Q4 23/24

Apr 25, 2024

Summary

FY2024 sales grew 7% as record orders and stronger margins offset a sharp export decline. FY2025 guidance calls for double-digit growth, led by domestic demand, while exports are expected to stay below INR 100 crore.

Ladies and gentlemen, good day and welcome to Kirloskar Pneumatic Company Limited Q4 FY 2024 earnings conference call hosted by Antique Stock Broking. As a reminder, all participants' line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Shah from Antique Stock Broking. Thank you, and over to you, sir. Yeah. Thank you. Good evening, everyone. On behalf of Antique Stock Broking Limited, I welcome you all to Q4 FY 2024 earnings call of Kirloskar Pneumatic Company Limited. To discuss the results, from the management, we have Mr. K. S. Srinivasan, Managing Director, and Mr. Ramesh Birajdar, CFO of the company. I will hand over the call to Mr. K. S. Srinivasan for his opening remarks, post which we can open the floor for Q&A. Over to you, sir. Yeah. Thank you, Amit. Good evening to all of you. Thanks for joining this call. Let me, at the outset, wish you all a belated Ugadi, Baisakhi, Tamil New Year's Day. May the new year bring us all good tidings and joy. I have with me on this call Ramesh Birajdar, the CFO, and Jitendra Shah, the company secretary. I am going to request Jitendra to read out the disclaimer for all of us, please. Thank you. Thank you, sir. The presentation uploaded on the website of the company and discussion on the financial results during the earnings call may contain statements relating to future business developments and economic performance that could constitute forward-looking statements. While these forward-looking statements represent the company's judgments and future expectations, a number of factors could cause actual developments and results to differ materially from expectations. The company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. Further, investors are requested to exercise their own judgments in assessing various risks associated with the company and also the effectiveness of the measures which taken by the company in tackling them, as indicated during the discussions. Thank you all. Thank you, Jitendra. The year FY 2024 was a difficult one. We had strong domestic sales growth, but a year in which the exports at INR 69 crores were nearly INR 100 crore lower than the previous year. This meant that the overall sales growth was muted at INR 1,323 crores, only 7% higher than the previous year. On the back of a favorable product mix and greater in-house manufacture, the pre-tax profit at INR 178 crores was nearly 24% higher than the previous year. Demand for our products remained strong with the new order booking in the year at an all-time record of INR 1,770 crores, nearly INR 500 crores higher than the previous year. This bodes well for the strong sales growth that we have planned for FY 2025. During the year, the company gradually enhanced its in-house manufacture capacity. We now manufacture our requirement of alloy steel forgings and critical fabrications. This has not only helped us to offer quicker deliveries, but also to reduce costs. The CapEx spend for the year was at INR 61 crore. This was primarily to enhance our capability to allow us to deliver over INR 500 crores of sales per quarter. The company also continued on its strong focus to build IPs. We had over 15 design and patent filings during the year. The company was also awarded the Kincentric Best Employer of the Year award, which is a testimony to the robust people processes that we follow. The company entered into an agreement with PDC Machines LLC, U.S.A., to package their diaphragm compressors for various hydrogen compression applications. This is a growth area in India, and we are now well placed to address this opportunity with the best solution available globally. The net working capital at INR 278 crores was 17.6% of sales. This is an improvement over the 19.1% that we had last year. We still are looking to reduce it as a percentage further during the subsequent years. Consequently, the fresh cash generation during the year FY 2024, post-tax, post-dividend, was over INR 125 crores. Let us now discuss the results by product lines. The air compressor business continued to grow with its two new product lines, the Tezcatlipoca centrifugal compressors and the Atmos Aria screw compressors, both doing well. The Tezcatlipoca has quickly established itself as the preferred choice among centrifugal compressor buyers. We have a good bank of orders for execution for this in FY 2025. Overall, there was intense competition in the air compressor space, with nearly all the global players being present and vying for market share. We continue to grow our business profitably, albeit at a moderate pace. Refrigeration compressors and systems. We had record sales of bare shaft ammonia compressors used in cold chain and ice plants. We remain a dominant player in this segment. The larger installations in food processing plants, dairies, and pharma continue to be dominated by imported compressors. We have just started installing our Khione screw compressor packages in this area. This should see significant scale-up in FY 2025. As we speak, we have got our first orders for export of this as well. The refrigeration package sales to the ammonia terminals and petrochemical plants were affected by delays in delivery of compressors from Europe, as well as in getting clearance from the EPC contractors for the sites. We expect this challenge to ease during the next 2 quarters. Overall sales in this segment was below our plans. Process gas compression systems. We had record execution of order for oil and gas projects in India during the year, and this not only contributed to sales growth, but also compensated for the poor off-take of CNG packages. We continue to have strong orders in this space. CNG packages and Kelana booster compressor installations continue to lag in spite of various steps and announcements in this sector. We expect to see material change on the ground in FY 2025. There has been significant uptake in both inquiries and finalization of orders for biogas compressor packages. The company, as of now, the most cost-effective compressor package for this, the Jarilo range, that can handle gas from 0.5 to 250 bar in 4-stage configuration. We expect this business to become a significant one during FY 2025 with several major projects under finalization. Export