Power Mech Projects Limited (POWERMECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Power Mech Projects Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Juili Baviskar from Ashika Institutional Equities. Thank you, and over to you, Ms. Baviskar.

Thank you. Good afternoon, and very warm welcome to everyone. On behalf of Ashika Institutional Equities, I welcome you all to Power Mech Projects Limited Q1 FY '27 Earnings Conference Call. Today, we have with us management represented by Mr. Rohit Sajja, Executive Director Mr. Nallamothu Aravind, Chief Financial Officer; and Mr. S.K. Ramaiah, Director, Business Development. We thank the Power Mech Projects for giving us the opportunity to host the call, and we will now like to hand over the floor to the management for their opening remarks, post which we will open the floor for Q&A. Thanks, and over to you, sir.

Good evening, everyone. I'm Nallamothu Aravind, CFO of the company. I would like to extend a warm welcome to all of you joining us today for our quarter 1 FY '27 earnings call. Thank you for taking the time to participate in this discussion. As we begin financial year 2027. The first quarter reflected the continued strength of our growth trajectory with improved performance across most of our core business verticals, except [ PTC ] business. Our results reflect the strength of our integrated business model, disciplined execution capabilities and continued focus on operational excellence. For Q1 FY '27, the company recorded total revenue of INR 1,632 crores, reflecting 26% growth over the same quarter last year. The growth was driven by sustained execution across our core verticals, along with the ramp-up of operations in civil infrastructure, industrial EPC, O&M and international projects. EBITDA for the quarter was INR 176 crores at 10.8% margin, representing a 3% decline year-on-year. The margin was lower compared to the same quarter last year, primarily due to higher material and execution costs arising from the ongoing Middle East conflict, increase in royalty costs in the KPM project following the government orders and royalty sharing for seasonal quantities, lower margins in the [ KBP Mining ] business, primarily due to higher and removal costs from the opening new seams during quarter 1. Production from these seams is expected to ramp up in the coming quarters, improving margins; lower other income during the current quarter. However, our stand-alone business noted 11.3% EBITDA margin compared to 10.2% in the same quarter last year. Profit after tax stood at INR 89 crores, reflecting 11% increase over quarter 1 FY '26. Profit after tax after minority interest stood at INR 80 crores compared with INR 53 crores in Q1 FY '26, [ 53% ] increase over Q1 FY '26. This has helped to take the EPS to INR 25.23 compared to INR 16.61 in the corresponding quarter of financial year '26. The management is confident of maintaining its full year target in terms of execution, order book and margin profile. Coming to the revenue mix, the quarter continued to reflect a well-diversified contribution across our business segments. The O&M business continued its steady growth, contributing INR 431 crores, an 8% increase year-on-year supported by new order inflows during the year. The Civil segment, including roads, railways and water distribution projects; contributed INR 796 crores, registering a 28% year-on-year growth. Industrial construction business contributed INR [ 270 ] crores, down by 13% year-on-year, which was offset by the industrial EPC business, which contributed INR 96 crores. The mining business showed strong positive trend with a revenue of INR 84 crores, representing 223% year-on-year growth, supported by the commencement and the ramp-up of revenue from the KBP mine from November 2025 onwards. Now coming to the revenue mix for quarter 1 FY '27, the geographical revenue mix comprised 96% domestic and 4% international revenues. Sector-wise, the Power segment contributed 51% of the revenue, while non-power segment contributed the remaining 46%. From the order inflow, the company secured orders worth approximately INR 1,864 crores during quarter 1 FY '27 against our annual target of INR 12,000 crores, representing approximately 15.5% of the annual target. Order inflows during the quarter remained well diversified across industrial construction, civil infrastructure and O&M. Among the key award wins during the quarter include O&M of Mumbai Monorail. This project also marks our entry into the highly technical urban mobility space. Our total order backlog, including MDO projects stands approximately INR 55,398 crores. Excluding MDO orders, the executable order book stands at around INR 15,229 crores. This provides us with strong multiyear revenue visibility across industrial construction, civil engineering, EPC and O&M business. We continue to see the strong order pipeline across thermal power, both construction maintenance, [indiscernible] civil infrastructure. So in summary, we are pleased with the progress achieved during Q1 FY '27. Our diversified order book, strong execution capabilities and strategic focus on high-value projects continue to position the company for sustained long-term growth. Our key priorities remain to improve execution in line with our plan trajectory, sustain and improve our margin profile through a higher contribution from O&M, mining and other relatively higher-margin business and further improve cash conversion and working capital efficiency with continued focus on collections, milestone certifications and advances. With a strong order pipeline and execution momentum across our business, we remain confident of delivering on our growth objective and creating long-term value for all our stakeholders. With this, I now request Mr. Ramaiah to share the key business developments and the outlook for the upcoming period.

