Skipper Q1FY18 Concall Summary
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Financial Highlights
- Successful migration to Ind-AS
- Sales increase by over 40%
- Gross sales to INR 432.72 crores from INR 309.8 crores
- Revenue growth of 40% because of undelivered production from Q4 which contributed to 20%
- Growth led by strong volume executed in engineering product business on both domestic and international frontas well sales of undelivered production
- EBITDA increased by 31% from INR 39.33 crores in the previous year to Rs.51.61 crores
- PBT increased to INR 24.76 crores from INR 15.49 crores indicating a growth of 52%
- Long term borrowing around Rs.200 crores
- Reduction in engineering segment PBIT margins because it is calculated from gross and not net revenue
- Volume growth of 15-17% only for the engineering division
Order execution/ projects
- Orders in excess of Rs.350 crores for transmission towers and poles supply
- Orders from PGCIL for 800KV Raigarh-Pugalur HVDC project
- Production executed from existing Uluberia plants and products to be manufactured
- Two landmark EPC projects for PowerGrid and RRVPN making Skipper eligible to bid and win new EPC projects
- Order intake of Q1 of about Rs.350 crores
- Good order inflows from Telangana TRANSCO, Andhra TRANSCO and Uttar Pradesh Power Transmission Company
- Order book size at the end of Q1 FY 2018 is Rs.2640 crores
- Dilution of order concentration to 47% for PowerGridwhich contributed about 50-51% of total revenue of Skipper Limited
Polymer division
- Confusion among partners on whether to hold stocks and credits
- Profitable revenue growth of atleast 15% on topline basis
- Consistent margin of 13% plus in current year
Increase in steel billet prices
- Increase in steel billet prices accommodated through price escalation and de-escalation clauses in majority of orders (inclusive of export orders)
- Increase in steel billet prices of 15%
Monopole business
- Revenue from monopoles below 5% but expecting it grow as the revenue grows in overall product mix
- Monopole easily adoptable for 132 and 220 kV lines for intrastate projects with demand expected to increase with smart cities
- Small entrants not likely in monopoles as the requirement of setting up galvanizing plant is very
- Capex plans for FY18 is about Rs.85 crores out of which Rs.60 crores will go to increasing the capacity and Rs.25 crores go towards tower testing station
Solar structure manufacturing
- Government of India planned to ramp up solar capacity to total one lakh megawatt
- Additional lines are being installed for which a budget of Rs.30 crores
- Requirement of 40 tonnes of solar structure
- Trial production completed
- Offer to developer sourcing structures for the project or through EPC contractor who will be winning the projects from developers
PVC Pipes
- PVC segment sales: 90% from retail and 10% from project which could change to 60% from retail and 40% from projects as there will be a direct participation from Skipper in project sales
- Utilization level at 50% of capacity
- GST effect on PVC causing a muted growth
Execution cycle
- Reduction in execution cycle from a range of 2-2.5 years to 1.3-1.4 years
- Majority of demand driven by renewable sources of energy which have a shorter execution cycle as compared to thermal sources
- Projects are mostly on TBCB basis which have high penalty clauses and hence TBCB operator generally focuses to complete as per schedule
- No change in receivable and inventory
- Faster contract closure
Customer sectors
- Power
- Telecom towers and telecom poles
- Lighting
- Future: Rail electrification
Debt/costs
- Overall debt of Rs.200 crores
- Overall cost of debt is 8% to 9%
- Overall interest costs increase from Rs.12.4 crores to Rs.16.9 crores which is a decrease from Rs.17 crores as compared to the corresponding quarter from previous year
- Out of the Rs.16.9 crores, Rs.15 crores towards interest and the rest to commission and charges
- Depreciation in Q1 FY2018 is Rs.10.75 crores and it is Rs.6.75 crores in FY2017
- Higher export execution from 15% to 20% causing increase in costs related to freight and packaging
Forex
- Hedging the export receivables against foreign currency loans through forward contracts
- Imports are hedged via LC or through buyer’s credit
- Even though there is a nominal forex gain of 10 million due to the Ind-AS implementation all the forex gains have to be accounted for on the basis of closing balance sheet approach.
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