of gas packages to MENA region was lower by nearly INR 100 crore, as we mentioned earlier. We do not expect any significant improvement in FY 2025 with the current situation in this region. However, our investment to build this business in Southeast Asia is bearing fruit, and this will grow gradually. The O&M services business continues to grow with the installed base itself growing. We expect this to become more and more significant as we go forward. Outlook for FY 2025. The global economy is getting into a new normal with all the wars and uncertainties getting plugged in. The initial rush to find alternate gas sources, reducing the concentration of supply chain to one country has clearly crossed the hump. We are into a period of relative stability and modest growth. However, for us at Kirloskar, we have the advantage of being India-focused, and this is an area of high growth. Further, the strategy to focus on building in-house capabilities for manufacture of most critical items and to build a new range of compressors for various requirements based on our IP and design will further strengthen our competitive position in this market. With a strong order bank at the start of the year, we are committed to deliver double-digit growth in top line in FY 2025. This should allow us to reach our aspirational target of INR 2,000 crores by next year. The company declared a final dividend of INR 4, which is 200%, taking the total dividend for the year to INR 6.50, which is 325%. Now with this, I would request Mr. Ramesh Deoras, CFO, to take you through the financials. Ramesh, can you? Yes. Thank you, sir. Good evening, everyone. I trust you have had the opportunity to view results recently posted on NSE and BSE website following the conclusion of our board meeting. Additionally, we have uploaded a presentation detailing our annual results on our company's website. For those who have not had the chance to review the results yet, let me provide a summary of our financial performance for the fourth quarter and fiscal year 2024. Before discussing specifics of our financial performance, let me first highlight some of the year's significant achievement. The company recorded new order bookings exceeding INR 1,770 crores during the fiscal year 2024. As of April 1st, 2024, the company's order book amounted to INR 1,475 crores, a significant increase by 28% from INR 1,150 crores recorded on April 1st, 2023. This sets the stage for a strong start to FY 2025. Sales of INR 1,323 crores, witnessing the growth by 7% over the last year. Profit before tax showed a growth by 25% to the tune of INR 178 crores. Commissioned the forging facility in Nashik as a part of vertical integration. Launched new products such as Tezcatlipoca, a centrifugal compressor, Atmos Aria, an off-shelf screw compressor, and Jarilo, a biogas compressor. I will now run through the business results for Q4 and the year ended on March 31st, 2024. Sales for the quarter Q4 were higher than the preceding quarter, Q3, and stood at INR 490 crores, 59% higher than compared to Q3 of FY 2024, and by 36% year-on-year for the fourth quarter. However, the sales for the full year showed a growth by 7% over preceding year as the company reached a total turnover of INR 1,323 crores compared to INR 1,239 crores in the previous year. With other income, mainly interest receipts, dividends, surplus and sale of assets of INR 19 crores against INR 11 crores in the last year. The total income for the year was INR 1,342 crores compared to INR 1,250 crores in the last year. With better product mix and better realization of sales, material cost was at 54% of sales compared to 56% in the last year. The annual employee-related expenses stood at INR 164 crores, up from INR 144 crores in FY 2023. This increase on account of one-time expenses of approximately INR 4 crores for the labor settlement, the commencement of forging plant in Nashik as a part of our vertical integration strategy and regular salary increments. Depreciation is in line with previous year and addition to assets. The company invested close to INR 61 crores in CapEx. Other expenses are a mix of variable costs and fixed costs. FY 2024 is at 18.21% of total income as compared to 18.6% of total income in previous year. There is no significant variation in the level of expenditure, and the cost control exercise in previous years will continue in the current year. Exception item in the profit and loss account is one-time impact of INR 8.38 crores taken on account of impairment of RoadRailer business. The EBITDA in the current year is marginally higher at 16% of total income compared to 14.2% in the previous year. This is mainly on account of change in product mix and better realization on sales. For the Q4, profit before tax was much higher at 16.3% compared to 11.6% of previous year due to higher sales in Q4 FY 2024. The annual profit before tax improved to 13.3% of total income compared to 11.4% in previous year. FY 2024 profit before tax of INR 178 crores showed a 25% growth over previous year's PBT of INR 143 crores. Profit after tax rose to INR 133 crores, which is 10% of total income compared to INR 108 crores in previous year, which was at 8.7%. 138,400 equity shares. Previous year, 189,400 equity shares under its employees stock option program. Consequently, paid-up share capital increased to INR 12.95 crores compared to INR 12.93 crores as at the beginning of the year. Basic earnings per share improved to INR 20.60 per share in the current year compared to INR 16.82 in the previous year. The board has recommended a final dividend at the rate of 200%, that is INR 4 per share for face value of INR 2 with interim dividend at the rate of 125%. The total dividend for FY 2024 would be 325% as against 275% in FY 2023. With about 93% of the revenue coming from the compression segment, it remains the only reportable segment. The compression segment earned operating profit of about 20% in the current year compared to 18% in the previous year. The compression segment is consistently sustaining profitability within the range of 18%-20%. Capital employed in the compression segment is almost same of last year. Net cash position of INR 275 crores as on March 31, 2024. Previous year, INR 190 crores after paying final dividend of the last year and the interim dividend declared in the current year, apart from capital, INR 61 crores. The company has no loans, neither term loans nor working capital loans. It is a debt-free company. Financing charges are paid to banks for services not related to any borrowings. Ratio of net working capital to sales improved to 17.6% from the previous year's 19.1%. Improvement is driven by higher customer advances and more favorable payment arrangement with suppliers. Receivables have increased to 86 days from 81 days in the previous year, primarily due to elevated Q4 sales. Similarly, suppliers outstanding have extended to 86 days from 70 days compared to previous year, attributed to improved payment terms with suppliers. Wherever necessary, the figures from the previous year have been regrouped, adjusted to align with current reporting. Now, this forum is open for discussion with our esteemed investors. