PTC Industries Limited — Q4 FY23 earnings call

Call held 9 Jun 2023

Management summary

PTC Industries is undergoing a structural transformation from a general industrial casting company to a high-technology aerospace and defence materials player. FY23 marked a significant inflection point with doubling profits and substantial margin expansion driven by higher realizations. Management is now pivoting from 'capability building' to 'capacity scaling,' with massive capex underway in the UP Defence Corridor.

Highlights

  • Annual Revenue reached ₹226 crores, representing a 22% YoY growth from ₹155 crores.

  • EBITDA grew 36% YoY to ₹66 crores, with margins expanding from 26% to 29%.

  • PAT doubled to ₹25.8 crores (approx. ₹26 crores) from ₹12.9 crores in the previous year.

  • Realization per kg saw a massive 74% jump to ₹1,480, up from ₹850 in FY18.

  • Debt-to-Equity ratio significantly improved, dropping from 1.0 to 0.58.

  • Announced a massive capacity expansion in Aerospace castings from 30-40 tons to 600 tons per annum.

  • Setting up a Titanium material mill with 6,500 tons capacity, targeting a 10x-15x revenue multiple on capex.

Concerns

  • Supply Chain Disruption (Titanium Sponge)

Key financials

  1. Revenue ₹226 Cr +22%YoY
  2. EBITDA ₹66 Cr +36%YoY
  3. EBITDA Margin 29%
  4. PAT ₹25.8 Cr +100%YoY
  5. Realization per kg ₹1,480 +74%YoY
  6. Debt-Equity Ratio 0.58 -42%YoY

What they filed

Q1 FY27: revenue up 121.1%, net profit down 36.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue69 58 69 51 75 +8%68 +17%96 +39%113 +121%
EBITDA11 6 15 5 9 −11%7 +11%9 −41%9 +64%
Net profit9 8 15 8 8 −10%6 −32%11 −27%5 −37%
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

  • Aerospace & Defence
    20% Revenue Contribution40 tons Current Capacity
  • Industrial Castings
    80% Revenue Contribution2,400 tons Capacity

Guidance & targets

Capacity

  • Aerospace Casting Capacity Capacity · Next 3-5 years · High confidence 600 tons

    From 40 tons today

    For the aerospace castings, we are adding two capacities. One is 300 tons for titanium casting and 300 tons for superalloy casting. So, combined together 600 tons annual capacity.

    — Sachin Agarwal, CMD

  • Titanium Material Mill Capacity Capacity · FY26 · High confidence 6,500 tonnes
    On an investment of INR150 crores, we are creating for titanium, a capacity in the tune of over 6,000 tonnes... I just took one example of a titanium material mill, which is having 6,500 tons capacity.

    — Sachin Agarwal, CMD

Revenue

  • Aerospace & Defence Revenue Mix Revenue · Next 5 years · Medium confidence 70-80%

    From 20% today

    In the next five years, that almost 70% of our revenue, 70%, 75%, 70% to 80% of our revenue is going to come from the aerospace and defence business.

    — Sachin Agarwal, CMD

Capex

  • Total Expansion Capex Capex · Next 1.5 years · High confidence ₹330 crores
    So we have INR150 crores plus INR180 crores, which is INR330 crores, out of that INR70 crores, INR80 crores is spent.

    — Sachin Agarwal, CMD

Risks & concerns

  • Supply Chain Disruption (Titanium Sponge)

    high

    Russia-Ukraine war has squeezed titanium sponge supply; PTC is mitigating this by investing in recycling technology (EBCHR) to use scrap.

    Management acknowledged

  • Long Qualification Timelines

    medium

    Aerospace components require multi-year audits and certifications (e.g., Safran audit) before commercial supply begins.

    Analyst acknowledged

  • Asset-Heavy Nature

    medium

    The business requires massive upfront capex (₹330cr+) which suppresses ROE during the construction and ramp-up phases.

    Analyst acknowledged

Areas of evasion (1)

  • Specific quarterly revenue guidance for the next 2 years.

Q&A highlights

3 direct
Suppressed ROE despite growth Direct
The first seven, eight years of our journey was investing in capability... When you invest in capability, you invest in infrastructure, not in capacity... The ROE for that will not happen right away.

Explains why historical ROE (sub-10%) is not representative of future potential as the company moves from R&D to commercial production.

Asked by Deepak Narnolia, Aditya Birla Capital

Competition from Midhani Direct
Midhani only produces 300 tons, in terms of material... And we are setting our capacity at over 6,000 tons. So, no sizable player has that small volume.

Management clarifies their scale advantage (20x Midhani's current capacity) and their status as the only private player in this niche.

Asked by Renjith Sivaram, Mahindra Manulife

Revenue potential of the new mill Direct
The revenue potential for that is, multiple times that of the investment... 10x to 15x [of the capex].

Provides a specific valuation/revenue framework for the ₹150-180cr material mill investment, implying a ₹1,500cr+ revenue potential from this single vertical.

Asked by Mukul Dharada, Individual Investor

1 min read 4 chapters

Detailed narrative

Strategic Pivot to Aerospace & Defence

PTC is aggressively shifting its revenue mix from 80% industrial to 70-80% aerospace and defence over the next five years. This transition is driven by the 'Parity Dharma' principle, focusing on high-entry-barrier technologies like titanium and superalloy castings. The company has already secured approvals from global OEMs like Safran, Dassault, and BAE Systems, moving from a development phase to a production-scaling phase.

Massive Capacity Expansion in UP Defence Corridor

The company is investing ₹330 crores in a new 50-acre campus in Lucknow. This includes a 600-ton aerospace casting capacity (up from the current 30-40 tons) and a massive 6,500-ton titanium material mill. The VAR (Vacuum Arc Remelting) foundations are already being laid, with installation expected by Q1 2024, while the EBCHR (Electron Beam Cold Hearth Remelting) unit is currently in transit.

Technological Moat and Import Substitution

PTC is positioning itself as a critical player in India's 'Atmanirbhar Bharat' drive, particularly for titanium components previously imported from Russia and China. By acquiring rare technologies like EBCHR and Plasma Cold Melting, PTC can recycle titanium scrap into aerospace-grade material. This 'Green Titanium' approach reduces carbon emissions by 26 tons per ton of titanium produced and significantly lowers raw material costs.

Financial Inflection Point

FY23 financials show a significant improvement in quality of earnings, with EBITDA per kg rising from ₹150 to ₹380. The company has successfully de-leveraged, reducing its debt-to-equity ratio to 0.58 following a successful fundraise. Management expects the massive capex to yield a revenue multiple of 10x to 15x at full capacity, suggesting a multi-fold increase in top-line potential by FY26-27.

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

More Capital Goods earnings calls