Concall AI

Macpower CNC Machines Limited — Q3 FY25 earnings call

Call held 20 Feb 2025

Management summary

Macpower CNC reported a robust order book of INR 362 crores in Q3 FY25, bolstered by INR 42 crores in new orders from the IMTEX exhibition. The company significantly expanded its manufacturing capacity to 2,000 machines, with plans to reach 2,500 by April 2025, and strengthened its sales and service team. While Q3 revenue recognition was impacted by payment delays and strategic deferrals, management anticipates Q4 to be the highest revenue quarter ever, driven by strong order execution and a shift towards higher-end, higher-margin products.

Highlights

Total order book increased to INR 362 crores, demonstrating strong demand (Rupesh Mehta, page 4).
Secured INR 42 crores in new orders from the IMTEX exhibition, primarily from corporates (Rupesh Mehta, page 4, 14).
Manufacturing capacity expanded to 2,000 machines, with an additional 500 machines to be available by April end 2025, reaching 2,500 units (Rupesh Mehta, page 4, 8).
Material consumption cost decreased by 5-6% year-on-year for 9 months, driven by higher-end products and backward integration (Rupesh Mehta, page 4).
Expanded sales and service force by over 100 people, now totaling 225, and established a new R&D Centre in Bangalore (Rupesh Mehta, page 4).

Concerns

Q3 FY25 revenue growth was lower than expectations due to INR 15 crores of billing deferred to Q4, primarily from bank payment delays and strategic IMTEX machine display (Manthan Jhaveri, page 9; Rupesh Mehta, page 10).
Interest cost for Q3 was INR 28 lakhs, higher than the previous quarterly run rate, attributed to working capital utilization and bank renewal charges (Khush Nahar, page 6; Rupesh Mehta, page 6).
A fire incident occurred in Unit 2 in February 2025, though management states minimal impact on Q3 production and Q4 regular business (Rupesh Mehta, page 13).

What they filed

Q1 FY27: revenue up 56.1%, net profit up 110.1% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	71	60	80	61	86 +21%	86 +43%	100 +25%	95 +56%
Expenses	58	53	66	53	72	71	84	80
EBITDA	13	8	14	8	14 +11%	16 +99%	16 +14%	15 +95%
Margin	18%	13%	18%	13%	17%	18%	16%	16%
Other income	0	0	-1	0	0	0	0	0
Interest	0	0	0	0	0	1	1	0
Depreciation	1	2	2	2	2	2	2	2
Profit before tax	11	6	12	6	13 +11%	13 +116%	14 +15%	13 +112%
Tax rate	27%	26%	28%	25%	25%	25%	26%	26%
Net profit	8	4	9	5	9 +13%	10 +119%	10 +18%	10 +110%
EPS	8.30	4.47	8.60	4.56	9.38	9.79	10.15	9.58

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.

Order book

high confidence

Total value

₹362 Cr

as of 2025-02-20 quantified

Inflow this quarter

₹42 Cr

Execution

Q4 is expected to be the highest revenue quarter ever, with INR 15 crores of deferred orders and INR 115-120 crores of machines ready for dispatch.

Composition

Corporates (IMTEX) (client type) ₹42 Cr
NEXA (product) 27%
Defence (segment) ₹17 Cr

Pipeline

qualified rfp

INR 377 crore orders submitted by bid, with INR 17 crore pending defence orders

Cancellations & deferrals

deferred: Orders worth INR 15 crores deferred from Q3 to Q4 due to bank payment delays and strategic display of high-end machines at IMTEX.

The total order book is now INR 362 crores, indicating a very good order book for the company.

Source: Prepared remarks

Capital allocation

high confidence

Capex ₹10 Cr Primarily internal accruals, potentially temporary working capital funds
- Backward integration and production capacity expansion
- R&D Centre in Bangalore
we said this year Capex will be INR 10 crore to INR 12 crores, that much will be done. In the next financial year also, there is a target of INR 15 crores... because we have to do backward integration and also have to facilitate some production capacity.
Debt Debt disclosed
- New borrowing Working capital utilization and bank renewal charges led to INR 28 lakhs interest cost in Q3.
M&A Foreign Partner Joint venture · Pending regulatory

To execute expansion on new land, establish a world-class facility, and fulfill distribution and JV objectives.

In JV, the discussion is still going on, but to execute them, the first requirement is expansion. When we will do JV, we will have to do it on the new land, in the new area, with the new entity. There we will do JV. For that, our discussion is still going on, and they are ready. But after we get the land, in JV, or on September exhibitions, I think we will execute the JV.

Guidance & targets

Revenue

Revenue growth Revenue · FY25 · Medium confidence significant growth above the double digit

But I think there will be a significant growth above the double digit.

