Jash Engineering Limited — Q2 FY25 earnings call

Call held 14 Nov 2024

Management summary

Jash Engineering reported a strong Q2 FY25, with significant consolidated revenue and profit growth driven by robust performance across its operating companies. The company maintained its full-year revenue guidance of Rs.675 crore and margin targets, supported by a healthy order book of Rs.873 crore. Strategic expansions in manufacturing capacity and market diversification efforts are underway to sustain future growth, despite some short-term profitability challenges in specific projects.

Highlights

  • Consolidated revenue increased 61% YoY.

  • Profit After Tax (PAT) grew by 212% YoY.

  • Profit Before Tax (PBT) grew by 272% YoY.

  • EBITDA improved by approximately 13% YoY.

  • Order book stood at Rs.873 crore as of November 1st, 2024.

  • FY25 revenue guidance maintained at Rs.675 crore, with potential to surpass.

  • FY25 EBITDA margin target of 21-23% and PAT margin target of 12-14%.

  • Rodney Hunt revenue expected to be >USD 33 million for FY25, up from USD 24.6 million last year.

Key financials

  1. Consolidated Revenue Growth 61%
  2. Consolidated EBITDA Growth 13%
  3. Consolidated PBT Growth 272%
  4. Consolidated PAT Growth 212%
  5. Order Book ₹873 Cr

What they filed

Q1 FY27: revenue up 17.5%, net profit up 198.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue140 181 300 128 158 +13%161 −11%291 −3%150 +17%
EBITDA25 41 59 -4 20 −17%17 −58%69 +17%8 +297%
Net profit16 35 36 -5 11 −32%13 −62%57 +58%5 +198%
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.

Segment breakdown

  • Jash Engineering (India)
    73% Revenue Growth
  • Shivpad
    133% Revenue Growth
  • Rodney Hunt (USA)
    49% Revenue Growth

Guidance & targets

Revenue

  • Combined Revenue Revenue · FY25 · High confidence Rs.675 crore
    At the beginning of the year, I had projected a combined revenue of Rs.675 crore as against Rs.522 crores, which we had achieved last year, this is close to I would say, 30% growth. From the performance of H1 I would say it looks that we are on line to achieve this turnover of Rs.675, crore and if everything goes in our favor, then we can surpassed this as well.

    — Pratik Patel

  • Double Revenue Revenue · FY28 · High confidence Rs.1000 crore

    From Rs.522 crore (FY24) today

    With these two plants coming online in FY26 we would be in a position to ensure that by FY28 we can double our revenue to Rs.1000 crore. When I say double our revenue, I am comparing with our revenue last year of Rs.522 crore to Rs.1000 crore in four years' time.

    — Pratik Patel

Profitability

  • EBITDA Margins Profitability · FY25 · High confidence 21-23%
    At the same time, we will be able to ensure EBITDA margins between 21-23% and PAT margins between 12-14%.

    — Pratik Patel

  • PAT Margins Profitability · FY25 · High confidence 12-14%

    — Pratik Patel

Capacity

  • Manufacturing Revenue Capability Capacity · FY26 · High confidence Rs.1000 crores
    And once these two facilities have come online, our capability will increase to Rs.1000 crores.

    — Pratik Patel

Order Book

  • Order Book Close Order Book · Year-end (FY25) · Medium confidence Rs.850-1000 crore
    To close the year, between Rs.850-1000 crore.

    — Pratik Patel

New Product Revenue

  • Revenue from Invent of Germany products New Product Revenue · Once established · Medium confidence Rs.25-50 crore
    We expect, once all these products are kicking in well and are established, we expect these products to bring anywhere between Rs.25-50 crore to our revenue.

    — Pratik Patel

Rodney Hunt Revenue

  • Rodney Hunt Yearly Revenue Rodney Hunt Revenue · FY25 · High confidence >USD 33 million

    From USD 26 million (last year) today

    I assure that everything is progressing well, and we are in line to achieve revenue in excess of USD 33 million in Rodney Hunt, as against 26 point odd million achieved last year.

    — Pratik Patel

Risks & concerns

  • Execution of low-margin/loss-making orders (Rodney Hunt, NPCIL).

    medium

    Legacy low-margin orders in Rodney Hunt and a loss-making NPCIL project are under execution, impacting short-term PAT, but management states these are a small portion of the total order book and are strategic.

    Analyst acknowledged

  • Client delays in taking delivery.

    medium

    Clients delaying delivery of finished products leads to blocked manufacturing space, necessitating new plant construction despite existing production capacity being sufficient for higher revenue.

