Jash Engineering Limited (JASH) Earnings Call Transcript

Good afternoon, everyone. I'm Siddesh Chawan from Ernst & Young, and I would like to welcome you to the Jash Engineering Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. The recording will be made available on the website within a day, and the transcript of the call shall be made available subsequently. To take us through the results and answer your questions today, we have the top management of Jash Engineering Limited represented by Mr. Pratik Patel, Chairman and Managing Director; Mr. Dharmendra Jain, Chief Financial Officer. Now I would like to draw your attention to the safe harbor related to today's earnings call. Comments made during the call may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risks that will cause future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. After the end of this call, if you need any further information or clarification, please do get in touch with us. With that said, I will now hand over the call to Mr. Pratik Patel. Over to you, sir.

Good afternoon, everyone. Thank you for sparing your valuable time and attending this call. I would now like to present the results for the first quarter. During this quarter, we reported revenues of INR 156 crores, which is quite a significant improvement year-on-year by around 17%. And also our PAT has turned positive in comparison to last year. So I will say the improvement has been there over corresponding period in last year. Most important is that we have during this quarter also commissioned our foundry expansion as well as our gate and valve manufacturing expansion. This increases our capacity by up to 30% and this would help us a lot in future in meeting our projected revenue targets. Our order book also is quite healthy and is enough, I will say, to cater to our yearly target and would allow us by the end of the year to have enough overflow of orders to take care of next year growth. This year, we now shift from India to our focus in America as well as in Saudi Arabia. As of today, it's funny that both these places are not stabilized. Saudi Arabia is still facing problem due to the Iran embargo of -- on the Gulf. And U.S. has issues related to Mr. Trump changing his position from time to time. However, both the markets are important and we have no other option but to be engaged with these two markets. As far as our long-term growth and strategy is concerned, we are quite confident that we would be able to achieve our projected revenue target of INR 1,500 crores by 2031. With this, I will now go to the results. Our revenue this year has -- quarter-to-quarter revenue has grown by 17%. It is not what I expected. I expected much better because the material which we produced for Qatar as well as for Singapore we have not been able to ship. The Qatar material is stuck for now more than 3 months because of the Gulf crisis. Many other orders also of Middle East are produced and kept in stock because we are not getting any vessels from India to ship to that region because of the conflict in that region. In case of Singapore, we are not delivering because we have some problem about getting the payments and so we are erring on the side of caution by not dispatching the materials. If those things would have been there, these results would have been much better. Our gross profit margin -- gross profit as well as margin, both have improved from last quarter -- last quarter of the same -- last quarter in the same year -- last year. Our EBITDA margin also has improved as well as our EBITDA has improved. So I would say overall -- and the PAT also has -- from minus INR 5 crores, it has gone to plus INR 5 crores. So I would say overall the quarter has been satisfactory, not as much as I would have desired, but it is still much better than what we were last year. Next. On the standalone basis, the true good news has been at Jash Engineering and at Waterfront. In case of Jash Engineering, the revenue has increased 21% and our PAT has significantly increased in this quarter. In case of Waterfront also, there has been a marginal increase in revenue, but because of very high profitable orders which [Technical Difficulty] put in, we are now in profit in this quarter, and some time back during the last meeting I have said that this year we expect Waterfront to achieve GBP 5 million plus in revenue with a significant profit and we maintain it would happen. As far as Rodney Hunt is concerned, there is no cause of concern. We are quite confident that this year we will achieve our projected revenue in excess of $35 million-$36 million and would be able to show profitability. What you see today is something which is the first quarter of -- blues. But I am sure that as we progress in the other quarters, we will see improvement at Rodney Hunt also. I am little bit concerned on Jash Process Equipment, but now we are working intensively and engaging with them in a very detailed manner to see that this company is also showing good performance by the end of the year. As far as our consolidated order book condition is concerned, our current order book stands at INR 932 crores, of which India has INR 293 crores and outside India the order book is INR 639 crores, which is quite a healthy sign because the more orders we have outside India, the improved performance on the PAT as well as the EBITDA margins. As you can see, in case of Waterfront, we have a INR 35 crores -- INR 34 crores order book, in Mahr, INR 31 crores order book, at Rodney Hunt INR 369 crores. And Jash Process Equipment is INR 29 crores, which is quite low compared to what we expected and in Jash Engineering is INR 559 crores. If you add the orders which we have already executed, the revenue till 1st -- 31st June -- 30th June and the order book we have today, you will observe that it is more than INR 1,080 crores, which means that it should be easy for us to meet our projected INR 875 crores revenue target, which I had informed in the last meeting. Next. Our pipeline of orders still is strong. We have already negotiated orders worth 72 crores and previous orders worth 60 crores are under negotiation. Here I would like to say that the under negotiation figure is only for those projects where the negotiations have commenced. We still expect more orders to be negotiated within this month and we are quite hopeful of adding INR 272 crores, something similar next month also -- this month also. This shows our consolidated income statement. As you can see from quarter 1 of FY '27 and quarter 1 of FY '26, there has been improvement at all stages. What is quite heartening is that the gross profit margin in Q4 and now is nearly same and generally in the Q4 the gross margins are better. However, if we are able to get it improved in Q1, then it gives a good feeling for the whole year. In view of this, I am quite positive for this year, as I have already informed before. Next. We have given a sales outlook of INR 875 crores with revenue within India of INR 320 crores and outside India of INR 555 crores. And you can see from the order book and revenue, which we have realized in quarter 1. This INR 875 crores target is easily achievable. I hope there is no big issues like last year and that we will be able to comfortably sail through with these figures. Thank you for patiently listening to me. Now I am ready to take your questions.

