About the Company
Power Mech Projects Limited operates as an engineering and construction company, which provides erection, testing and commissioning (ETC), civil and operation and maintenance services for power projects.
Q1 2020 Updates
Financial Results & Highlights
Standalone Financials (In Crs) | |||||
Q1FY20 | Q1FY19 | YoY % | Q4FY19 | QoQ % | |
Sales | 470.2 | 334.6 | 40.53% | 571.9 | -17.78% |
PBT | 41.15 | 26.22 | 56.94% | 47.1 | -12.63% |
PAT | 26.46 | 17.21 | 53.75% | 28.9 | -8.44% |
Consolidated Financials (In Crs) | |||||
Q1FY20 | Q1FY19 | YoY % | Q4FY19 | QoQ % | |
Sales | 493.1 | 464.7 | 6.11% | 659.5 | -25.23% |
PBT | 42.9 | 41.4 | 3.62% | 60.2 | -28.74% |
PAT | 28.4 | 24.4 | 16.39% | 40.2 | -30.35% |
Detailed Results
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- The consolidated revenues for the company grew 6% YoY while profits grew 16% YoY.
- Amongst the different divisions, revenue growth was:
- Erection: Down 2.5% YoY
- O&M: Up 9.7% YoY
- Electrical Works: Up 285% YoY
- Civil & Others: Down 4.8% YoY
- The EBITDA margin fell 30 bps YoY to 13.4% in Q1.
- Order backlog as of 3rd August 2019 was at Rs 7399 Cr out of which 47% was from the power sector.
Investor Conference Call Highlights
- The revenues from the power business were around 63% of total revenues.
- The company secured around Rs 748 Cr of orders in the quarter and they aim to secure around Rs 1200 Cr of orders in the rest of the year.
- One of the projects under the Sarva Shiksha project for the Andhra Pradesh government of Rs 562 Cr has been cancelled by the government and the other project of Rs 875 Cr is going on. The Andhra Pradesh government has also put the lift irrigation project of Rs 1235 Cr on hold and the company is waiting for clarity of this one.
- The O&M order backlog grew 15% while the ETC order backlog grew 8% in Q1.
- The management is confident that they will achieve last year’s target of order booking of more than Rs 700 Cr this year in O&M.
- The management believes that they can book an additional Rs 4000 Cr of order booking in this year with around Rs 3600 Cr in the domestic sector while the rest would be from international orders. Out of this Rs 3600 Cr around Rs 2700 Cr is expected from the power sector.
- The company does not any penalties arising from the cancelled project from the Andhra Pradesh government.
- The company sees a lot of opportunities arising from the O&M business for state-owned enterprises like NTPC and other companies like Vedanta. The company is only associated with NTPC for short term projects but they are hopeful of bagging long term orders.
- The management expects around 25% of revenue contribution from O&M and the individual revenues up to Rs 670 Cr. The management also expects erection business to be around Rs 970 Cr.
- The management is confident of crossing 18% growth and maintaining margins at current levels.
- Among the order book target of Rs 4000 Cr, around Rs 1300 Cr is expected from O&M, Rs 1200 Cr from Mechanical, Rs 1100 Cr from Civil and Rs 500 Cr from Electrical.
- The debt for the company is at Rs 390 Cr excluding the equipment loan of Rs 300 Cr and the working capital. Average borrowing cost is between 9.8% and 9.9%
- The management expects the net-working capital days for the company to reduce to 95-110 days from the current level of 123 days in the next 2 years.
Analyst’s View
Power Mech has been a consistent performer in the engineering and construction space. The company is making good headroom into the O&M business. The management expects the order book to grow consistently on the back of the foray into non-power sectors and the increased O&M work. The company has yet to show any signs that they have been affected by the general economic conditions in the market. However, the cancellation of one of the AP state projects and the putting on hold of another major irrigation project in the state raises questions about how the company’s operations will continue under the new government in the state. Nonetheless, given their optimistic attitude and recent performance, Power Mech looks like a reasonable bet in the construction sector at current valuation.
