Sanghvi Movers is engaged in the business of providing hydraulic and crawler cranes to various industries in the infrastructure sector and has a fleet of medium to large-size hydraulic truck mounted telescopic and lattice boom cranes and crawler cranes with lifting capacity ranging from 20 tons to 800 tons.
Financial Highlights & Results
- The company’s revenue grew 16% YoY to Rs. 127 Cr while PAT rose up 82% YoY to Rs. 34 Cr.
- The company completed a Capex of Rs. 162 Cr in FY23 as follows :-
- The company’s number for FY23 were as follows :-
- Total Turnover – Rs. 486 Crores
- Profit after Tax – Rs. 112 Crores
- Average Capacity Utilisation – 83%
- Avg. Blended Yield – 1.97% per month
- Net Debt – Rs. 161 Crores
- Net Debt to Equity Ratio – 0.19 : 1
- Avg. Borrowing Cost – 8.90% p.a.
- Net Worth – 841 Crores
- The sector wise revenue comparison of FY23 to FY22 is as follows :-
- The order book position of the company as on 31st March, 2023 were as follows :-
- The Revenue breakup for the company for FY23 is as follows :-
- Income from Operations; Crane Rental – 444.98 Cr
- Income from Wind EPC business – 5.20 Cr
- Income from Project EPC business – 5.61 Cr
- The details of Other Income for FY23 is as follows :-
- The Proposed Capex Plan for the company for FY24 stands as follows :-
- The Vietnam subsidiary company has received extension of suspension of business operations vide letter dated 14th December 2022. Total extension period is from 18 December 2022 to 18th December 2023.
Investor Conference Call Highlights
- The management states that the consistent focus on debt reduction over the past three years has further strengthened the company’s balance sheet. It has enabled to generate surplus cash for future capital expenditures and investment opportunities in allied businesses.
- The EBITDA in FY23 has grown to 59%, which is an improvement of 12% over FY22 where the EBITDA was 47%.
- The management states that in FY23, the wind industry added about 2.3 gigawatts of capacity addition. In the last financial year, it was a transition year as the industry has been laying the groundwork to achieve India’s ambitious target of 140 gigawatts of renewable wind energy.
- The target primarily involves building associated infrastructure and capabilities around metmass, grid infrastructure, substations, acquiring and developing sites.
- Looking forward, the management states that it has order visibility and market pull for FY24 that the country may add 5 gigawatts of capacity addition in wind.
- The management believes that offshore wind power is too expensive as compared to onshore power, with 25 to 40 gigawatts of additional untapped potential energy there at 140 metres. An this number crosses more than 100 gigawatts.
- The management gives guidance of yields above 2% for FY24.
- The company has proposed to increase the authorized share capital from INR10 crores to INR25 crores for long term possible needs.
- The management states that the country is in capex upswing, which is expected to bring in demand to the company. In the refinery and petrochemical space, nearly 80 mtpa of capacity is being added either as an enhancement Brownfield or Greenfield project.
- In thermal power sector, almost 25 gigawatts of capacity are at various stages of construction.
- In steel sector, 13 mtpa of capacity addition is expected in this financial year. The cement industry plans to add about 80 mtpa by FY ‘24. Nearly every tier 1, tier 2, metro city has an elevated or underground metro under construction. These are all expected to increase demand for cranes and movers, thus the company is having a very big capex plan in FY24.
- The management states that all the capex that has been committed, has already been backed by orders.
- The management gives capacity utilization guidance for FY24 to be at more than 80%.
- On order visibility, the management states that most of the projects are associated with are multi-year projects. Some of the order book is going into the next financial year as well.
- The management sees good order visibility till the end of FY ‘24, with a healthy inquiry pipeline, and almost INR300 crores odd of order book, which needs to be executed in FY ‘23-’24.
- The management states the gross block number of crane as of 31st March, 2023 as INR 2,300 Cr.
- The management states an increase in the freight & manpower cost in Q4 was due to primarily the freight cost with certain cranes getting deployed with some other clients and the manpower cost, due to an increase in the manpower because of the deployment of additional cranes.
- The management states that it is strategically looking at allied businesses with focus on driving both project EPC and wind EPC. Last year, was the first year, where they had started and going forward, they expect to add more revenue coming from those two verticals.
- The management states that the EBITDA margins for both new business segments is 35% to 40%.
- The management states that there has been a transition in the wind industry in the last two years, with OEMs now been focused on delivering product and not undertaking the execution of the project.
- The customer of the OEM is an IPP, who doesn’t have the project experience, to do a complete project execution in the wind industry. So the management see that as a scope for the company to get involved in the providing turnkey EPC services for the wind industry.
- The management states that in project EPC, for the bigger projects such as fertilizer plants, refineries and petrochemicals; they provide a crane on a rental basis and also undertake allied activities such as equipment direction, alignment, engineering solutions, structural work etc.
- The management states that the average age of the cranes fleet currently stands at 20 years.
- The management states that the capex for FY24 is funded partly through internal accruals to the tune of 30% and the balance 70% will be availed by long term loans from the bank.
- The management clarifies that for existing internal accruals, they don’t need to liquidate any non-core assets to fund capex. There is sufficient cash flow generated through the business to fund the capex.
Sanghvi Movers Ltd is one of India’s largest crane movers and the fifth largest in the world. The company reported good revenues up 16% YoY to Rs. 127 Cr while PAT rose up 82% YoY to Rs. 34 Cr. The management also has resumed having concalls after many years. The company is going through another heavy capex cycle with demand supported this time from all sectors, as compared to only the wind sector in the previous cycle. The company is also going into allied business which have proven success since the past few quarters. The risk of the company stands in terms of the debt accrual, which not done conservatively could lead to problems as seen in the past few years. Nonetheless, the company has done a good job over reducing its huge debt over the past few years and prepares to grow at a good pace over the short term. Thus, it is a must-track small cap company for risk-taking investors.