[Operator Instructions] We will take the first question from Kunal with InCred.

Sir, congrats on the good set of numbers. So my first question is so why did we not include the product level sales bifurcation with percentage breakup and region-wise breakup in the presentation? Can you just maybe broadly give me that range?

See, Kunal, we had a long discussion with our IR team and what we concluded was that this is the region-wise order booking and product-wise order booking is something which is very drastically changing from quarter-to-quarter. More important is when it is compared year-to-year and so we decided to cut down on all that and show it year-to-year because it will lead to better comparison and at the same time allow more time for question and answer.

Okay, sir. Sir, so if you can maybe give a break up of maybe region-wise just a percentage of how much revenue was from the domestic region versus international, and international how much sales was from U.S. and other -- rest of the world?

That we can give, however, it is already -- the revenue figures is already given in the second slide where standalone is there.

[indiscernible] last page. Last page, segmental...

And in the results also, if you go on the website or on stock exchange, you can find out these details.

Okay, sir. Sir, now you will not be giving you know like India, Europe, Far East, U.S. so that -- and U.K, that will not be the thing going ahead? Now you will only give the consolidated order book and segment wise -- entity wise order book?

So all those data would be in year-to-year. So year-to-year would be much detailed, so that you can compare because if one big order is executed in a certain quarter, all the data gets skewed.

And out of about INR 150 crores turnover, INR 70 crores is in India and INR 80 crores in out of India.

Okay. Sir, and my question on the quarterly margins, as you mentioned, we have done 60% margins and I think last year during this time, Trump had announced tariffs and we were trying to book orders, including the tariff amount and increased prices. So is this the benefit of that or are we seeing some manufacturing benefit that over here we are getting? So what is the impact of this?

Both. If you recall, we had informed that we have got INR 5.6 crores -- something like INR 5.6 crores as tariff refund.

Refund, yes.

Yes, so obviously that has also helped. But it is a combination of both.

Sir, tariff refund is a part of the revenue or what is it part of?

[Technical Difficulty] Consumption.

Consumption. Okay, okay. And sir, how is the -- as you also mentioned in your opening remarks that the Jash Process Equipment, which it has, Shivpad and WesTech?

No. It's not -- it is not Shivpad, it is only WesTech. The WesTech name has been changed to Jash Process.