There is improvement in the total order backlog from the end of the last year INR 15,898 crores, and now it is INR 16,228 crores. Of course, major order has come up in the civil segment with [ 14.54% ] on backlog. And then O&M substantially -- growth is there [indiscernible], and that has boosted the order backlog by 11.8% to INR 3,322 crores. So it is a very positive sign. And of course, EPC segment, electrical, these segments [indiscernible] revenue it has to come down. And then the EPC business also, there is a [indiscernible] lot of opportunities, I'll expalin it to you later. [indiscernible] The domestic market continues continues to play a major role of 98.7% of the order backlog and order percentage booking [ while interaction ] is 0.3%. And then the power sector continues to do business including huge capacity [indiscernible] are having a lot of focus is there from the organization also is 26.4%. This is the overall [indiscernible] position. Now coming to the opportunities what we have done in the beginning when we started, we mapped the opportunity size of INR 70,000 crores to INR 75,000 crores on a broad basis in various segments of the different SBUs in power, non-power, [ inflation ] O&M, [indiscernible] now coming to quarter-wise, more focus is there, and that has [indiscernible] what we are going to get it to INR 2,500 crores of o mapping the power sector alone is the install the [indiscernible] wise when we and all the more [indiscernible]. Therefore, from the overall perspective, when I say in the power sector, the overall scenario is like this. We have been tracking about 58,000 megawatts of ordering which has been done in the main [indiscernible]. That is based on our interest, where we have to focus it. Of course, the capacities can be different based on the overall market, specific projects we are tracking it. And based on this, [indiscernible] about INR [ 2.14 ] lakh crores [indiscernible] major plant coming up and units megawatt [indiscernible] INR 30,000 crores the the various players apart from the state sector, central sector and the private sector, private sector is taking the lead. Adani is planning to jack up the capacity from [indiscernible] in the next 5 to 7 years. Therefore, [indiscernible] there are other players also state, central of them there is an add-on capacity also HCL already have taken action. Therefore, what we have done in this is that we have mapped opportunity which is available in the next, say, 2 years, about INR 60,000 crores. As on today, taking into account what has been gone forward in terms of ordering and et cetera the site construct is tendering is [indiscernible] megawatts. And then the Adani 1,200 megawatts. That should come to 2,000 megawatt and then JSW is planning 6,400 megawatts. That should together 26,000 something like that. [indiscernible] crores to INR 30,000 crores. And then the coming year also it can add up. And that is where the overall focus of the company is there because of the strength we have developed it and better to go to the opportunities where it is the private sector delivery. And we have a major job the [indiscernible] gigawatt INR 1,000 crores. There being a renewable type of segment and the existing will be added will be renewed and new contracts will add to the growth and all the other areas which we can in terms of the sector and then the new investing in the mining, tenders plant 1 [indiscernible] are working of [indiscernible] mapping to [indiscernible] crores to INR [ 1,000 ] crores order book for the current year based on opportunities we are having and [indiscernible].[Operator Instructions] The first question comes from the line of Deepak Poddar from Sapphire Capital.

So just first, I wanted to understand on the margin front. I mean you cited a few reasons, right? I mean the overhead removal cost and the royalty as well as the raw material cost. So how is the scenario right now? I mean, how should one look at overall annual EBITDA margins, given the current scenario?

Yes. See, the increase in royalty last year, when you are comparing the last year quarter presentation, there is exceptional revenue recognized in Q1 FY '26, [ seed ] quantity where we generated more revenue. And the current -- subsequently, the government issued an order, and they reduced the royalty. And this time, KBP Mining just started the production from November onwards. And initially, we did around 1.6 million tonnes of execution during the last till March. And the current year, we are targeting around 3 million tonnes. We started the new seeds that where initially OB removal is higher where we just started the seams, and the corresponding coal production will start from the subsequent quarter. Overall, the stripping ratio is within the agreed quantity ratio only. But one quarter, we'll have a higher OB cost and lower coal production. Subsequent quarters will cover that. Overall for the year, we'll maintain the same EBITDA committed margins of 15% to 16% in KBP mine. And overall lower other income, we have QP funds in the stand-alone level, and we are using that QP funds for the [indiscernible] construction. [indiscernible] income because of that also the other income side INR 3 crores to INR 4 crores higher. Now we completed that and we are not generating any revenue from the -- we are generating revenue on the FDs of -- margin on FD something. That is also one of the reasons. And overall, we projected guidance 12.5% margin, which we committed during the current year, we are sure about getting this margin profile with a lot of new orders we received during the last year on the O&M and the civil infra projects where we got good margins in those project that will generate this EBITDA margin in the [ Q2 ].

Okay. That was very helpful, sir. And then secondly, on MDO, so what sort of execution we are targeting this year and next year from MDO?

