T R I L — Q2 FY25 earnings call

Call held 8 Oct 2024

Management summary

Transformers & Rectifiers India Limited (TARIL) reported a strong Q2 FY25, driven by robust revenue growth and significant margin expansion. The company secured substantial new orders, bolstering its order book to INR3,500 crores. Management outlined ambitious plans for capacity expansion, backward integration, and a focus on exports and specialized transformers, aiming for a US$1 billion revenue target within three years.

Highlights

  • Standalone revenue reached INR457 crores in Q2 FY25, an impressive increase of 75% Year-on-Year.

  • H1 FY25 revenue stood at INR773 crores, marking an 86% increase compared to H1 last year.

  • EBITDA for Q2 FY25 was INR76 crores, a significant rise of 236% Year-on-Year, with an operational EBITDA margin of 16.53%.

  • Profit After Tax (PAT) for Q2 FY25 was INR42.18 crores, showing a robust increase of 1,272% Year-on-Year, with a PAT margin of 9.22%.

  • Secured new orders totaling INR1,031 crores in Q2 FY25, bringing H1 FY25 order inflow to INR1,729 crores.

  • Unexecuted order book as of September 30, 2024, stands at INR3,500 crores, expected to be executed within the next 18 months.

  • First phase of new capacity addition (15,000 MVA) for commercial production is set to begin in January 2025.

  • Company targets to become a US $1 billion revenue company in the next three financial years.

Key financials

2 periods

Headline

  • Revenue
    ₹457 Cr
    YoY +75%
  • EBITDA
    ₹76 Cr
    YoY +236%
  • EBITDA Margin
    16.5%
  • PAT
    ₹42.18 Cr
    YoY +1,272%
  • Order Inflow
    ₹1,031 Cr
  • Order Book
    ₹3,500 Cr

H1

  • Revenue
    ₹773 Cr
    YoY +86%

What they filed

Q1 FY27: revenue up 8.1%, net profit down 4.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue462 559 676 529 460 −0%737 +32%783 +16%572 +8%
EBITDA69 85 131 88 52 −25%125 +47%118 −10%93 +6%
Net profit46 55 94 67 37 −20%76 +38%91 −3%64 −4%
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.

Guidance & targets

Revenue

  • Total Revenue Revenue · next three financial years · High confidence US $1 billion
    our journey towards the US $1 billion in the next three financial year has already started.

    — Chanchal Rajora, CFO and Advisor to the Board

  • Total Revenue Revenue · current financial year (FY25) · High confidence INR2,000 crores
    Our revenue target for the current financial year remains intact as informed by Chairman sir also

    — Chanchal Rajora, CFO and Advisor to the Board

  • Total Revenue Revenue · next financial year (FY26) · High confidence INR3,500 crores
    if I am targeting INR3,500 crores in next financial year, it is based on the order book, what I have right now.

    — Chanchal Rajora, CFO and Advisor to the Board

  • Acquisition Revenue Revenue · first year post-acquisition · High confidence INR700 crores to INR800 crores
    it may add up around INR700 crores to INR800 crores revenue on the first year itself in our books.

    — Chanchal Rajora, CFO and Advisor to the Board

Order Book

  • Order Book Execution Order Book · next 18 months · High confidence INR3,500 crores
    our unexecuted order books stand to INR3,500 crores which will be executed in next 18 months' time.

    — Chanchal Rajora, CFO and Advisor to the Board

Capacity

  • New Capacity Addition (15,000 MVA) Capacity · January 2025 · High confidence Commercial production
    The first phase of new capacity addition of 15,000 MVA will start for commercial production from January 2025.

    — Jitendra Mamtora, Chairman

  • Fabrication Unit Operational Capacity · March 2025 or little later, but not later than June 2025 · High confidence Operational
    First phase of fabrication unit will be operational from March 2025 or little later, but not later than June 2025.

    — Jitendra Mamtora, Chairman

Operational Efficiency

  • Integrated Organization Operational Efficiency · Q1 FY26 · High confidence 100% record integrated
    We target to be 100% record integrated organization by quarter one, '25-'26.

    — Jitendra Mamtora, Chairman

Export Share

  • Export Share Increase Export Share · Medium confidence more than 25%
    the visit to Europe last month focused on an increase in export share by more than 25%

    — Jitendra Mamtora, Chairman

Debt

  • Debt-Free Status Debt · near future · Medium confidence Debt free company
    Our ultimate aim is to transform into a debt free company in the near future, supported by clear and actionable plans already underway.

    — Chanchal Rajora, CFO and Advisor to the Board

Profitability

  • EBITDA Margin Profitability · Medium confidence 19%
    as Chairman Sir keeps guiding us always and keep telling us that in the good olden days we reached up to the 19% margin levels. So, we are aiming for that.

    — Chanchal Rajora, CFO and Advisor to the Board

Working Capital

  • Working Capital Cycle Working Capital · next two by next year · High confidence around 120 days
    in next two by next year, we have a target of around 120 days working capital cycle.

    — Chanchal Rajora, CFO and Advisor to the Board

Capacity Utilization

  • New Capacity Utilization Capacity Utilization · third quarter of next year · High confidence 100%
    the new capacity expansion and 100% utilization will be reached by third quarter of next year, right.

    — Chanchal Rajora, CFO and Advisor to the Board

  • Overall Capacity Utilization Capacity Utilization · this year (FY25) · High confidence 75% to 80%

    Previously 50% → 75% to 80%

    in last year we have actually delivered around 50% of the capacity utilization. And this year, we are aiming around 75% to 80% capacity utilization level.

