Release Date: February 15, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pennar Industries Ltd (BOM:513228, Financial) reported a double-digit growth in revenue, profit before tax (PBT), and cash flow for Q3 2025.
- The company's net sales increased by 12.75% to INR 839.7 crores, and PBT grew by 20.29% to INR 39.78 crores.
- The diversified engineering and custom-designed building solutions segments contributed significantly to revenue growth.
- The company has successfully reduced its working capital days from 110-120 to 79, with a target to reach 60 days.
- Pennar Industries Ltd (BOM:513228) is expanding its capacity with a new plant in Gujarat, expected to boost production in the pre-engineered buildings sector.
Negative Points
- Operating margins remain at 10%, with expectations for improvement as new plants are commercialized.
- The company faces challenges in scaling its tubes business, which has remained flat over the past five years.
- There are concerns about the impact of US tariffs and duties, although the company does not anticipate significant effects.
- The solar panel manufacturing joint venture is seen as a commoditized industry, raising questions about its strategic fit.
- The company has provisions for bad debts, indicating potential issues with accounts receivables management.
Q & A Highlights
Q: When do you expect to see operating leverage from the new plant, given that operating margins are still at 10%?
A: We anticipate a long-term sustained improvement in margins as revenue scales. As new revenues are added at higher operating margins, we expect consistent margin increases. This trend has been ongoing for the past few quarters and is expected to continue. - CFO
Q: What is the rationale behind entering the solar panel manufacturing business, given its commoditized nature?
A: The solar panel venture is part of a strategy to realize value from legacy businesses. We have partnered with Zwork, transferring our know-how and assets to a joint venture where we hold a minority stake. This allows us to monetize our capabilities without substantial investments. - Vice Chairman
Q: How is your supply chain structured in the US, and do you see opportunities to increase sourcing from India due to proposed duty changes?
A: Our supply chains are localized, with most procurement done within the respective regions. We do not anticipate significant changes due to duties, as our strategy is to maintain localized supply chains to avoid tariff impacts. - Vice Chairman
Q: Can you provide an outlook for the next quarter and year in terms of revenue and EBITDA margins?
A: While we don't provide specific guidance, we are confident in projecting quarter-on-quarter revenue and profit growth. Our strategic focus is on maintaining growth across our prioritized business sectors. - CFO
Q: What is the plan for reducing the percentage of revenue from non-prioritized businesses?
A: Currently, 35% of our revenue comes from non-prioritized businesses. We aim to reduce this significantly over the next few years, with a target to bring it down to zero in five years. - Vice President, Corporate Planning
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
