Goodluck India Limited — Q2 FY25 earnings call

Call held 13 Nov 2024

Management summary

Goodluck India reported a resilient Q2 FY25, with double-digit growth in revenue and profits despite geopolitical headwinds and domestic market softness. Management expressed strong confidence in its new value-added projects, particularly the recently commissioned hydraulic tube plant and the upcoming defense facility, which are expected to be major growth and margin drivers from FY26 onwards. However, the call revealed that the near-term revenue contribution from these projects in FY25 will be minimal, a walk-back from prior expectations. The company reiterated its full-year growth guidance of 15-20%, banking on a stronger H2 performance.

Highlights

  • Q2 FY25 Total Operating Income grew 10.3% YoY to ₹976 crores.

  • Q2 FY25 EBITDA increased 18.7% YoY to ₹87.45 crores.

  • Q2 FY25 PAT rose 29.9% YoY to ₹45.06 crores.

  • H1 FY25 Sales Volume surged 9.4% YoY to 200,489 metric tons.

  • New hydraulic tube plant commissioned in September with a capacity of 15,000 MT; commercial production to start in Q4 FY25.

  • Defense & Aerospace plant commissioning is on track for March 2025, with commercial production from April 2025.

  • Management reiterated full-year revenue growth guidance of 15-20%, targeting approximately ₹4,000 crores for FY25.

  • Significant revenue contribution from new capex projects (hydraulic and defense) is now expected from FY26, a delay from previous expectations for FY25.

Concerns

  • Delay in revenue from new capex projects

Key financials

3 periods

Headline

  • Total Operating Income
    ₹976 Cr
    YoY +10.3%
  • EBITDA
    ₹87.45 Cr
    YoY +18.7%
  • PAT
    ₹45.06 Cr
    YoY +29.9%

Q2

  • Sales Volume
    1,03,000 tons
    QoQ +0.98%

H1

  • Total Income
    ₹1,908.33 Cr
    YoY +9.3%
  • Net Profit
    ₹79.53 Cr
    YoY +25.7%

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

  • FY25 Revenue Revenue · FY25 · High confidence almost 4000 crores
    Its view that we should almost reach 4000 cores this financial year, last year it was 3500 and this year we should reach almost 4000 nearby 4000.

    — Ram Agarwal, CEO

  • FY25 Revenue Growth Revenue · FY25 · Medium confidence 15% to 20%

    From 15% to 20% today

    15 to 20% growth in our conservative target for time to come... Management is confident we will achieve the growth as guided earlier.

    — M C Garg, Chairperson

  • Defense Plant Revenue Potential (at full capacity) Revenue · Post ramp-up · Medium confidence 300 to 350 crores
    Almost when it will, when it will raise its full capacity of 1,50,000 shells, then it is likely to give 300 to 350 crores.

    — Ram Agarwal, CEO

Margin

  • EBITDA Improvement Margin · Annual · Medium confidence 5% to 10% on a Year-to-Year basis
    Every year the EBITDA has to improve... we expect EBITDA improvement anything between 5 to 10% EBITDA improvement on a Year-to-Year basis.

    — M C Garg, Chairperson

  • Defense Capex Margin Margin · Post ramp-up · Low confidence more than 20%
    And this will the defense CapEx margin will be more than 20%, right? We hope so.

    — Ram Agarwal, CEO

Capex

  • Defense Plant Commissioning Capex · Q4 FY25 · High confidence Commissioned by March 25
    It is likely to be commissioned by March 25 and from April 25, we are likely to start the trial come the commercial production.

    — Ram Agarwal, CEO

  • Defense Plant Utilization Capex · FY26 · Medium confidence minimum 60 to 70% of the production target
    But in the next year, when we start from April 25, yes, we will aim for minimum 60 to 70% of the production target in the coming financial year.

    — Ram Agarwal, CEO

  • Hydraulic Plant Ramp-up Capex · Q1 FY26 · High confidence Full contribution from April 25

    Previously Expected contribution of 250 crores in FY25 (recalled by analyst) → Full contribution from April 25

    This year from the fourth quarter, it will give a bit contribution, but from April 25 it will give full contribution.

    — Ram Agarwal, CEO

Risks & concerns

  • Delay in revenue from new capex projects

    high

    The hydraulic plant's significant revenue contribution is pushed to FY26, impacting FY25 growth drivers.

    Analyst acknowledged

  • Export disruption from geopolitical tensions

    medium

    Management cited geopolitical tensions and sea route issues as a reason for a hit to exports in H1.

    Management acknowledged

  • Raw material price volatility

    medium

    Management explicitly mentioned that steel prices were 'very, very volatile' during the quarter.

    Management acknowledged

  • Inconsistency in reporting key metrics

    low

    Management provided a conflicting figure for EBITDA/ton and deflected the analyst's correction.

