Goodluck India Limited — Q1 FY25 earnings call

Call held 30 Jul 2024

Management summary

Goodluck India delivered a robust Q1 FY25, marked by record sales volumes and healthy profit growth, despite facing export-related logistical headwinds and price pressures. Management expressed strong confidence in future growth, underpinned by two major capex projects in high-margin precision tubes and defense, which are progressing on or ahead of schedule. The company provided strong revenue guidance for FY25 and FY26, anticipating significant contributions from these new capacities, which are also expected to drive margin expansion.

Highlights

  • Standalone operating income reached ₹904 crores, a 6.8% YoY increase from ₹846 crores.

  • EBITDA grew 12.4% YoY to ₹79.65 crores, with an EBITDA margin of 8.8%.

  • Sales volume for the quarter was a record 1,02,000 tons, up 17% YoY.

  • Profit jumped by approximately 27% YoY.

  • EBITDA per ton stood at ₹8,350 for the quarter.

  • The new precision auto tube plant (₹200 cr capex) is set to commission by August-end, targeting ₹250 crores revenue in FY25 and ₹500 crores in FY26.

  • The defense plant (₹200 cr capex) is 6-8 months ahead of schedule, with trial production expected by Q4 FY25, targeting ₹300 crores peak revenue.

  • Value-added products contribution was approximately 57-58% in Q1.

Key financials

  1. Operating Income ₹904 Cr +6.9%YoY
  2. EBITDA ₹79.65 Cr +12.4%YoY
  3. EBITDA Margin 8.8%
  4. Sales Volume 1,02,000 tons +17%YoY
  5. EBITDA per Ton ₹8,350
  6. Total Borrowing ₹608 Cr

What they filed

Q1 FY27: revenue up 22.7%, net profit up 25.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue976 942 1,105 983 991 +2%1,032 +10%1,061 −4%1,206 +23%
EBITDA71 80 85 92 92 +30%98 +23%91 +7%101 +10%
Net profit45 40 42 40 41 −9%43 +8%49 +17%50 +25%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • Total Revenue Revenue · FY25 · High confidence approx. 4100 crores
    Right now, our revenue is 3527, the 31st March 2024 and this year we are likely to take it almost 4100 crores...

    — Ram Aggarwal

  • Total Revenue Revenue · FY26 · High confidence approx. 4800 crores
    ...and in the next year, we will be taking it to 4800 where it's all four quarters will come.

    — Ram Aggarwal

  • Auto Tube Plant Revenue Revenue · FY25 · High confidence approx. 250 crores
    The total contribution will be two quarters only this year. From next year it will be fully ramped up and we are expecting addition of around 250 crores this year...

    — MC Garg

  • Auto Tube Plant Revenue Revenue · FY26 · High confidence approx. 500 crores
    ...and the next year we are expecting around 500 crores.

    — MC Garg

  • Defense Segment Revenue (Maximum) Revenue · Post-stabilization · Medium confidence approx. 300 crores
    Take maximum we are anticipating it almost 300 crores but initially will be less because it will take time. Production will take time to stabilize.

    — MC Garg

  • Billion Dollar Revenue Target Revenue · by FY28 · Low confidence Billion Dollar

    Previously by FY27 → Billion Dollar

    By FY27, it was three to four years targets, and the roadmap is ready. But stage by stage we will keep on implementing it and execute, FY27 I don't say right now... We will exceed the target may be not by 27, but maybe by 28.

    — MC Garg

Volume

  • Overall Volume Growth Volume · coming quarters · High confidence minimum 20%
    Volume growth was 17% as I told you in the beginning and we have been growing for last three years, average rate of growth was 20% approximately and conservatively that is the minimum we will be growing in coming quarters also.

    — MC Garg

Margin

  • Defense Segment EBITDA Margin Margin · Post-commissioning · Medium confidence 15-25%
    So, it is only an estimation right now because we have not made so far, but. I think it will be between 15 to 25% it is in range only once we make then we can tell you.

    — Ram Aggarwal

  • Overall EBITDA Margin Margin · medium term · Medium confidence improvement towards 9.5-9.7%

    From 8.8% today

    So, basically I have told this, auto tube once this year our EBITDA margin in this quarter it is 8.8% and with the implementation of our larger tire tube project it will be reaching towards 9.5, 9.7.

