SCHNEIDER - SCHNEIDER ELECTRIC INFRASTRUCTURE LIMITED Share Price

Management Outlook:
Schneider Electric Infrastructure's management expressed a positive outlook, driven by India's infrastructure push outlined in the recent budget. Key growth areas include power & grid modernization (notably nuclear energy expansion to 100 GW by 2047, solar energy, and green hydrogen initiatives), transport (Vande Bharat trains, urban rail, and airport electrification), data centers (AI-driven demand), and e-mobility (EV manufacturing and charging infrastructure). The government's focus on clean energy, digitalization, and urban development aligns with Schneider's offerings in smart grids, SF6-free equipment, and digital solutions.

Major Points:

1. Financial Performance:

   • 9M FY25: Orders up 13.8% YoY (Rs.1,546 Cr), sales up 18.2% (Rs.2,050 Cr), PAT growth of 26.4% (Rs.213.3 Cr).
   • Q3 FY25: Highest-ever quarterly sales (Rs.857 Cr), EBIT growth of 32.3%, and margin expansion due to better product mix and operational efficiency.
   • Backlog stands at Rs.1,086 Cr (+7.3% YoY).

2. Strategic Initiatives:

   • Capacity Expansion: Transformer capacity to increase from 5,500 MVA to 7,000 MVA (Rs.14 Cr investment).
   • Sustainability Focus: SF6-free equipment pilots, green transformers for steel plants, and ESG-driven digital tools.
   • Emerging Sectors: Wins in data centers, semiconductors, and e-mobility (EV charging infrastructure).

3. Market Opportunities:

   • Nuclear (SMRs/microreactors), renewables (solar inverters, storage), and smart grid solutions.
   • Digital services (EcoStruxure platform) and recurring revenue from modernization/asset monitoring.

Management emphasized leveraging India's capex surge (Rs.11.2 lakh Cr budget) and building internal capabilities for sustained growth.

Question 1:
Congratulations on a great set of numbers. So just two questions. One is that you mentioned your order inflow was a little slow in quarter 3. How is your deal pipeline and future outlook in terms of order going forward?

Answer:
The slowdown in Q3 order inflow was attributed to timing effects rather than structural issues. Management emphasized a healthy pipeline with no foreseeable roadblocks, expecting robust order momentum moving forward.

Question 2:
Your other expenses continue to rise fairly strongly, like almost 30%, 40% rise again in this quarter. Can we get a sense of how things will go moving forward? Will the benefit of operating leverage finally kick in?

Answer:
The rise in expenses includes provisions directly tied to sales and investments in team-building, capability enhancement, and organizational strengthening. Future optimization is expected as internal capabilities mature and stabilize.

Question 3:
In the nuclear part, what can be our opportunity size out of this plan of 100 gigawatts? What products can we supply here?

Answer:
Opportunities include supplying power equipment (transformers, automation systems, software) for small modular reactors (SMRs) and microreactors. The focus is on supporting indigenous nuclear infrastructure development aligned with India's 2047 goals.

Question 4:
Our order backlog growth is just 7% for this quarter year-on-year. Are we expecting a slowdown in growth for the next few quarters?

Answer:
The modest backlog growth reflects a temporary Q3 slowdown and strong sales execution. Management anticipates order pickup in Q4 and aims to bolster backlog through active pipeline conversion.

Question 5:
How do you wish to allocate capital/cash flows over the next few years? Priority: CapEx, working capital, or debt repayment?

Answer:
Funds will prioritize working capital and growth investments (e.g., capacity expansions like the Kolkata plant). The focus remains on funding organic growth while maintaining financial stability.

Question 6:
Are we seeing margin peaks due to better sales mix, productivity, etc., or can margins improve further?

Answer:
Management stressed continuous efforts to optimize sales growth, margins, and fixed costs. Margins are not peaking, with further improvements expected through operational efficiency and strategic initiatives.

Question 7:
How does your offering differ from L&T's acquired business? Is there overlap?

Answer:
Products serve similar applications but target complementary segments. Both entities focus on distinct customer needs, avoiding direct overlap and leveraging respective strengths.

Question 8:
How are forex fluctuations impacting imports/raw material costs?

Answer:
A robust hedging policy and treasury management mitigate forex risks. Currency volatility has limited near-term impact due to proactive risk management.

Question 9:
What is the adoption rate of digital solutions (e.g., EcoStruxure), and how does it affect margins?

Answer:
Growing demand for digital solutions (e.g., predictive maintenance, cloud analytics) is reflected in higher-margin engineered/customized projects. Recurring revenue from subscriptions is already contributing positively.

Question 10:
With grid automation trends, how does Schneider benefit?

Answer:
Schneider's grid modernization solutions (software, resilient equipment) align with India's need for reliable, AI-driven grid management. Opportunities include upgrading DISCOM infrastructure and renewable integration.

Question 11:
Are supply chain constraints (e.g., CRGO steel) affecting transformer capacity expansion?

Answer:
Suppliers are adapting to meet rising demand. CRGO steel shortages are being addressed through planning and partnerships. Domestic steel production initiatives may further alleviate dependencies.