure • Oil and Gas Sector: 70% exposure; remaining 30% split between boiler and general engineering applications. • Growth Opportunities: Increased inquiries in the boiler and water segments due to rising capital expenditure.
Future Outlook • Exports: Potential increase as crude oil prices rise; preparation for reopening U.S. market. • New Products: Development of green hydrogen pipes in research phase. • Investment Opportunities: Considering various options for excess cash flow, including potential rig sale.
Conclusion • Commitment to improving operations and thanking shareholders for their support.
Maharashtra Seamless Limited Q1 FY24 Earnings Conference Call Summary
Key Highlights • Date of Call: August 2, 2023 • Participants: Chairman D.P. Jindal, Deputy General Manager Kaushal Bengani • Performance: • 7% revenue decline year-over-year • 6% increase in EBITDA • 48% rise in profit after tax (PAT) • Achieved 100% gross debt-free status • Cash reserves exceeded INR 1,000 crores • Capital expenditures initiated for new facilities in Telangana • Inclusion in MSCI index increased foreign institutional investor holdings • Order book valued at INR 1,725 crores
Raw Material and Export Market • Raw Material Prices: • Steel prices decreased by about 10% • Expected positive impact on EBITDA margins • Export Market: • Recent slowdown in exports, particularly to the U.S. • Optimism for recovery due to increasing rig counts
Production Capacity and Expansion Plans • Seamless Pipe Production: • Telangana plant capacity: 650,000 tons (currently finishing 100,000 tons) • INR 184 crores investment to enhance finishing facilities • Volume Outlook: • Projected 5% to 10% growth in tonnage for seamless and ERW pipes • Current production: 436,000 tons, expected to increase to 536,000 tons next year
Order Book and Premium Connections • Order Book Value: • Decrease attributed to bulk orders from the oil sector and temporary export slowdown • Premium Connections: • Focus on obtaining licenses for premium connections • Current manufacturing capacity for premium joints limited to 25,000 tons
Financial Metrics and Cash Reserves • EBITDA Margins: • Expected to remain strong with a baseline of INR 20,000 per ton • Cash Reserves: • Held for potential growth opportunities, not immediate shareholder returns
Production and Maintenance • Impact of Maintenance Shutdowns: • Loss of about 10,000 tons due to a 15-day preventive maintenance shutdown • Future Dispatches: • Expected to reach approximately 375,000 MT over the next three quarters
Market Position and Customer Spending • Customer Orders: • Continued strong orders from public sector undertakings (PSUs), including ONGC • Global Pricing Pressures: • Softening prices but expected demand rise due to reduced pipe stocks in the U.S.
Future Plans and Commitment • Capital Expenditures: • Upgrades to hot mill in Nagothane to commence post-Telangana expansion • Shareholder Value: • Commitment to enhancing shareholder value and improving operations
Announcement Details • Date of Announcement: June 5, 2023 • Earnings Call Date: May 29, 2023 • Moderated by: Vikash Singh (PhillipCapital India) • Company Representation: Kaushal Bengani (due to absence of D.P. Jindal and Saket Jindal) • Compliance: Communication sent to BSE and NSE as per SEBI regulations • Transcript Access: Available via a provided link
Financial Highlights • Record Financial Year: Highest revenue, dispatches, and profits • Q4 FY23 Metrics: • Revenue: +22% from Q3 FY23 • EBITDA: +27% • PAT: +85% • EPS: +77% • Year-over-Year Growth: • Revenue: +42% • EBITDA: +72% • Corporate Actions: • Amalgamation of United Seamless with Maharashtra Seamless • 1:1 bonus share issuance • 100% dividend payout • Inclusion in MSCI index
Operational Insights • Order Book: INR 2,063 crores with steady margin outlook • Investment Plans: INR 250 crores in FY24 for finishing line installation • Rig Segment Profit: INR 727 lakhs due to favorable currency adjustments • Operating Margins: Expected to remain stable at 17-18%
Capacity and Production • Telangana Facility: Current utilization at 1 lakh tons out of 2 lakh tons • Production Enhancement: Plans for finishing line installation • Inorganic Growth: Not actively pursued but open to opportunities
Working Capital and Capital Expenditure • Working Capital Cycle: High inventory days due to raw material purchasing strategy • Capex Plans: INR 2,000 crores over the next few years, funded through internal accruals
Market Focus and Strategy • Order Intake: Consistent with a focus on domestic orders over exports • Export Market Demand: Steady, particularly in the US and Canada • Corporate Structure: Simplification through amalgamation of subsidiaries
Future Outlook • Drilling Rig Business: Significant increase in day rates; next contract repricing in May 2025 • Revenue Guidance for FY24: No specific guidance, but expectations of 5-10% improvement in tonnage • Capital Expenditure Impact: Expected to increase annual returns by INR 800 crores post-installation
Conclusion • Commitment to Improvement: Focus on investor relations and operational efficiency • AGM Announcement: Earlier date announced to enhance communication with stakeholders
Communication Details • Date of communication: February 1, 2023 • Earnings call date: January 24, 2023 • Key participants: • Saket Jindal (Managing Director) • Kaushal Bengani (Senior Manager of Investor Relations) • Vikash Singh (Moderator from PhillipCapital) • D. P. Jindal was absent initially but expected to join later.
Company Performance Overview • Strong margins reported despite a maintenance shutdown at a Seamless pipe mill. • Maintenance shutdown executed in FY23 due to a large order book. • Production capacity expected to increase by 10% in the next quarter.
Financial Highlights • Prepayment of long-term debt reduced interest costs. • Successful 1:1 bonus issue doubled equity capital. • Significant cash balance with a net debt position of minus 469 crores. • Capital expenditures of 852 crores to be funded through internal accruals.
Order Book and Market Outlook • Improved order book with strong demand anticipated, especially in the Seamless segment. • Amalgamation of United Seamless with Maharashtra Seamless is progressing.
Q&A Session Insights • Current quarter margins are stable and on a positive trajectory. • Canadian market reopened for exports, with potential for significant volume. • Discussion on client concentration and export opportunities, particularly with ONGC and Oil India. • Future ownership changes of rigs discussed, with a possibility of selling if beneficial. • Value-added segments like drill pipes and premium connections are being explored.
Future Guidance • Optimistic EBITDA guidance for FY23, potentially exceeding 1,000 crores. • Conservative estimate of over 800 crores for FY24, pending order visibility. • Significant capital expenditure planned for FY24, focusing on two priority projects.
Capacity and Operational Efficiency • Strong order book confirmed, particularly in the export market. • Anticipated improvements in capacity utilization in Q4 compared to Q3. • Ongoing efforts to enhance operational efficiency and expand into value-added products.
Conclusion • Positive outlook for the oil sector and commitment to delivering good returns to investors emphasized by Saket Jindal.