— Rupesh Mehta
Revenue growth Revenue · FY26 · High confidence 20%, 25%

I think the growth expected next year will be 20%, 25% because the manpower that has been increased, their realization has not come so much yet, which will start coming.

— Rupesh Mehta

Average Selling Price

Average price per machine Average Selling Price · Near term · High confidence INR 23 lakhs to INR 25 lakhs

Previously INR 20 lakhs → INR 23 lakhs to INR 25 lakhs

So this time, I think that the average price will come between INR23 lakhs to INR25 lakhs, because double columns, HMC, VTL, and 5 axis.

— Rupesh Mehta

Capex

Capex spend Capex · FY25 · High confidence INR 10 crore to INR 12 crores

we said this year Capex will be INR 10 crore to INR 12 crores, that much will be done.

— Rupesh Mehta
Capex spend Capex · FY26 · High confidence INR 15 crores

In the next financial year also, there is a target of INR 15 crores

— Rupesh Mehta

Capacity

Manufacturing capacity Capacity · April end 2025 · High confidence 2,500 machines

Previously 2,000 machines → 2,500 machines

So now we can make 2,000 machines, after that now this construction is going on, in which we are adding 500 capacity, so 2,500 will be available for the next '26.

— Rupesh Mehta
Revenue capacity Capacity · FY26 · High confidence INR 450 crores

See, next year, if we take it, a month has passed, if we take it roughly, we will have a capacity of INR 450 crores, in terms of revenue

— Rupesh Mehta
Additional machines Capacity · FY26 · High confidence extra 2,000 machines

So in '26, in financial year, I think, we will add extra 2,000 machines.

— Rupesh Mehta

Sales Target

Sales target Sales Target · FY26 · High confidence INR 500 crore

our target is INR 500 crore has been given to sales force.

— Rupesh Mehta

EBITDA Margin

EBITDA Margin EBITDA Margin · Future (implied) · Medium confidence around 20%

you can calculate EBITDA margin, around 20%.

— Rupesh Mehta

PAT Margin

PAT Margin PAT Margin · Next financial year (FY26) · High confidence not less than double digits

still if we talk about the PAT margin, I am not expecting less than double digits, in the next financial year.

— Rupesh Mehta

What to watch in Q4 FY25

Capacity utilization of 2,500 machines

Next quarter (May 2025 for 2,500 capacity)

Current 2,000 machines capacity, 500 being added

Target Full utilization of 2,500 machines

Why it matters

Crucial for revenue growth and efficiency, especially with increased order book.

So now we can make 2,000 machines, after that now this construction is going on, in which we are adding 500 capacity, so 2,500 will be available for the next '26.

Risks & concerns

Payment delays from banks/PSUs
medium

Delays in loan disbursement from banks and PSUs caused deferral of Q3 billing, impacting revenue recognition.

Both acknowledged
Supply chain disruption due to import dependency and geopolitical sanctions
medium

Reliance on foreign suppliers (Fanuc, Siemens, Mitsubishi) for critical components poses a risk, especially with US sanctions affecting some companies.

Both acknowledged
Bad debt risk from extending credit without proper due diligence
medium

Management is cautious about extending credit to retail/tier 4 customers to avoid bad debt, preferring to focus on corporates with strong financial assurances.

Management acknowledged
Execution challenges for high-end, sophisticated machines
low

Manufacturing 5-axis and double-column machines takes longer (4-5 months delivery time for foreign companies), potentially impacting capacity utilization in terms of numbers.

Management acknowledged
Competition in entry-level product segments
low

Entry-level products face higher competition, where the focus is on numbers rather than technology.

Analyst acknowledged

Q&A highlights

7 direct

Q3 Revenue Growth and Margin Volatility Partial

One of the reasons for this is that in Q3, due to Diwali coming in November, so that 8 days. In growth, we should have orderbook and production capacity. So, the biggest challenge is the realization of the bank. As you know, we do not give machines on credit, because we have to unnecessary show it in bad debt.

Explains the reasons behind lower-than-expected Q3 growth and margin volatility, attributing it to external factors like bank payment delays and strategic deferrals for IMTEX.

Asked by Manthan Jhaveri

Impact of Fire Incident Direct

Arnav ji, this fire has just happened, so it had no impact in the December quarter. And this fire happened in Unit 2... But there was not much loss in production. We are still calculating it and giving it to the insurance company... and there is no impact of this in Q3 because this happened in February.

Clarifies that the recent fire had no impact on Q3 results and minimal impact on Q4 operations, addressing investor concerns about potential disruptions.

Asked by Arnav Sakhuja

Land Acquisition for Defence MoU and Future Expansion Direct

So, there is a process in Sequence of Land under Defence Policy... I think that according to the process, we are making their payment in April.

Provides an update on the progress of land acquisition for the defence manufacturing unit and future world-class facility, indicating a timeline for initial payments.

