Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skipper Ltd (BOM:538562, Financial) achieved its highest ever third-quarter revenue with a 42% year-on-year growth, driven by strong demand in the engineering business.
- The company's consolidated EBITA increased by 44% year-on-year, with operating EBITA margins improving to 9.8%.
- Finance costs as a percentage of sales improved to 4.4% from 4.9%, indicating better working capital efficiency.
- The order book stands at 6,354 crores, reflecting a near all-time high backlog, reinforcing leadership in the domestic power T&D segment.
- Skipper Ltd (BOM:538562) is expanding its capabilities into substation EPC, which offers significant margin potential and strong demand prospects.
Negative Points
- The company faces capacity constraints, limiting its ability to aggressively take on new orders despite a strong demand pipeline.
- Engineering products have seen a slight drop in margins, attributed to the variability of contract execution.
- The polymer segment has been facing headwinds due to volatile commodity prices and lower government allocation in certain projects.
- The order book growth was muted despite a significant order inflow, indicating potential execution challenges.
- The company is operating at high capacity utilization, which may constrain revenue growth until new capacity is fully operational.
Q & A Highlights
Q: Can you provide an update on the 75,000-ton capacity expansion and its expected revenue impact?
A: We plan to commission part of the facility in Q4 and the remainder in Q1 of the next fiscal year. We do not expect additional revenue from this expansion in Q4, but anticipate it will contribute starting in Q1 of the next fiscal year. The overall revenue potential of this capacity expansion is about 700 crores. - CFO
Q: What is the current status of interest expenses and working capital, and what are your expectations for the next year?
A: Our finance costs have improved to 4.4% from 4.9% year-on-year for Q3. Working capital days are currently at 88 days. We aim to further reduce finance costs through better contract quality and operational efficiency, but we do not have specific guidance at this time. - CFO
Q: How do you plan to scale up the substation EPC business, and what capabilities are you building?
A: We are focusing on engineering strength and execution capabilities, including manpower and equipment. We are favorably placed to secure our first major substation project, which will help us gain experience and scale up in this segment. - Director
Q: What is the current demand scenario, and how does it affect your revenue growth guidance?
A: The bid pipeline remains strong at 18,000 to 20,000 crores. We are selective in bidding due to capacity constraints but expect robust revenue growth. The market is buoyant, and our sector is not dependent on government spending, which supports our growth outlook. - Director
Q: What are your plans for future capacity expansion and its funding?
A: We plan to continue expanding capacity, with a potential 75,000-ton addition in FY26. The current expansion is funded through internal cash flows, and we have raised 75 crores in debt so far. Future expansions will be similarly funded, leveraging strong internal cash flows. - CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