So Shivpad has been merged with Jash Engineering completely?

Yes, it was already announced before.

So the -- My two questions. My first is the performance of Jash Engineering has benefited more because of the standalone business or Shivpad...

Shivpad is very small of our total revenue, so it is only 10%-15% of the revenues, not because of Shivpad.

Okay. And also, if you can throw some light on what are the concerns that you are seeing in the Jash Process Equipment?

See, whenever you acquire a new company, we always think everything is very rosy at the time of acquisition. But once we acquire, we evaluate and we found out that their costing systems were little different. Plus, the marketing was not aggressive and we were losing orders. And so we are making some changes. It is a transition period. It will take 2, 3 quarters for us to come to a clear picture on how to proceed further. But it'ss not going to be as easy as we thought in the beginning.

[Operator Instructions] We will take the next question from [indiscernible].

Congrats on a good set of results this quarter. So the question I asked was the new -- I had was the new FAQs that you released, you also mentioned a data center opportunity, which was new this time around. So why have we added that? Like have we added -- developed any new products in this market or are we like selling our existing products to new hyperscale or India -- Indian data center to players like Yotta, AWS, Microsoft or...

So we are not supplying to them, we are supplying to their vendors. The vendors who are doing the refrigeration or air conditioning et cetera or cooling, we are supplying to them, point number one. Point number two, this was an existing product which has been modified and developed to suit data center application. So exactly not the same product, a deviation from that product. We were not aware of this market 4 months before. We were approached by various people and we were shocked that the requirement for data center for these type of vessels is huge. We have first -- We have got the first order for four numbers and we are negotiating another order for 32 numbers. In fact, we have quoted for more than 600 pressure vessels, enough to keep -- to make a new plant. So it is an exciting development for us, it is a big business. Surely we are lacking in capacity, but once we see sustained order flow, then we will think of what to do next.

Got it sir. And given the data center water requirements are mission critical, do you see these commanding better margins than your other segments?

No, no, no.

And the municipal orders you cater to?

No. I don't think so because more -- it is as simple as this. More the volume, more the competition. So when we are talking of 600 pressure vessels, the type of competition would be intense. The margin profile would be the same.

Got it. Got it sir. And regarding Rodney Hunt, the $35 million revenue target we have for the next year, how much PAT margin are you baking in and how much percentage of the revenue would be coming from the higher margin post-tariff orders versus the legacy orders we quoted at 25% tariffs?

I would say the post-tariff order -- the both would be like 40%-60%. 40% would be old orders and 60% would be new orders. We are expecting a PAT margin of around 6% to8% -- 9% range.

Got it, sir. And when do you expect it to reach the 10% PAT margin we have targeted there? Would FY '28 be a realistic assumption to make?

I would say that this is too early for me to project it like that. And the reason for that is Mr. Trump. Now they are talking of putting 100% tariff on countries buying Russian oil. And if that happens again, we would be in turmoil. So I would say, yes, if everything goes right, we should be able to do by FY '28. But otherwise, let's keep our fingers crossed.

We will take the next question from Sudeep Anand.

Congratulations for a good set of numbers. Sir, in the opening speech, you mentioned about some dispatch issue to Qatar and some payment issues from Singapore. So those problems were solved during this August-September? And how do you see this going forward, say in H2 FY '27? And Singapore, this payment issue, is it related to a particular client? Or is it a general issue that you are facing over there?

It is related to a particular client. We have not got the old payment. So a large consignment we are not sending. In spite of having a letter of credit, we are not sending because whatever was balance payment due for earlier consignment, we have not got. And the consignment for Qatar is stuck because of the Gulf War. Now when -- in the beginning, there was in between -- 1 month back around we had an option to send it by -- through Saudi Arabia through Red Sea. But with the recent Houthi attacks on the Red Sea cargo, even that possibility is gone.

Okay. So, sir, in the U.S., what's the current tariff structure over there? Is it 12%?

15.6%, 10% special tariff and 5.6% was the existing. So 15.6% is the current tariff there.