Asked by Dhawal Shah

Slow Order Inflow in Q3 Direct

This is not ours. In entire India's Q3, when the IMTEX exhibition comes, it does not happen every year... all India's buying stops in December because people think that we will not book in November-December.

Explains that the perceived slow order inflow in Q3 was a sector-wide phenomenon due to the IMTEX exhibition in January, where customers typically defer purchases to avail better deals and see new technology.

Asked by Mann Ashar

Foreign JV Status and Defence Orders Direct

In JV, the discussion is still going on, but to execute them, the first requirement is expansion. When we will do JV, we will have to do it on the new land... And even today, I have INR 17 crore pending defence orders, Piyush ji.

Updates on the ongoing foreign JV discussions, linking it to the new land acquisition, and confirms a pending defence order book, indicating future growth avenues.

Asked by Piyush Jain

Import Dependencies and Supply Chain Risks Direct

First of all, our dependence on imports, is of the whole world, not just India, but India as a whole, in which Fanuc, Japan's systems for running machines, computers, and Siemens, now Mitsubishi, these three companies are our import components...

Discusses the company's reliance on global suppliers for critical components and acknowledges the potential risks of supply chain disruptions, while also mentioning the nascent domestic alternatives.

Asked by Navneet Singh

Competition and Payment Terms Direct

Ajay ji, there are two things in this, in the growth of the country, the entry level product, on the higher end product, any company, has to do R&D and move forward... Secondly, you talked about credit Ajay ji. In that, there are two things, there are big corporates, whose LCA we get, or whose assurance, other than bank guarantee, we get PDC checks...

Addresses concerns about competition in entry-level products and the company's cautious approach to credit, emphasizing focus on higher-end machines and strategic credit for corporates.

Asked by Ajay Surya

Future Cost Structure and PAT Margin Direct

Sales service team, almost, the cost now, the cost of 225 has come. Now it will come maximum, 10% maximum, we will develop new areas... still if we talk about the PAT margin, I am not expecting less than double digits, in the next financial year.

Provides insight into the expected increase in fixed costs due to sales force expansion and marketing, while maintaining a positive outlook for double-digit PAT margins in the next financial year.

Asked by Prateek Kothari

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance and Order Book Dynamics

Macpower CNC reported a Q3 FY25 marked by a strong order book reaching INR 362 crores, including INR 42 crores in new orders secured from the IMTEX exhibition in January 2025. Despite this, Q3 revenue growth was lower than anticipated, primarily due to payment delays from banks and PSUs, which deferred approximately INR 15 crores of billing into Q4. Additionally, some high-end machines were strategically displayed at IMTEX, further extending their billing cycle.

Capacity Expansion and Operational Enhancements

The company has expanded its manufacturing capacity to 2,000 machines and is on track to add another 500 machines by April 2025, bringing total capacity to 2,500 units. This expansion is supported by a significant increase in the sales and service force, which grew by over 100 people to a total of 225. Macpower also established a new R&D Centre in Bangalore on December 31, 2024, to drive innovation and product development.

Strategic Shift Towards Higher-End Products and Margin Improvement

Macpower is actively shifting its product mix towards higher-end machines, such as 5-axis, double column, and VTL, which command an average price of INR 23-25 lakhs, up from INR 20 lakhs. This shift, combined with backward integration efforts, has already led to a 5-6% reduction in material consumption costs over the past nine months. Management expects this strategy to drive EBITDA margins towards 20% and maintain double-digit PAT margins in the next financial year.

Capital Expenditure and Future Growth Plans

The company's Capex for the current fiscal year (FY25) is projected to be between INR 10-12 crores, with a target of INR 15 crores for FY26, primarily funded through internal accruals and temporary working capital. These investments are aimed at backward integration, capacity enhancement, and R&D. Macpower is also pursuing a foreign joint venture and a new world-class manufacturing facility on 32 acres of land, with initial payments for the land expected by April.

Market Outlook and Export Strategy

Management anticipates 20-25% revenue growth in FY26, driven by increased capacity, a strong order book, and a focus on big corporates and high-value machines. While export orders from IMTEX are being evaluated for ethical and technical feasibility due to potential US sanctions, the company is aggressively pursuing international markets, including participation in a major exhibition in Germany in September, to diversify its revenue streams.

Challenges and Risk Mitigation

Key challenges include payment delays from banks and PSUs, which can impact revenue recognition, and potential supply chain disruptions due to reliance on imported components from countries like Japan and Germany. To mitigate risks, Macpower is cautious about extending credit to retail customers, focusing instead on corporates with strong financial assurances, and is exploring domestic alternatives for critical components, though these are still in early stages of development.

This is an AI-generated summary of a publicly available earnings call transcript.

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