Key takeaways of the call

Order booking/inflow in H1FY21 was Rs 1922 crore (FY20 was Rs 3919 crore).

Order book continues to be satisfactory. Order backlog as end of Sep 30, 2020 was Rs 6761 crore (compared to Rs 6916 crore as at Mar 31, 2020). Inaddition the company is L1 for some orders.

Of the order backlog about 77% is project orders and 23% are product orders. Export orders was about 1358 crore, which is roughly about 20% of the order backlog. Moreover about 52% of the order book is from PSUs/Government. Further, less than 1% of our existing orders from customers have been put on hold. Getting good enquiries for most of its business divisions, particularly from PSU Companies.

ISGEC Hitachi Zosen has booked orders worth about Rs 152 crore in Q2FY21 and its order backlog as end of Sep 30, 2020 was about Rs 600 crore. Further, the company has booked orders worth Rs 1000 crore in Oct 2020.

All factories are working at full capacity and Project sites in India as well as abroad are running normally, though there are still some manpower shortages. Offices are working with about 50 – 65% workforce in office, on rotation basis. The rest of the office employees work from home on the days that they are not working from office.

The Company has implemented a cut in compensation for FY21 and has optimised manpower in some business areas, which has reduced the employee cost by around 15%. For junior employees - Manager level and below, the salaries have been restored from November 2020.

Expect revenue to be normal from Q3FY21 onwards.

Expect order booking to be good going forward. Have enquiries from both PSU/Government as well as that of private sector. More order finalisation are expected from PSU/Government sector in sectors/industry such as railways, coal, power, water, process industries and material handling. In addition order in relation to air pollution control and FGD are also expected to get finalised going forward. These are expected to compensate for any shortfall in private sector orders.

FGD Business: The company has capacity to execute FGD orders worth 1000 MW a year currently. Lot 6 of NTPC orders have got postponed and the bidding has to happen in November 2020 now. However the private sector orders are under pipeline. NTPC is not allowing Chinese to bid in its tenders.

Philipines Plant: The company is not keen on running a plant in a foreign country so the intent is to divest the project. The company incurs a loss of about Rs 3.5 crore per quarter.

To the exception of distillery plant set up in Sugar Factory, no major capex plans are lined up for FY21 & FY22 and the company is only to take up debottlenecking and efficiency improvement projects and the capex will be typically about Rs 15-20 crore.

Typically CG orders will be lumpy in nature. The company have good enquiries for pressure vessels, castings etc.

The company expects the margin for manufacturing segment to be about 10%, which is more sustainable. There is no exceptional driving the margin of manufacturing in Q2FY21 and that is more to do with order mix.

Execution time frame for product orders are in the range of 2 to 16 months. In case of projects it is about 9 months to 3 years.