    — Chanchal Rajora, CFO and Advisor to the Board

Receivables

  • Receivable Days Receivables · next 3 years · High confidence around 90 days

    Previously 174 days → around 90 days

    we are targeting receivable levels of around 90 days in next 3 years' time.

    — Chanchal Rajora, CFO and Advisor to the Board

Market context

  • Net Cash from Operating Activities Cash Flow · end of this financial year (FY25) · High confidence Positive

    Previously INR37.59 crores negative → Positive

    By the end of this financial year, Khushi.

    — Chanchal Rajora, CFO and Advisor to the Board

Risks & concerns

  • Delays in green hydrogen projects

    medium

    All projects for green hydrogen transformers, where TRIL is the only qualified supplier, have been delayed due to viability or margin expectations.

    Management acknowledged

  • Working capital intensity

    medium

    Acknowledged as a capital-intensive industry, but management has clear plans to reduce debtor days and optimize inventory to achieve a 120-day working capital cycle.

    Management acknowledged

  • Raw material price volatility (CRGO)

    low

    Management stated CRGO prices have stabilized, BIS certification for other mills will bring price correction, and they have pass-through facilities with most customers.

    Analyst downplayed

Areas of evasion (3)

  • Breakup of export vs domestic revenue
  • Segment-wise order book breakup (IDT, Scott, STATCOM)
  • Margins on export side

Q&A highlights

3 direct
Export markets, competitive edge, and strategy Direct
Ganeshram, at the moment, it is not the price, it is technology, we have the technology. Technology is not an issue. Issue is the delivery. You know, so most of the overseas players are occupied for next two and half to three years. So delivery plays a major role.

Reveals TRIL's competitive advantage in exports is technology and timely delivery, not just cost, and identifies key target markets and competitors.

Asked by Ganeshram, Unifi Capital

Supply chain constraints (CRGO, bushings) and backward integration plans Direct
we are going for backward integration in a big way. So, one of the projects is for the manufacturing of the tanks for which we have already, signed up with the agent to buy the land... And CRGO, as far as the CRGO is concerned, we are in the advanced stage of taking over one of the processing houses in Ahmedabad for processing CRGO... for the RIP and RIF bushing, we are tying up with another manufacturer who has a track record of last 10 years into the same field.

Addresses critical raw material and component supply risks by detailing concrete backward integration and collaboration strategies.

Asked by Tanay Rasal, Nomura

Working capital management, receivable days, and path to debt-free status Direct
we are targeting receivable levels of around 90 days in next 3 years' time. The steps what we have done is this, the first and more important steps what we have done, slowly, we are converting all entire industry customers, private industries or industrial customers to the LC basis... The biggest improvement what we have done is and we could able to do it that we could able to eliminate the customers who are the bad pay masters from our order book.

Provides a clear strategy and timeline for improving working capital efficiency and achieving a debt-free balance sheet, crucial for long-term financial health.

Asked by Agastya Dave, CAO Capital

2 min read 5 chapters

Detailed narrative

Strong Q2 FY25 Performance and Order Book Growth

TRIL delivered a robust Q2 FY25, with standalone revenue reaching INR457 crores, a 75% Year-on-Year increase. H1 FY25 revenue also saw significant growth, hitting INR773 crores, up 86% YoY. Profitability improved substantially, with Q2 EBITDA at INR76 crores (up 236% YoY) and a PAT of INR42.18 crores (up 1,272% YoY), resulting in an EBITDA margin of 16.53% and PAT margin of 9.22%. The company secured new orders worth INR1,031 crores in Q2, bringing the total H1 order inflow to INR1,729 crores, and maintaining a strong unexecuted order book of INR3,500 crores as of September 30, 2024, which is expected to be executed within 18 months.

Ambitious Capacity Expansion and Backward Integration Plans

TRIL is aggressively expanding its manufacturing capabilities. The first phase of a new 15,000 MVA capacity addition is slated for commercial production from January 2025. Furthermore, trial runs for a fully automated radiator manufacturing facility up to 765 kV have commenced, and the first phase of a fabrication unit will be operational by March 2025, or by June 2025 at the latest. The company aims to become a 100% record integrated organization by Q1 FY26, which includes taking over a CRGO processing house with a capacity of 25,000 tons per year and collaborating for RIP/RIF bushing manufacturing.

Export Market Focus and Specialized Transformers

The company is strategically focusing on increasing its export share by more than 25%, targeting markets in Europe, Africa, and America. TRIL's competitive edge in exports is driven by technology and faster delivery times, rather than just price. They are particularly targeting special duty transformers, such as electric arc furnace transformers, having recently received an order for a 175 MVA unit from Arcelor Mittal, Mexico. The company also highlighted its unique position as the only qualified supplier for green hydrogen transformers in India.

Working Capital Improvement and Debt Reduction Targets

Management is committed to optimizing working capital, targeting a reduction in the working capital cycle to around 120 days by next year and receivable days to approximately 90 days within the next three years. Strategies include converting industrial customers to LC basis, ensuring timely clearances for utility payments, and eliminating bad paymasters from the order book. The ultimate goal is to become a debt-free company in the near future, with net cash from operating activities expected to turn positive by the end of FY25, from a current negative INR37.59 crores.

Outlook on Demand and Raw Material Stability

TRIL foresees no overcapacity in the transformer market for the next two to three years, citing an INR18,000-19,000 crores inquiry pipeline. Demand for IDT, power, Scott connected, and STATCOM transformers is expected to remain robust, particularly from railways due to increased train speeds. While green hydrogen projects have seen delays, TRIL remains the sole qualified supplier. Regarding raw materials, CRGO prices have stabilized, and the company has pass-through facilities with most customers, mitigating margin risks from price fluctuations.

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