Okay. And lastly, sir, on your CapEx and expansion front, what's the current status in terms of Saudi Arabia new plant which we are looking for?

See, in case of Saudi Arabia, we have already got all the permissions, Iqama, et cetera. All the official permission required to set up a plant has been received. We have applied for land now. Once they give us some indication of where they are able to give us land and how much, thereafter we have to go and sign the papers and then proceed further with project report and things like that. In case of America, the land is already acquired. We have just to finalize the contractor, build the plant.

We'll take the next question from Sanju Marwa.

Sir, I just have one question. And you touched upon that point regarding this Russia sanction oil bill which U.S. Senate has passed. Assuming it sees the daylight, what is your plan of action and what are your thoughts? I know it's early days. I don't know which way it turns, but if in case it comes, how are we planning for it and what are your thoughts on it?

So we have -- if you see in the past, I've been telling you that we have been circumspect regarding taking the orders in America. So most of the orders presently which we have are more towards manufacturing in America and not manufacturing in India. I would say around 70% are made in America and 30% are made in India. If push comes to shove, then we may have to manufacture more in America to overcome that situation. But we'll see as and when it happens.

Sure. So, out of INR 630 crores -- no, sorry, what was the number? INR 639 crores was the total exports order book?

INR 300 crores and something is in America order book. You can see from the slide. INR 300 crores and something was in America.

So, 70% of that is what you're saying can be managed through a Rodney Hunt...

It's already planned.

Okay. It's already planned. Understood...

And what is -- when I say 30% in India, it is 30% means, around -- India would be around 10% to 12% and then overhead and profit would make it 30%.

Got it. And sir, just wanted to understand, are you thinking on these lines in anticipation of these increased tariffs? Are you thinking of already increasing your pricing when you price it and budget it and send it to the customers? Are you already...

We are already doing it. Yes, we are already budgeting and doing it. So 15.6% is there. We are considering 25%, but we cannot consider 100%, otherwise we'll be out of the market. So we already have -- based on past year experience, I have already ensured that we are considering a little bit more than what is currently applicable. And if it is within that, then we have a better profit. But if it goes beyond that, then there is a problem.

And just last one from my side, sir. In FAQs, you had mentioned that this year's PAT margin you are -- earlier you were saying 12% to 13%, but now I think post-refunds and probably the order book and the execution of Q1, you are thinking 13% to 14% is what we should realistically bake in, right, from PAT margin perspective?

See, in the Q1 itself or Jash Engineering standalone, PAT margin is nearly 13%. For Waterfront also it has improved. So yes, it is possible, but as I said, we have to see from what happens. If there is some another geopolitical situation arising and that results into another chaos, then we don't know. So I would say we are in a position to achieve 13% to 14%, but it depends as we progress in the year.

We'll take the next question from Salil Desai.

Pratik bhai, you had mentioned about some change in the way you want to approach Mahr Maschinenbau and maybe do some manufacturing in addition to just the design. So if you can give an update on how that's going, if there is an implication for margins?

So Mahr Maschinenbau we already are taking orders, but we are not manufacturing and we don't intend to do manufacturing in Austria. However, the products of Mahr are now -- already we have got first two big jobs in U.K. for those -- for Mahr screens. And these screens -- two screens are for the British market and I think 14 screens are for Iraq. And some of these would be made in India and some of these would be made in U.K. So yes, we have started taking orders in Mahr Maschinenbau, and the manufacturing would be rolled out in U.K. and India at this moment.

I see. And sir, second is this pressure vessels for data center, I would say slightly modified what you were already making to make it suitable for this application. So what was it being used for earlier? What was the core application that you were serving earlier?

We were supplying pressure vessel for transmission lines, for water hammer control, not for cooling. So there is a small difference between the two. Internal design differences are there. And it is -- And frankly speaking, even we were not knowing that such a demand is there. But the client needed 16 vessels in 4 months, which is impossible for us to do. So yes, they split the order into 3 or 4 parts and given everyone for 4-4 vessels. And now that we know what type of involvement is there, if we are getting the second job, then we will rethink on our manufacturing infrastructure in Indore for this product.

