Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ramkrishna Forgings Ltd (BOM:532527, Financial) reported a year-on-year revenue growth of 4% for Q1 FY 25.
- The company's EBITDA margin expanded by 70 basis points year-on-year, reaching 23.1% for Q1 FY 25.
- The company has secured new order inflows worth 1,679 crores during the quarter, with significant contributions from North America, Europe, and India.
- Ramkrishna Forgings Ltd (BOM:532527) is optimistic about future growth opportunities, particularly in the automotive and railway sectors.
- The company has successfully restarted operations in its subsidiaries, leading to improved margins and operational efficiency.
Negative Points
- Net profit after tax for Q1 FY 25 decreased to 73.1 crores compared to 77 crores in Q1 FY 24.
- Domestic revenue for the quarter was muted, partly due to lower offtake and a decrease in raw material prices.
- The company faced a one-off expense of 17.54 crores, impacting the EBITDA margin.
- There is ongoing uncertainty in the steel market, which could affect future realizations and margins.
- Shipping costs have increased, adding to the overall expenses and impacting profitability.
Q & A Highlights
Q: What is the rationale behind the acquisition of the Mexican company?
A: Lalit Khetan, CFO and Whole-Time Director, explained that the acquisition was strategic to quickly establish a legal entity in Mexico. This move allows Ramkrishna Forgings to start operations immediately, bypassing the one-year setup time required for a new entity.
Q: Can you share details on the annual order book and its execution timeline?
A: Lalit Khetan stated that the total order book is over 1,200 crores, executable over four years. This translates to approximately 300 crores per year starting next year.
Q: Why was domestic revenue muted this quarter?
A: Lalit Khetan attributed the muted domestic revenue to a mix of lower offtake and a decrease in raw material prices in the domestic market.
Q: What is the status of the Vande Bharat order?
A: Lalit Khetan mentioned that the company has started making prototypes and will submit them for validation in the coming quarter. The order, worth 270 crores, is expected to be executed over FY 26 and FY 27.
Q: Can you provide more details on the margin improvement in subsidiaries?
A: Lalit Khetan noted that operational efficiencies and the ramp-up of GMT Auto and other subsidiaries have contributed to margin improvements. The company expects this trend to continue.
Q: What is the demand outlook and volume guidance for FY 25?
A: Lalit Khetan reaffirmed the company's commitment to achieving 15% to 20% volume growth year-on-year, supported by a strong order book and steady customer offtake.
Q: Why has there been significant growth in exports recently?
A: Lalit Khetan attributed the growth to the company's world-class facilities and effective global marketing efforts. Customers seeking diversification and advanced technology are increasingly turning to Ramkrishna Forgings.
Q: What is the current status of the railway segment and potential future orders?
A: Lalit Khetan indicated that the company is in the process of validating its designs for the Vande Bharat project, which could open up new opportunities with Indian Railways and other private sector orders.
Q: What are the financial impacts of the recent investments in subsidiaries?
A: Lalit Khetan mentioned that the company's debt levels have increased by approximately 100 crores due to investments in subsidiaries. However, the overall debt levels are expected to remain stable by the end of the fiscal year.
Q: How are you managing the impact of fluctuating raw material prices on exports?
A: Lalit Khetan explained that raw material prices for exports are indexed to North American and European markets, which helps mitigate the impact of price fluctuations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
