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    Patel Engineerin

    PATELENGGood
    Construction·13 Nov 2024
    Management Summary

    Patel Engineering reported a strong Q2 FY25 with robust revenue and profit growth, driven by solid project execution. The company significantly reduced its gross debt and maintains a healthy order book, primarily in the hydro sector. Management expressed confidence in future order inflows and project execution, supported by government infrastructure initiatives and strategic alliances.

    Highlights

    7

    • Consolidated Revenue grew 14.98% YoY to ₹1,174 crores in Q2 FY25.

    • Consolidated Operating EBITDA increased 15.8% YoY to ₹162 crores, with margins at 13.81%.

    • Consolidated Profit After Tax (PAT) surged over 150% YoY to ₹81 crores.

    • Gross Debt reduced by over ₹500 crores in the last year, reaching ₹1,438 crores as of September 30, 2024.

    • Current Order Book stands at ₹17,260 crores, with 64% from the hydro sector.

    • Targeting ₹10,000-12,000 crores in order inflow over the next year.

    • Anticipate maintaining average EBITDA margins of 13-14% in coming quarters.

    Key financials

    Single quarter

    06 metrics
    1. 01Consolidated Revenue₹1,174 Cr+15.0%YoY
    2. 02Consolidated Operating EBITDA₹162 Cr+15.8%YoY
    3. 03Consolidated EBITDA Margin13.8%
    4. 04Consolidated PAT₹81 Cr+1.5%YoY
    5. 05Gross Debt (Consolidated)₹1,438 Cr

    Segment breakdown

    Hydro Sector
    56% Revenue Contribution
    Irrigation Sector
    18% Revenue Contribution
    Tunnelling Sector
    12% Revenue Contribution
    Roads and Other Sectors
    14% Revenue Contribution
    List

    Guidance & targets

    7
    CategoryTargetPriority
    Order Inflow
    Order Inflow
    ₹10,000-12,000 crores
    		High
    Profitability
    EBITDA Margin
    13-14%
    		High
    Debt
    Term Debt Payoff
    ₹650 crores
    		Medium
    Asset Monetization
    Non-core Asset Realization
    ₹150-200 crores
    		High
    Asset Monetization
    Arbitration Claims Realization
    ₹100-150 crores
    		Medium
    Capex
    Capex as % of Order Inflow
    5%
    		High
    Interest Cost
    Interest Cost Savings from Credit Rating
    50-100 bps
    		Medium

    Risks & concerns

    3
    RiskSeverity

    Monsoon season impact on execution

    Q2 was a challenging monsoon quarter, but the company still achieved revenue growth. — Management acknowledged

    medium

    Election season impact on order inflows

    Slowdown in new orders due to election year, but anticipate strong recovery post-elections. — Management acknowledged

    medium

    Interdependency on other contractors for project completion

    Finishing work on projects like Subansiri is interdependent on H&M/E&M contractors, which can affect timelines. — Management acknowledged

    low

    Q&A highlights

    3

    “See, I'll tell you, inventory is a component of two, three things. One is there is a stock of land parcels also, around INR350-odd crores is stock of land. So as I mentioned earlier, so our net working capital days is around 115 days, if I remove the average normal working capital. That excludes some arbitration claims, which are continuing in inventory, plus there are the stock of land is there. So if you exclude that, then my normal working capital is around between 3 to 4 months only, so which is normal.”

    Clarifies the components of high inventory and explains that core working capital days are within normal range after adjustments for non-core assets and arbitration claims.

    asked by Tej from Niveshaay Investment Advisors

    2 min read5 chapters

    Detailed Narrative

    01

    Robust Q2 FY25 Financial Performance

    Patel Engineering reported a strong Q2 FY25, with consolidated revenue growing 14.98% year-on-year to ₹1,174 crores. Operating EBITDA saw a 15.8% increase, reaching ₹162 crores, while EBITDA margins stood at 13.81%. The company's Profit After Tax (PAT) demonstrated significant growth, surging over 150% to ₹81 crores compared to ₹32 crores in the prior year, despite the challenges of a monsoon quarter and the loss of the late CMD.

    02

    Strong Order Book and Future Inflow Outlook

    As of September 30, 2024, the company's order book stands at a healthy ₹17,260 crores, with the hydro sector contributing 64%, irrigation 21%, and tunnelling 10%. In Q2, Patel Engineering secured a Letter of Award for the Jigaon Water Lifting project worth ₹317.6 crores (₹111 crores share) and was declared L1 for the Teesta-V hydropower project at ₹240 crores. Management anticipates an order inflow of ₹10,000-12,000 crores over the next year, with a bidding pipeline of ₹10,000 crores currently under evaluation and another ₹40,000 crores identified for future bidding.

    03

    Significant Debt Reduction and Asset Monetization

    The company has made substantial progress in debt reduction, decreasing consolidated gross debt by over ₹500 crores in the last year to ₹1,438 crores as of September 30, 2024, resulting in a healthy debt-equity ratio of approximately 0.39. This was aided by the monetization of non-core assets, including a ₹36 crore land sale in Bangalore and ₹55 crores from an arbitration award in Q2. The company aims to realize ₹150-200 crores annually from non-core assets and expects to pay off its ₹650 crore term debt within the next 3-4 years.

    04

    Positive Sector Outlook and Strategic Focus

    Management highlighted India's significant infrastructure commitment of ₹11.11 lakh crores and the government's focus on renewable energy, hydro, and water management. The company's strategic focus remains on hydro (56% of Q2 revenue), irrigation (18%), water sector, pipeline work, and roads. Strategic alliances with PSUs like RVNL and Ircon are expected to strengthen project execution capabilities, both domestically and internationally.

    05

    Project Execution Confidence and CapEx Strategy

    The final concreting of the powerhouse for the 2,000 MW Subansiri hydroelectric project has commenced, with the remaining ₹250-300 crores of work expected to be completed in 6-12 months. Management expressed confidence in future project timelines, citing government initiatives ensuring 90% land acquisition and environmental clearances before project awards. Capital expenditure is primarily for plant and machinery for new projects, averaging ₹100-150 crores annually, representing a maximum of 5% of order inflow.

    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.