    Management acknowledged

  • Difficulty in mass marketing premium products in India.

    low

    New products from Invent of Germany are premium and costly, making mass marketing in India challenging, with success dependent on indigenization and competitive pricing over time.

    Management acknowledged

Q&A highlights

3 direct
Rodney Hunt's H1 PAT deterioration and future margins. Direct
It is legacy order also, and at the same time we have had problems in getting people, because we have lot of orders for make in America, but we don't have enough people. And so, to get people, we have increased our salary as well as wages in Orange, Massachusetts, where the manufacturing plant is. So, it is a combined effect of everything.

Management directly addressed the reason for lower PAT in Rodney Hunt, attributing it to legacy low-margin orders and increased labor costs due to staffing challenges for 'Make in America' orders, providing transparency on operational hurdles.

Asked by Salil Desai

Negative margins on NPCIL projects and strategy. Direct
The reason we took that order was because NPCIL has huge plans, and this order also, we had bided initially at a higher price we had lost. They had placed order on someone else he could not execute, so, they came back to us, and we did it only to prove that we are better than everyone in India... So, we have proved our point, but now we are not doing the future jobs at losses.

Management candidly explained taking a loss-making project to establish credibility and secure future business with a key client (NPCIL), demonstrating a strategic long-term view despite short-term financial impact.

Asked by Salil Desai

Capacity to execute large orders and reach Rs.1000 crore revenue. Direct
So, in our type of business, in the same infrastructure which I have currently existing infrastructure, also I can produce Rs.1,000 crore I don't have to build two plants. The reason you have to build plants is clients place order on us, and when the product is ready, they don't take delivery, blocking scarce space under cranes in plant... So even today, from the existing manufacturing capacity, it is possible for me to achieve Rs.1000 crore.

Management clarified that current capacity is sufficient for Rs.1000 crore revenue, and new plants are primarily for addressing logistical issues like client delivery delays and space constraints, rather than a hard capacity bottleneck for production.

Asked by Gopinath

2 min read 6 chapters

Detailed narrative

Strong H1 FY25 Performance and Robust Order Book

Jash Engineering reported a strong first half of FY25, with consolidated revenue increasing by 61% year-on-year and Profit After Tax (PAT) growing by 212%. This performance was driven by significant revenue growth across its subsidiaries, including Jash Engineering (73%), Shivpad (133%), and Rodney Hunt (49%). The company's order book stood at a healthy Rs.873 crore as of November 1st, 2024, despite substantial dispatches in October, and is expected to close the year between Rs.850-1000 crore.

FY25 Revenue and Margin Outlook Maintained

Management reiterated its full-year FY25 combined revenue projection of Rs.675 crore, a 30% growth over the previous year's Rs.522 crore, with confidence in potentially surpassing this target. The company also maintained its profitability guidance, targeting EBITDA margins between 21-23% and PAT margins between 12-14% for FY25. The improvement in margins is attributed to a better product mix, higher margins on sales, and increased revenue, rather than solely raw material price fluctuations.

Strategic Capacity Expansion and Future Growth Drivers

Jash Engineering is expanding its manufacturing footprint with two new facilities in Chennai and SEZ Pithampur, expected to be commissioned in FY26. These expansions are projected to increase the company's manufacturing revenue capability to Rs.1000 crore and enable the company to double its revenue to Rs.1000 crore by FY28 from the FY24 base of Rs.522 crore. The new plants are also intended to address logistical challenges such as client delivery delays that block existing production space.

US Market Growth and BABA Act Compliance

The US market, particularly through Rodney Hunt, is a significant growth driver, with revenue expected to exceed USD 33 million in FY25, up from USD 24.6 million last year. The company is well-positioned to comply with the BABA Act (Build in America, Build for America), which mandates 65% US contribution until 2029 and 95% thereafter, by having and expanding its manufacturing facilities in America. The US infrastructure market, including water, wastewater, and pumping stations, is seen as a major revenue source, irrespective of political changes.

New Product Initiatives and Market Diversification

Jash Engineering has entered a joint venture and technological tie-up with Invent of Germany to offer secondary treatment equipment in India, targeting Rs.25-50 crore in revenue from these premium products once established. The company is also actively refocusing efforts in the Middle East and expanding into new markets like Vietnam and Cambodia, with Indonesia identified as a major market in Southeast Asia.

Addressing Short-Term Profitability Challenges

Management transparently addressed the deterioration in Rodney Hunt's H1 PAT, attributing it to legacy low-margin orders and increased labor costs due to staffing challenges for 'Make in America' projects. Similarly, a loss of approximately 13% on a Rs.50 crore NPCIL order was acknowledged as a strategic move to establish credibility and secure future, profitable business with the client, demonstrating a long-term perspective on market penetration.

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