POWERMECH - Power Mech Projects Limited Share Price

Management's outlook for Power Mech Projects highlights robust growth driven by diversified sectors and strategic initiatives. Key points include:

• Revenue Guidance: Targeting 25-30% growth in FY25, backed by improved execution post-elections and a strong order pipeline.
• Margins: Expect stable margins with potential improvement as high-margin MDO operations scale; peak margins anticipated in FY26-27.
• Order Book: Aiming for INR11,000 crore orders in FY25, focusing on industrial plants, O&M, railways, water, and BharatNet optical fiber projects. Unexecuted orders stood at INR18,115 crore (ex-MDO) as of August 2024.
• Sector Opportunities:
  • Power: Growth from BHEL's thermal projects (13,840 MW), Adani's expansions, and NTPC's 22 GW target. O&M revenue surged 52% YoY in Q1.
  • Non-Power: Railways (INR2,500 crore active projects), steel (SAIL, JSPL expansions), and mining (NMDC's INR50,000 crore plans).
  • International: O&M revenue up 27% YoY; exploring markets in Jordan, Qatar, and Saudi Arabia.
• MDO Updates:
  • KBP (Jharkhand): Delayed land clearance resolved; production to start by Q3/Q4 FY25.
  • Tasra (SAIL): Output to ramp up to 4,000"“5,000 MT/day post-washery tie-ups.
• New Initiatives: Pursuing green hydrogen projects aligned with India's 5 MTPA target, leveraging European technology partnerships.
• Margins by Segment: O&M (18%), international (20%), civil power (10%), and mining (13%) drive profitability, offsetting lower-margin erection (6%) and T&D (3%) businesses.
• Debt: Controlled at net debt of INR40 crore (debt-equity 0.31x).

Overall, management remains optimistic about sustained growth, margin expansion, and diversification across power, infrastructure, and emerging sectors.

Question 1:
Is it possible to give color on the EBITDA margin segment wise, say, in civil works, in the power segment, in the mining segment separately, railway segment separately?
Answer:
EBITDA margins vary: Mechanical erection (6%), Industrial construction (10%), Civil power (10%), Infrastructure (9%), T&D (3%), International operations (20%), O&M (18%), Water (19%), and Mining (13%). Weighted average EBITDA margin for Q1 FY25 was 12.2%.

Question 2:
If I look at these numbers, relatively, your water division and your civil in the power is on the higher side, while erection, industrial construction is on the lower side and even power T&Ds on the lower side. Am I right?
Answer:
Yes. O&M, water, and civil (power/non-power) have higher margins. Lower margins in industrial construction and T&D are due to delayed projects and mobilization costs for new orders.

Question 3:
Coming to the opportunity in the power side... So, within NTPC's INR10 crores per megawatt construction cost, what proportion would be civil opportunity?
Answer:
Civil and structural portions account for ~20-25% of the adjusted INR8-8.5 crores per megawatt (excluding IDC). Opportunities depend on BHEL's scope and material involvement.

Question 4:
We are hearing that in the thermal side, the vendor is limited to BHEL. Do you foresee timely delivery for NTPC/Adani projects?
Answer:
BHEL's capacity is ~15,000 MW/year, but challenges like working capital exist. The government may push Thermax, L&T, or GE to supplement. NTPC is exploring alternate packaging strategies for BOP.

Question 5:
Will the Supreme Court's mine tax judgment impact MDO operations?
Answer:
No. MDOs are contractors, not mine owners. Taxes apply to revenue, not retrospective liabilities. Offtake is contractually protected, ensuring no disruption.

Question 6:
Could you highlight Adani Mundra FGD project details and revenue expectations?
Answer:
Adani's FGD tenders (Udupi, Mundra) are progressing. Revenue of INR300"“350 crores is anticipated in FY25, with orders finalizing in 2 months. Execution has begun in Udupi.

Question 7:
What drives confidence in achieving 25-30% FY25 revenue growth despite past execution delays?
Answer:
Power sector opportunities (NTPC's 17 GW, Adani's expansion), O&M traction (INR1,500"“2,000 crores), railways (INR5,000 crores pipeline), and industrial/mining projects (NMDC, JSPL) underpin growth. Execution capacity is strengthened.

Question 8:
When will tax rates normalize to 25-26%?
Answer:
Tax rates will normalize to 26-27% in FY25, dropping from FY24's elevated rate due to one-time income tax settlement from a prior search.

Question 9:
When will MDO projects boost margins?
Answer:
MDO margins (~15-16% now) will improve post FY26-27 after full ramp-up and washery integration. KBP's revenue starts in Q3/Q4 FY25, while SAIL's Tasra offtake recovers post-washery resolution.

Question 10:
Are BHEL tenders delayed? When will order inflows materialize?
Answer:
BHEL's tendering (e.g., Lara, Pulser) aligns with 42-month schedules. Orders are expected from Q2-Q4 FY25 as engineering finalizes. Power sector inflows remain a focus.

Question 11:
What is the FY25 order inflow guidance and segment split?
Answer:
INR11,000 crores target includes O&M (INR1,500"“2,200 crores), power (civil/ETC), railways, infrastructure, and BharatNet projects. A INR75,000 crores pipeline spans power (INR12,000"“15,000 crores) and non-power sectors.