Deepak, Rohit here. So with regards to the MDO, we plan to do 3 million tonnes in our first mine, which is KBP. And perhaps in the second mine. The washery is about to get commissioned. We expect to do the hot commissioning by November, December. That's when we are going to achieve the full feed of the resource that we are going to produce here. So both the mines together, we expect to do INR 500 crores by the end of this year. So 3 million tonnes in the first mine, second mine, we'll do close to 1.2 million to 1.3 million tonnes because it's going to start ramping up once we have the full feed available after the washery gets commissioned.

And what about FY '28?

FY '28, INR 1,100 crores to INR 1,200 crores. So there's going to be a significant ramp-up because once the washery is commissioned, we anticipate to achieve peak capacity in the same mine, which is 3.5 to 4 because there is 0.5 million tonnes of Jama coal that we also have to produce. So depending on how much Jama that comes in fields, so 3.5 to 4 is ideally what we should look at there after the washery is constructed. And KBP be the first mine with CCL this year, we'll do 3 next year, we will ramp it up to 4, 4.2 million tonnes, Deepak.

Okay. I got it. And in terms of margin, I mean, given your higher share of revenue coming from MDO, so what does it mean for the overall margins? I mean, how much benefit overall at the company level this increased MDO revenue can bring?

Yes. So I think FY '28, we should be able to see a net margin of 21% to 23%, both the MDOs together. And this margin profile is going to continue over the life of mines with few ups and downs, whenever we have to do some CapEx reinvesting at the end of at the end of [indiscernible] convey that we have to. But otherwise, this is the average margin profile that we see.

So next year at 1,100, 1,200, 21%, 23% EBITDA margin in MDO is achievable task, right?

No. This is when we reach the peak capacity only, this is the expected 20%, 21% blended weighted average.

So next year '28, we still -- one of the mines, we still reach peak capacity. So probably from '29, you can see the margins. So next year, we'll be around, again, 15% to 17% range and then it will ramp up to 21% to 23%.

Next year would be 15% to 17% and FY '29 maybe 21%, 23% from MDO one can...

Yes, yes.

Okay. Understood. And just one last thing on the opportunity size that you mentioned around INR 25,000 crores, INR 30,000 crores. So is that your bidding -- is this the amount that we look to bid, I mean, going forward?

Yes, I think you are correct. See, initially, we make an estimate based on the opportunity that is based on our internal assessment. Once the tender comes, we try to make a more accurate estimate of that based on how the customer asks for the scope and qualification and other things. Sizing of the opportunity has come up from quarter-to-quarter INR 20,500 in power sector and INR 8,000 crores in the non-power sector, infrastructure and other areas. And every quarter, we will update that. And based on the tenders -- won tenders and then we update the new opportunity as it comes and see where we can penetrate the new sectors of the business.

And this INR 12,000 crores of order inflow for this year, we are looking from this pool of INR 25,000 to INR 30,000 crores?

The [indiscernible] power sector. [indiscernible]. And then particularly we have got a very solid relationship with [indiscernible] based on our performance and our record of working and there are a lot of new plants which are getting added into their capacity plan is there is there and then new projects [indiscernible]. We're hopeful the power sector business also should go up in terms of our install business as well as [indiscernible].

And also, Deepak, just to add to what Ramaiah said. So typically, in the power sector, our spike to answer your INR 25,000 crores, INR 30,000 crore question. In the power sector, our strike rate is -- rate is around 60% to 65%. So most of the bids we participate in, we anticipate or we expect to win based on historical data and the way we are progressing here. So that's why we cap it at INR 30,000 crores to INR 35,000 crores in terms of the number of projects we bid for and achieve arrive number of INR 12,000. Just wanted to give you the...

[Operator Instructions] Next question comes from the line of [ Madhu Agarwal ] with Agarwal Family Office.

A quick clarification. On the expected revenue from mining across [ KBC and Tastra ], are we revising downwards from the INR 600 crores? I think last quarter, we had said we do INR 350 crores from KBC and INR 150 crores from Tastra. Are we now revising that downward to INR 500 crores across both the mines?

No together is INR 500. So that's why we told INR 350 crores plus INR 150 crores from [indiscernible] together INR [ 500 ] crores.

Sorry, my apologies. I've just got my math wrong. My apologies. That's fine.

Next question comes from the line of [indiscernible] with Prosperity Wealth Management Private Limited.

[indiscernible] Could quantify that number?

[indiscernible] We did around INR 70 crores. INR 70 crores.

Okay. And what is the [indiscernible] EBITDA margin for this [indiscernible]?

. [indiscernible] 10% to 11% for remaining quarters..

Next question comes from the line of Mahesh Patil from ICICI.

[indiscernible]

[indiscernible].

Q1 of last year, right?

Yes. [indiscernible]

[indiscernible] started before that because of the penalty is coming down [indiscernible]

[indiscernible]

Next question comes from the line of Mudit Bhandari with IIFL Capital.