    Analyst deflected

Areas of evasion (2)

  • The specific breakdown of 'Other Income' was deflected with a request to email offline.
  • The discrepancy in the EBITDA per ton figure was not directly addressed or corrected.

Q&A highlights

1 direct, 1 evasive
Revenue contribution from new hydraulic (auto) capex Partial
This year from the fourth quarter, it will give a bit contribution, but from April 25 it will give full contribution.

This was a crucial clarification, revealing a significant delay in revenue generation from a key growth project compared to prior management guidance (recalled by the analyst as ₹250 crores for FY25), impacting the current year's growth drivers.

Asked by Yash

EBITDA per ton for Q2 Evasive
Ram Agarwal: It is almost 8,100 approximate. ... Please check your records. In my opinion it was almost approximately 8000 and it remains the same, almost same flat.

Management's stated figure of ₹8,100 was inconsistent with both the prior quarter (stated as ₹8350 by analyst) and the calculated figure for Q2 (~₹8,490). This shows a lack of precision on a key operational metric and created confusion.

Asked by Prateek Bhandari

FY25 growth guidance of 15-20% Direct
M C Garg: It is definitely achievable. Management is confident we will achieve the growth as guided earlier. However, in the second quarter, I told you the heavy monsoon all over the country. Elections, Indian elections, US election, we are export thrust company, disruption in export definitely affected the demand but still we were able to record a moderate growth of 10%.

This question forced management to reaffirm its full-year guidance despite a slower Q2 and the newly revealed delay in capex contribution, placing more pressure on H2 performance to meet the target.

Asked by Rakesh Roy

3 min read 6 chapters

Detailed narrative

Q2 & H1 FY25 Performance Review

Goodluck India demonstrated resilient performance in a challenging environment. For Q2 FY25, total operating income reached ₹976 crores, a 10.3% YoY increase from ₹885 crores. EBITDA grew more robustly by 18.7% to ₹87.45 crores, while PAT saw a significant 29.9% jump to ₹45.06 crores. For the first half (H1 FY25), total income was up 9.3% to ₹1908.33 crores, and net profit increased by 25.7% to ₹79.53 crores, supported by a 9.4% YoY rise in sales volumes to 200,489 metric tons.

New Hydraulic Tube Plant: Commissioned but Revenue Delayed

A major milestone was the commissioning of the large diameter, heavy wall hydraulic tube plant in September. This plant, built with an investment of ₹200 crores and a capacity of 15,000 MT, is one of very few such facilities globally. While commercial production is set to begin in Q4 FY25, management clarified that significant revenue contribution is now expected only from Q1 FY26. This marks a delay from previous expectations of a ₹250 crore contribution in FY25. The company sees excellent demand for this product as an import substitute for Chinese seamless pipes and plans to achieve full capacity utilization within 12-18 months, after which it may consider doubling the capacity.

Goodluck Defense & Aerospace Project on Track for FY26 Launch

The company's foray into defense is progressing as scheduled. The plant is expected to be commissioned by March 2025, with trial runs and commercial production commencing in April 2025. For FY26, the company is targeting a utilization of 60-70% of its production capacity. At full capacity of 150,000 shells, management estimates a revenue potential of ₹300-350 crores. They noted strong interest from both domestic and international buyers, who are awaiting the plant's commissioning.

FY25 Guidance Reaffirmed Despite Headwinds

Despite a challenging H1 marked by geopolitical tensions, elections, and a heavy monsoon that impacted demand, management reiterated its full-year revenue growth guidance of 15-20%. This was further quantified with a target to reach 'almost 4000 crores' in revenue for FY25, up from ₹3500 crores in FY24. Achieving this target now hinges on a significant acceleration in performance in H2, as the new capex projects will offer minimal support in the current fiscal year.

Operational Metrics and Margin Outlook

The company's sales volume for Q2 FY25 was 1,03,000 tons, a slight sequential increase from Q1's 1,02,000 tons. There was some confusion regarding the EBITDA per ton, with management stating a figure of ~₹8,100, while calculations based on reported EBITDA and volume suggest a healthier figure closer to ₹8,490. Management guided for a 5-10% year-on-year improvement in EBITDA going forward and stated that a 'real significant improvement' in EBITDA margins will be visible in FY26 once the high-margin defense and hydraulic tube businesses are fully ramped up.

Updates on Other Business Verticals

The company continues to execute its order for the bullet train project, having completed nearly 65% of its 22,000 MT order, with the remainder to be finished in the next 8-12 months. In the solar support structure business, the company is supplying for 200 MW, has a good order book, and sees strong visibility for at least the next year. Management confirmed there are no plans to demerge or expand the low-margin CR coil business.

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