[Operator Instructions] We will take the next question from Vedant Rane.

I would like to ask that considering our Q1 has been for past couple of years, this year has been quite good for us. So does this revenue also includes the INR 35 crores, INR 36 crores, which you mentioned in Q4 that has been deferred, but not booked as a part of revenue in Q4? Does this...

Yes. It is routine. Same thing happened in June. So it is now compensated. Added whatever not done in March and reversed whatever not recognized in June. So around INR 27 crores, INR 28 crores we have reversed in June and added to the last year reversal.

So my question was more like operationally are we -- would have been -- we still would have been positive this quarter if this was not the case?

Yes, because INR 36 crores minus INR 20 crores...

INR 27 crores.

INR 27 crores, so...

INR 26 crores.

INR 26 crores.

And INR 10 crores is positive.

Got it. Sir, another question would be, so now that the U.S. tariff issues are -- for now has been like brought down, cooled down, so are we seeing any increase in order bookings from U.S.?

Do you think that I should aggressively go for order booking when Mr. Trump is saying 100% tariff on India if they imported Russian oil?

Yes. Right.

See, we cannot. In fact, we are negotiating some -- very few of some orders, which are very big. Each order -- 2-3 orders and each order in excess of $7 million. And we keep our fingers crossed that before we get those orders, this crisis is resolved, otherwise we will be in a deep mess. So we are ourselves not pushing for finalization of those orders.

Got it, sir. And sir, could you please repeat again the timelines for the Saudi project like the commercialization and trial runs?

See, we -- our timeline -- internal timeline is that we should be getting the land by end of this year. And we should be able to have the plant ready by end of next year. Whereas the next year is December '27. If we get the plant ready by December '27, then by end of the financial year '28, it should be in operation. March '28 it should be in operation, both, that as well as Houston, both.

We will take the next question from Yogansh.

Am I audible?

Yes.

Congratulations on a good set of numbers, sir. Just two follow up questions. Most of the things have been answered by you. So, sir, on the data center opportunity that you shared, the four vessels that we did, if you could quantify the size of the business, and similarly, once we get more orders, 30, 60, 80, whatever vessels we are anticipating, what could be the quantum of this business?

So one vessel would be between INR 30 lakh to INR 50 lakh, depending upon its size. INR 30 lakh, INR 50 lakh, maybe up to INR 60 lakh. And -- so if we get order -- like we are negotiating an order for 32 vessels, then it would be around, say, INR 35 lakh or INR 35 lakh, INR 40 lakh, INR 50 lakh into 32. So I feel that we have a limited capacity. We cannot produce 600 vessels in our existing setup. But yes, we can produce 75 to 80 vessels in a year in our setup, along with the existing product line.

So this could be a INR 25 crores, INR 30 crores business opportunity if we work at the full scale?

Yes.

So, sir, secondly, if suppose you have to scale this business up, given the setup you have, do you think you have scope to increase this capacity or it will take a lot of time and hamper the remaining business that we have, sir...

It won't affect the remaining business we do, because the demand which we are seeing is like crazy. So once we are very confident of continuity of that type of orders and business, we may think of going for additional land and looking for setting up a new plant.

Okay. But that would be at least 1.5 year project, right?

Exactly. That would fit in our future expansion plans. As of now, we believe we have invested enough in India to cater to INR 1,500 crores revenue. In future, most of it will come from Saudi Arabia as well as from the Houston plant. However, if required, if business opportunity exists -- and India is booming. Frankly, I would say even India is booming for us. So sooner or later, we will have to take that call also. Not before '28, but we'll have to take that call. And if this is forcing us to take a call sooner, then we will do it.

Fair enough, sir. And sir, I think you did answer this question, but I had some lag, so I might be repeating this question. So apologies for that. The tariff reversal that you mentioned, some INR 5.5 crore, are we expecting more tariff reversal? If yes...