Q3 2019 Updates
Financial Results & Highlights
Standalone Financials (In Crores) |
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Q3FY19 | Q3FY18 | YoY % | Q2FY19 | QoQ % | 9M FY19 | 9M FY18 | 9M% Change | |
Sales | 460.48 | 289.52 | 59.05% | 383.78 | 19.98% | 1178.93 | 907.41 | 29.92% |
PBT | 437.08 | 206.15 | 112.02% | 339.51 | 28.74% | 103.88 | 66.42 | 56.39% |
PAT | 271.42 | 134.16 | 102.31% | 224.62 | 20.84% | 668.21 | 42.98 | 55.47% |
Consolidated Financials (In Crores) |
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Q3FY19 | Q3FY18 | YoY % | Q2FY19 | QoQ % | 9M FY19 | 9M FY18 | 9M% Change | |
Sales | 612.84 | 356.55 | 71.88% | 538.26 | 13.85% | 1615.85 | 1064.86 | 51.74% |
PBT | 57.34 | 28.58 | 100.64% | 46.63 | 22.98% | 145.37 | 86.86 | 67.37% |
PAT | 38.87 | 20.24 | 91.98% | 33.54 | 15.87% | 102.92 | 60.9 | 68.98% |
Detailed Results
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- PowerMech has enjoyed a phenomenal quarter with standalone and consolidated Q3 revenues rising 59% and 72% YoY respectively.
- PBT and PAT for Q3 have been up more than 100% YoY.
- Meanwhile EBITDA margin has declined 55 bps YoY to 13.22% in the current quarter.
- The PAT margin on the other hand has risen 43 bps YoY to 5.53% in the current quarter.
- The vast majority of the increase in consolidated revenues has been due to the rise in the Civil & Other works segment which has grown 3.25 times from Rs 58.6 Cr in Q3FY18 to Rs 249 Cr in Q3FY19.
- The segment wise growth in 9M consolidated revenues is as follows:
- Erection: Up 27.9% YoY
- O&M: Up 6.7% YoY
- Electric Works: Up 159.7% YoY
- Civil & Other Works: Up 167.8% YoY
- Orders Backlog as of 13th Feb ’19 has been at Rs 6736 Cr.
Investor Conference Call Highlights
- The company has seen a good 9 months of performance mainly due to their strong order book.
- Around 79% of revenues originated from domestic business while 21% originated from international subsidiaries.
- The revenue mix stood at 66% from power and 34% from non-power.
- The dependency on BHEL and power sector is coming down which is helping in better working capital management.
- Debtor days have reduced to 63 days from 72 days last year.
- Based on the strong order book of almost Rs 6700 Cr, the company expects to maintain a steady growth rate of 22%-25% in revenues for the next 2-3 years.
- In international markets, Bangladesh operations have been good with the company bagging 12 project orders worth almost Rs 1200 Cr. Nigeria has also been good for them with orders worth Rs 450 Cr.
- The company also reports a growth of almost 32% in the O&M order book.
- The revenue contribution of BHEL has gone down to 18% from 35% last year.
- This highlights the company’s diverse sources of revenues and their commitment to not stay dependent on any single revenue source.
- The company is doing well on focusing on reducing dependence on power sector and will continue to modify and adapt their focus areas according in order to keep delivering steady growth of 20-25% while maintaining margins at current levels.
- The company is targeting to complete their Sarva Shiksha Abhiyan project before the deadline of 24 months and is asserting that they are well on their way to do so.
- The company currently has only one irrigation project in their order book currently.
Analyst’s View
Power Mech has been a good player in the engineering and construction space. The company is doing well to reduce their dependency on the power sector and on BHEL. The order book has also been consistently growing paving the way for them to maintain their current growth trajectory of more than 20-25% per year for the next couple of years. However, EPC space is a very crowded space with a lot of competitive pressure. Moreover, a lot depends upon the prevailing government policies in terms of visibility of future projects in EPC segment. Hence, any investor must understand risks involved in it.
Disclaimer
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