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    Electrost.Cast.

    ELECTCAST
    Capital Goods·31 Jan 2025
    Management Summary

    Electrosteel Castings reported a mixed Q3 FY25, with revenue impacted by a blast furnace shutdown, though 9M FY25 performance showed modest growth in income and PAT. The company maintains a healthy order book and is progressing on its brownfield expansion, aiming for 9 lakh tons capacity by March 2025. Management expressed optimism for a rebound in government infrastructure spending and stable EBITDA margins, while addressing challenges in the US export market and delays in asset valuation.

    Highlights

    5
    • Consolidated 9M FY25 total income grew 2.9% YoY to ₹5,701 crores, with EBITDA increasing 2.7% YoY to ₹961 crores and PAT growing 5.5% YoY to ₹541 crores.

    • The company's long-term credit rating has been upgraded by CRISIL from AA- to AA, reflecting improved financial health.

    • A robust order book of 6 lakh tons provides 8.5 months of revenue visibility, supported by strong demand drivers like River Linking and Jal Jeevan Mission.

    • An anti-subsidy refund of ₹23 crores from the European Commission contributed to a significant increase in other income this quarter.

    • Management is optimistic about a restart in government infrastructure spending from April 2025, following the Union Budget.

    Concerns

    4
    • Q3 FY25 total income was down 4% YoY to ₹1,816 crores, primarily due to a 14-day shutdown of the Mini Blast Furnace (MBF) in December 2024 and January 2025.

    • The MBF shutdown resulted in an estimated revenue loss of approximately ₹105 crores and incurred expenses of ₹7.5 crores.

    • A momentary slowdown in government expenditure, particularly for the Jal Jeevan Mission, has impacted demand and led to the order book being at the lower end of its historical range.

    • The US export business has been negatively affected by an overall market slowdown and 'Made in America' policies, leading to a reduction in export contribution from 5% to 1%.

    What Changed2

    vs Q4 FY25

    Guidance items9 → 11 (+2)Risks discussed4 → 5 (+1)
    Key financials

    Metrics

    10

    Periods

    2

    Q3 FY25

    5
    • Consolidated Total Income
      ₹1,816 Cr
      YoY-4%
    • Consolidated EBITDA
      ₹294 Cr
    • Consolidated EBITDA Margin
      16.2%
    • Consolidated PAT
      ₹160 Cr
    • Consolidated PAT Margin
      8.8%

    9M FY25

    5
    • Consolidated Total Income
      ₹5,701 Cr
      YoY+2.9%
    • Consolidated EBITDA
      ₹961 Cr
      YoY+2.7%
    • Consolidated EBITDA Margin
      16.9%
    • Consolidated PAT
      ₹541 Cr
      YoY+5.5%
    • Consolidated PAT Margin
      9.5%

    Order Book

    high confidence

    Total Value

    ₹ 6,00,000 tons

    as of 2025-01-31

    quantified

    Execution

    8-1/2 months of order book

    Composition

    Export(geography)
    14.0%
    Jal Jeevan Mission(client type)
    50.0%

    "The order book is currently at the lower end of the historical 8-10 month range due to a momentary slowdown in government spending, but the bidding pipeline remains strong."

    Source:
    Q&A

    Capital allocation

    2
    medium confidence
    CategoryHeadline
    Capex

    ₹700 crores

    Liquidity

    Liquidity disclosed

    The company has a claim of Rs. 1200 crores related to the JSW coal block, and management is optimistic that the majority of this will be realized, providing cash flow.

    Guidance & targets

    11
    CategoryTargetPriority
    Capacity
    DI Pipe Installed Capacity
    9 lakh tons
    High
    Capacity
    DI Pipe Manufacturing Capacity
    1 million ton
    High
    Capacity
    Installed Capacity
    9.5 to 1 million tons
    Medium
    Production
    FY25 Production
    North of 7.5 lakh tons
    Medium
    Production
    FY25 Production
    8.5-9 lakh tons
    Medium
    Production
    Production
    9.5-1 million tons
    Medium
    Profitability
    EBITDA Margin
    16%-18%
    High
    Volume
    Sales Volume
    8.5 lakh tons to 9 lakh tons
    Medium
    Revenue
    Turnover
    ₹9,000 crores
    Medium
    Revenue
    Turnover
    ₹9,000-9,500 crores
    Medium
    Revenue
    Fittings Production Turnover Increase
    ₹300-500 crores
    Low

    Government Infrastructure Spending Restart

    Next quarter (starting April 2025)
    CurrentMomentary slowdown
    TargetSpending restart from April 2025

    Why it matters

    Crucial for demand recovery and order inflow, especially for projects like Jal Jeevan Mission.

    Well, there has been a momentary slowdown from the government side on the expenditure towards Jal Jeevan Mission... we are very optimistic that spending will restart and starting April, I think things would be back to the way they were earlier in regard to the demand pull.

