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    KONSTELEC

    KONSTELEC
    Construction·5 Feb 2025
    Management Summary

    Konstelec Engineers Limited reported improved profitability with EBITDA margin at 10.57% and PAT growing 28% to ₹3.70 crores. The company holds a strong unexecuted order book of ₹485 crores as of December 31, 2024, and a bidding pipeline over ₹1,000 crores, targeting 15-20% annual revenue growth. However, the company is navigating project execution delays, working capital challenges leading to negative cash flow, and high customer concentration, while also addressing pending receivables from its Nigerian operations.

    Highlights

    5
    • EBITDA margin improved to 10.57% (from 9.39%), reflecting a 13% growth.

    • PAT increased by 28% to ₹3.70 crores (from ₹2.89 crores).

    • Unexecuted order book of ₹485 crores as of December 31, 2024, offers significant revenue visibility for 18-24 months.

    • Bidding pipeline is robust, exceeding ₹1,000 crores, with a 10-15% success rate.

    • Company is targeting 15-20% annual revenue growth for the next 2-3 years and aims to exceed FY24 performance.

    Concerns

    4
    • Project execution faced slowdowns due to external factors like land concerns and the election year, impacting H1 FY25 targets.

    • Negative cash flow is observed due to milestone-based billing and the need to fund suppliers 100% upfront, creating working capital stress.

    • Receivables from Nigeria operations still include ₹2 crores pending from an original ₹3 crores, despite management's efforts.

    • High concentration of revenue from top 10 customers (40-50%) is a recognized risk.

    What Changed1

    vs Q4 FY25

    Guidance items8 → 4 (-4)

    Key financials

    Single quarter

    04 metrics
    1. 01ROE11.3%
    2. 02ROCE16.4%
    3. 03EBITDA Margin10.6%+13%YoY
    4. 04PAT₹3.7 Cr+28.0%YoY

    Order Book

    high confidence

    Total Value

    ₹ 800 crores

    as of 2024-12-31

    quantified

    Execution

    The unexecuted portion of 485 crores is expected to be executed over approximately 18 to 24 months.

    Composition

    Mix3 sectors
    • Refinery60.0%
    • Steel20.0%
    • Other sectors20.0%

    Share of order book by sector

    Pipeline

    deal pipeline tcv

    Bidding pipeline in excess of ₹1,000 crores with a 10-15% success rate.

    Cancellations / Deferrals

    • deferred:Couple of projects slowed down due to land concerns from the government, impacting H1 FY25 targets.

    "The company has a strong order book providing good visibility, but execution can be impacted by external factors."

    Source:
    Prepared remarks

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Debt

    Gross ₹49 crores

    Cost 9.5%

    Liquidity

    Undrawn ₹58 crores

    The company has a CC limit of around ₹58 crores.

    Guidance & targets

    4
    CategoryTargetPriority
    Revenue
    Annual Revenue Growth
    15-20%
    High
    Revenue
    Annual Performance
    Exceed FY24 performance
    Medium
    Revenue
    Revenue Seasonality
    30-40% in H1, 60-70% in H2
    High
    Profitability
    Bottom Line Margin
    Improvement
    Medium

    Quarterly Results Disclosure

    next financial quarter
    CurrentHalf-yearly reporting
    TargetStart of quarterly results disclosure

    Why it matters

    Increased transparency and investor confidence through more frequent financial updates.

    So we might start from the next financial quarter but not sure.

    How to verify

    guidance_and_targets

    Risks & concerns

    5
    RiskSeverity

    Project execution delays due to external factors

    Land concerns from the government and election year slowdowns have caused project delays, impacting H1 FY25 top-line targets.Management acknowledged

    medium

    Working capital stress and negative cash flow

    Milestone-based billing means partial payments from clients, while 100% funding is required for suppliers, leading to working capital requirements and negative cash flow.Management acknowledged

    medium

    Receivables from Nigeria operations

    ₹2 crores from an original ₹3 crores are still pending from Nigerian operations, though management is actively pursuing recovery.Management acknowledged

    medium

    Manpower shortage for skilled roles

    The company faces a challenge in finding skilled manpower and is addressing this through partnerships with training centers and colleges.Management acknowledged

    medium

    High customer concentration

    40-50% of revenue comes from the top 10 customers, and the company aims to dilute this concentration.Management acknowledged

    low

    Q&A highlights

    8

    “So currently, we are operating 800 crores orders. Currently 485 crore is an unexecuted portion. ... Around 18 to 24 months.”

    Clarified the total order book, unexecuted portion, and the expected timeline for its execution, providing revenue visibility.

    asked by Mr. Hiral Nandu

    2 min read6 chapters

    Detailed Narrative

    01

    Overview of Business & Financial Performance

    Konstelec Engineers Limited, an EPC player in electrical instrumentation and automation, reported an EBITDA margin of 10.57%, a 13% growth from 9.39%. The company's PAT increased by 28% from ₹2.89 crores to ₹3.70 crores. ROE and ROCE for the first half of FY25 stood at 11.3% and 16.4% respectively. The management aims to exceed FY24's performance in the current financial year, targeting an annual revenue growth of 15-20% for the next 2-3 years.

    02

    Order Book and Execution Outlook

    As of December 31, 2024, Konstelec holds a total order book of ₹800 crores, with ₹485 crores remaining unexecuted. This unexecuted portion is expected to be completed within 18 to 24 months, providing strong revenue visibility. The company also boasts a robust bidding pipeline exceeding ₹1,000 crores, with a historical success rate of 10-15%. However, project execution has faced slowdowns due to external factors like government land concerns and the general election year, impacting H1 FY25 targets.

    03

    Strategic Expansion and New Market Opportunities

    Konstelec is actively expanding into new high-growth sectors such as renewable energy, data centers, smart cities, and industrial automation, leveraging its transferable expertise in electrification and instrumentation. The company is also making inroads into new geographies, particularly Saudi Arabia, where significant infrastructure development is expected. Management believes these new areas offer healthier margins compared to existing projects and are crucial for achieving its Vision 2030.

    04

    Financial Health and Working Capital Management

    The company's total debt stands at ₹49 crores, with an effective cost of borrowing less than 10%. While the company maintains a CC limit of ₹58 crores, it experiences negative cash flow due to its milestone-based billing model. Clients typically pay 60-70% upon material delivery, while Konstelec funds 100% of supplier costs, creating a working capital gap that needs to be covered until project closure. This dynamic necessitates reliance on banking institutions for working capital support.

    05

    International Operations and Receivables

    Konstelec's Nigerian operations continue to be healthy, yielding a net margin of around 20%. However, ₹2 crores of receivables from Nigeria are still pending from an original ₹3 crores, due to country-specific financial fluctuations. Management is actively working to recover the remaining amount in the upcoming financial year and has no plans to shut down these profitable activities despite the collection challenges.

    06

    Operational Efficiency and Manpower Strategy

    The company acknowledges a persistent challenge in securing skilled manpower. To address this, Konstelec is actively partnering with training centers and colleges to groom talent from an early stage, ensuring a pipeline of skilled professionals for future projects. This strategy aims to enhance operational efficiency and support the execution of its growing order book, particularly for significantly important projects requiring specialized skills.

    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.