    — Ram Aggarwal

Risks & concerns

  • Export Logistics Challenges

    medium

    Management cited ship and container shortages over the last 2-3 months affecting export operations, which constitute ~25% of business.

    Management acknowledged

  • Margin Pressure from Price Volatility

    medium

    EBITDA growth (12.4%) lagged volume growth (17%) due to price declines, indicating a potential risk to profitability if prices remain weak.

    Analyst acknowledged

  • Execution and Ramp-up of New Projects

    medium

    The company is entering new, complex product areas (155mm shells, large-dia welded pipes) which carry inherent risks related to production stabilization and market acceptance.

    Analyst downplayed

Areas of evasion (2)

  • Naming specific potential customers for the defense business
  • Providing a detailed revenue segment breakup on the call

Q&A highlights

1 direct, 1 evasive
Discrepancy between Volume Growth (17%) and EBITDA Growth (12.4%) Partial
Volume growth, yes, volume growth is in terms of money, it is 17% and the EBITDA growth is 12.39% because the prices have gone down in this quarter. Still prices have gone down.

Reveals that the company faced margin pressure due to falling prices, which offset some of the benefits of strong volume growth.

Asked by Hatim Broachwala

Revenue and margin potential from new capex (Auto Tubes & Defense) Direct
The total contribution will be two quarters only this year. From next year it will be fully ramped up and we are expecting addition of around 250 crores this year and the next year we are expecting around 500 crores.

This quantifies the significant revenue contribution expected from the new high-margin auto tube plant, a key pillar of the growth story.

Asked by Pradeep Rawat

Competition and customer base in the new defense segment Evasive
Sir I can tell you it's very difficult to name the customer on this public platform number one. Number two, as per the present indications, the demand is huge. Demand is huge. People are waiting only for the product to come out and place order on us.

Highlights the sensitivity of the defense business and indicates that while management is confident about demand, specific customer contracts are not yet disclosable, representing a key unknown for investors.

Asked by Arjun Agrawal

2 min read 5 chapters

Detailed narrative

Q1 FY25 Performance: Record Volumes Amidst Headwinds

Goodluck India reported a strong start to FY25, achieving its highest-ever quarterly dispatch of 1,02,000 tons, a 17% YoY increase. This volume growth translated into a standalone operating income of ₹904 crores and an EBITDA of ₹79.65 crores (up 12.4% YoY). However, EBITDA growth lagged volume growth due to price pressures during the quarter. Management highlighted that despite challenges from national elections and export logistics, the company's diversified product portfolio enabled a 'reasonably good growth'.

Strategic Capex: Precision Tubes Plant Nearing Completion

A key growth driver, the new precision tubes plant, is on track for commissioning by the end of August 2024, with commercial production starting a month later. This project, with a capex of around ₹200 crores, will produce large-diameter welded pipes, a first of its kind in India, aimed at replacing seamless pipes in the construction industry. Management projects this plant will add ₹250 crores to revenue in FY25 (from two quarters of operation) and ramp up to ₹500 crores in FY26, contributing to margin expansion.

Defense Foray: Project Ahead of Schedule with High Potential

The company's subsidiary, GoodLuck Defense and Aerospace, is progressing rapidly, with its plant for manufacturing 155mm gun shells now 6-8 months ahead of schedule. Trial production is expected by Q4 FY25, with commercial production in Q1 FY26. The ₹200 crore project will have a capacity of 1.5 lakh shells per annum, with a peak revenue potential of ₹300 crores. Management sees immense opportunity, citing strong global demand and a favorable geopolitical environment, positioning this as a 'game changer' for the company.

Margin and Growth Outlook

The company's EBITDA margin stood at 8.8% in Q1. With the commissioning of the higher-margin auto tube project, management expects the blended margin to improve towards 9.5-9.7%. The defense segment is anticipated to operate at a much higher EBITDA margin of 15-25%, which will further enhance profitability once it scales up. Backed by these new capacities, the company has provided strong revenue guidance of ₹4100 crores for FY25 and ₹4800 crores for FY26, while committing to a minimum volume growth of 20% in the coming quarters.

Market Environment and Financials

Management remains bullish on the domestic market, driven by government spending on infrastructure, defense, and sustainability initiatives like green energy. The company is actively participating in the solar sector, supplying specialized hardware like Penta tubes. On the financial front, total borrowings stand at ₹608 crores. While the domestic outlook is strong, the company acknowledged facing logistical challenges in the export market, which accounts for about 25% of its business.

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