    How to verify

    guidance_and_targets

    Risks & concerns

    5
    RiskSeverity

    Mini Blast Furnace (MBF) shutdown impact

    A 14-day shutdown of the MBF in Q3 FY25 led to a 4% YoY decline in total income and an estimated revenue loss of ₹105 crores, impacting quarterly performance.Management acknowledged

    medium

    Slowdown in government infrastructure spending

    Momentary slowdown in government expenditure, particularly for Jal Jeevan Mission, has reduced demand and kept the order book at the lower end of its typical range.Management acknowledged

    medium

    US export market headwinds

    The US market is experiencing a slowdown, and 'Made in America' policies are making customers apprehensive about non-American products, impacting export volumes.Management acknowledged

    medium

    Delays in brownfield expansion project

    A minor delay of 2-3 months in the ₹700 crore Phase-2 CAPEX is expected due to manpower shortages and equipment supply issues, pushing the 9 lakh tons capacity target to March 2025.Management acknowledged

    low

    Uncertainty in coal block asset valuation and realization timeline

    The valuation and realization of the ₹1200 crore claim related to the JSW coal block are ongoing, with management unable to provide a specific timeline due to past inaccuracies.Analyst acknowledged

    medium

    Q&A highlights

    8

    “So with the total loss that was given by Madhav ji was for the total 12-13 days and in December what we have lost is around Rs. 45 crores of revenue. ... So, the total expense for the shutdown is around Rs. 7.5 crores.”

    Clarified the direct financial impact of the operational disruption on revenue and expenses for the quarter.

    asked by Rajesh Agarwal

    3 min read6 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Impacted by Blast Furnace Shutdown

    Electrosteel Castings reported a consolidated total income of ₹1,816 crores for Q3 FY25, a 4% decrease compared to the previous year. This decline was primarily attributed to a 14-day shutdown of the Mini Blast Furnace (MBF) at its South unit, which occurred for 6 days in December 2024 and 8 days in January 2025. The shutdown resulted in an estimated revenue loss of approximately ₹105 crores and incurred expenses of ₹7.5 crores, impacting the quarter's profitability. Despite this, the company achieved a consolidated EBITDA of ₹294 crores with a margin of 16.2% and a PAT of ₹160 crores with an 8.8% margin.

    02

    9M FY25 Shows Modest Growth and Margin Stability

    For the nine months ending December 31, 2024 (9M FY25), Electrosteel Castings demonstrated resilience with a consolidated total income of ₹5,701 crores, marking a 2.9% year-on-year growth. Consolidated EBITDA for the period stood at ₹961 crores, an increase of 2.7% YoY, maintaining a healthy margin of 16.9%. PAT grew by 5.5% YoY to ₹541 crores, with a PAT margin of 9.5%. The company's management expressed confidence in maintaining EBITDA margins within the 16%-18% range for the foreseeable future, citing offsetting movements in raw material prices (downward trend in coke/coking coal, upward trend in iron ore).

    03

    Brownfield Expansion Progress and Capacity Targets

    The company is actively pursuing a brownfield expansion project with a planned CAPEX of ₹700 crores for Phase-2, aimed at increasing DI pipe manufacturing capacity to 1 million tons. As of December 31, 2024, ₹480 crores of this CAPEX has been spent. While there's a minor delay of 2-3 months due to manpower and equipment supply issues, the company expects to reach an installed capacity of 9 lakh tons by March 2025. The ultimate target is to achieve 1 million tons capacity by March 2026, with production reaching 9.5-1 million tons by March 2027.

    04

    Robust Demand Outlook Despite Short-Term Slowdown

    Management highlighted a robust long-term demand scenario for DI pipes, driven by government initiatives such as River Linking, Viksit Bharat Vision, Jal Jeevan Mission, and AMRUT 2.0. Although there has been a momentary slowdown in government expenditure, particularly for the Jal Jeevan Mission (which accounts for about 50% of the order book), the company is optimistic that spending will restart from April 2025 following the Union Budget. The current order book stands at 6 lakh tons, providing 8.5 months of visibility, which is at the lower end of the typical 8-10 month range.

    05

    Strategic Focus on Product Innovation and Market Diversification

    Electrosteel Castings is enhancing its product portfolio and R&D efforts, particularly in fittings, to offer comprehensive water solutions. The company has seen a significant increase in fittings volumes, up by approximately 3000 tons in 9M FY25 due to new product lines, with a target to reach 25,000 tons. Geographically, while the US export market faces headwinds due to slowdown and 'Made in America' policies (reducing its share from 5% to 1%), the company is exploring new markets in Southeast Asia and Africa and seeing optimism in the Middle East, particularly Saudi Arabia.

    06

    Credit Rating Upgrade and JSW Coal Block Claim

    A significant positive development is the upgrade of the company's long-term credit rating by CRISIL from AA- to AA. This reflects improved financial stability and outlook. Additionally, the company has a claim of ₹1200 crores related to the JSW coal block. Management is optimistic that the majority of this amount will be realized, which would provide a substantial cash flow to Electrosteel Castings, although a specific timeline for this realization could not be provided due to past delays in the valuation process.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.