Release Date: April 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mahindra EPC Irrigation Ltd (BOM:523754, Financial) achieved a 4% revenue growth in FY25, despite a nearly flat industry performance.
- The company reported a significant improvement in its bottom line, with a PBT of INR10.71 crores in FY25 compared to INR2.43 crores in FY24.
- The company achieved a 32% revenue growth in Q4 FY25, marking the highest ever Q4 revenue.
- Mahindra EPC Irrigation Ltd has successfully increased its non-subsidy business contribution to 33.4% from a mere 3% in FY20.
- The company has implemented strategic sourcing initiatives and cost control measures, resulting in a material cost saving of 2.6% compared to FY24.
Negative Points
- The company faced a de-growth in the first half of FY25 due to strong headwinds from general elections.
- There is a significant skew in revenue towards the second half of FY25, leading to higher debtors as of March 31, 2025.
- The industry faced challenges such as skyrocketing raw material prices and policy changes, impacting growth.
- Mahindra EPC Irrigation Ltd's operating profit margin remains a concern, with a full-year margin of 5% despite a 10% margin in Q4.
- The company has increased other expenses due to the growth in irrigation projects, which have higher on-site costs.
Q & A Highlights
Q: Could you explain the 7% savings in material costs and why the operating profit doesn't reflect this saving?
A: The 7% savings in material costs are due to a reduction in raw material prices (2.6%), a higher share of irrigation projects (2.6%), and favorable product and market mix (1.6%). However, the operating profit doesn't fully reflect this saving because project sales have lower material costs but higher on-site expenses. – Unidentified_2
Q: What kind of operating profit margin can we expect in the coming years, considering the changes in business mix?
A: Historically, our operating margin has been in the range of 6-8% during stable years. We aim to return to this level of stability as a first milestone, with ambitions to increase margins further over time. – Unidentified_2
Q: Do provisions on receivables indicate bad debts, or are they just delayed payments?
A: Payments from state governments, our primary clients, are delayed but not typically bad debts. The provisions are more about managing exposure and ensuring prudent business operations. – Unidentified_2
Q: How is Mahindra EPC increasing its market penetration, especially against competitors like Netafim?
A: We focus on demand generation through farm demonstrations, leveraging Mahindra's extensive dealer network, and exploring new segments like institutions and municipalities. We also innovate in product offerings to appeal to a broader customer base. – Unidentified_2
Q: Are there plans to establish more satellite centers in response to proactive state policies?
A: Yes, we are reviewing our supply chain strategy to optimize for emerging markets in northern India. We are considering new satellite units to better serve these growing markets and reduce costs. – Unidentified_2
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
