Key takeaways of conference call

Order book (net of GST) as on Aug 9, 2019 stood at Rs 508.4 crore of which the metering orders were RS 486.5 crore; switchgear was Rs 10 crore; lighting order Rs 9.3 crore and wires & cables Rs 2 crore. This gives good revenue visibility year ahead.

Enquiry base for Metering tenders are at a healthy level, which provides good visibility and positive outlook for the coming quarters

Cables turned in muted performance on account of low project orders due to uncertainty on account of elections.

Since June 2019 the lighting business sees good traction. Lighting and metering segment expect to register strong growth on sequential business in Q2FY20. Start of festive season demand to drive growth for the B2C business of the company.

Expansion in consolidated EBITDA margin in Q1FY20 to the tune of 170 bps to 12.2% (vs. 10.5% in Q1FY19) was largely due to increased contribution from high margin metering and switchgear business.

Consolidated EBIT margin of Metering Business expanded by 60 bps to 14.1% (vs 13.5% in Q1FY19) led by superior product mix and strong operating cost control.

See good double digit growth in metering business. In short-term the company expects the metering business to register a sequential growth of 20% in Q2FY20. The consolidated EBIT margin of metering business is expected around 15-16% for FY20. The Q1FY20 EBIT margin of 14.1% is due to product mix and that will improve going forward. Poly carbonate the raw material price softened compared to last year and that will help margin improvement.

Lighting – the growth potential is very large considering LED penetration way of happening. The opportunity comes with challenges such as requirement of innovation and pricing. The company is upto the challenges. Going forward, starting second half of current fiscal, the project business in lighting business to pick up.

Switchgear – the growth is much slower. The overall demand is not large right now. Even the government purchasing was muted due to elections. In last 2 year the switchgear has picked up. Going forward just a kind of double digit growth is expected for switchgear business. However the company expected to register a growth rate higher than the industry in switchgear.

In metering the margin is expected to get better. About 1% margin improvement is expected in lighting going forward. Switchgear and cable not much of improvement expected.

Metering business has strong tendering/enquiry pipeline. Various tenders and enquiries from utilities and the need from them are for about 2 crore meters.

Increase in net working capital is largely due to inventory built up in metering business where the production is higher in recent times.

New products: New MCB 10k - this got much better feature than 10 year old earlier model. The billing has started and this will replace. Seven new products launched in lighting and enhance the already rich product offerings. This has just gone into market. As we approach festive season the lighting business will see strong demand.

Debt will remain at current levels with plus or minus Rs 10 crore.

Expect non utility debtors coming down going forward.

Revenue growth at good double digit growth happen in meters based on 2 favorable factors good order book and enquiry are very strong and this exclude smart meter opportunity. Next 3-4 years the growth will be good.

PAT margin – better control on expenses with centralized procurement systems in place along with revenue growth is expected to result in margin improvement.

The B2C business in medium to long term to grow at faster rate with brand building initiatives of the company yielding results. However in the immediate future with in B2C business, the lighting to grow in bigger way, the switch gear and cables to growth at steady rate.

Professional lighting division accounts 30% of the lighting business. There is good enquiry bank is there and expects the demand to pick up.

There has been slowdown in real estate sector impacting the demand for switchgears and cables.