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead. Hi, sir. Thank you so much for the opportunity, and congratulations for the good results. Sir, our order book backlog has grown by 28% on year-over-year basis. Going into FY 2025, is it fair to assume that we will report similar kind of growth? What is there in the order backlog? I think we have been always saying that strong double-digit growth is what we can always confirm. We did slip on the top-line growth last year, so hopefully we should catch up and have a very significant double-digit growth. Let's take it quarter by quarter. Yeah, because the export is the one major, which has pulled us back this year. Do you think any improvement, because number is very small now? Yeah. We have done only INR 69 crores of export. We expect to be under INR 100 crores of export even for the next year. Domestically, we will report. Domestically, we have very strong order books, so we would still be able to deliver at least 20% growth. Okay. And sir, in terms of margins, last two quarters, we have been hitting very strong numbers, 17%, and this quarter we are hitting 18.7% kind of margin. So are these margins sustainable? We believe so. There are multiple reasons why this margin has come out. It is a process that we have been talking about on the various calls. Directionally, our margins have been improving as the two lagging business started fading away. The transmission business has been repurposed. That has given us a certain margin growth. The RoadRailer business per se, let us say we are not running the operation. Now we have also taken the impairment, so that hopefully by the next one or two quarters, we will dispose the balance assets. So all this has ensured that the operating margin has gone up. So this is where we have already planned that it will be, and it will continue to improve as the product mix further improves. Okay. Sir, a few quarters back, we had indicated that we might achieve INR 2,000 crore of sales by FY 2026. Are we still, given this strong order intake, will we be able to report this kind of number in FY 2026? What we have said is, even in the opening comment I said that by FY 2026, definitely yes. But on a quarter by quarter, if you add up, you probably try and do it even faster. Sure. Sir, last question from my end. In terms of order inflow guidance, you indicated that the inquiry flow has been very strong. The order inflow also looks very decent for the full year? Order inflow is something that we will have to wait and watch. The activity level inquiries are pretty good. Last year was a very good order intake. We continue to see a same kind of traction domestically, and we hope that we will have even stronger order intake this year. Sure. Thank you. Thank you so much, sir. Thank you, Mahesh. Thank you very much. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead. Yeah, hi. Thanks for giving the opportunity and congratulations on quite a good set of numbers over there. Sir, on the commentary, you mentioned that CNG and Kelana, they lagged this year, but however, you are expecting a material change in FY 2025. If you can provide clarity, why do you say so? If you quantify what kind of inquiries could be there, what kind of order flow could be there from CNG and Kelana compressors, that will be helpful. Second thing you mentioned also to biogas, specifically, you mentioned that you are expecting a significant uptick in compressor inquiry. If you can put some light over here, what is happening across the industry? If you can quantify that, what kind of order inflow or what kind of value as well as the number of compressors are we expecting for biogas. And third question was on the unallocable expenses. When I see the unallocable expenses, we are still at the similar level of INR 65 crore for the full year. I mean, versus what it was in the last year. When should one see the unallocable expenses coming down? Let me first answer the first two question, then I am going to request Ramesh to answer the last one. On the CNG and Kelana, CNG package sales have actually continued to decline. We went down last year. We further went down the year that is just completed. In Kelana, we actually grew. The number of compressors that went out this year is probably the highest ever. Sum totals, both the CNG and Kelana combined, it still was lower than the last year. Approximately we did about a combined number of packages, about 110 we did. We were above 150 as you know, the previous year. So it is still much, much lower. Now this is what is being shipped out. The order intake is being quite different. There have been significant amount of order inflow coming in primarily around Kelana. There are also quite a few tenders that we have quoted on the CNG as well, but a lot of them need clearances for us to be shipped out. So this is what we always been saying that the order getting alone doesn't solve the problem unless we get site clearance for them to be shipped out. This, we expect should start picking up. Once that happens, the execution on this will go up during the year. Hopefully, we are expecting. See, the overall number that is being put out by the Petroleum and Natural Gas Regulatory Board is available on the website. You will see that it is roughly about 12,000 stations have to come up in 5 years. Out of that, 1 year is already over. So that many just have to be done in the next 3 to 4 years. We expect a significant uptake in clearances to ship these out. As far as biogas is concerned, several large players have announced major investments in this space. Having said this is a technology that is evolving primarily based on the sustenance and availability of the bio source. If you set up a biogas plant based on urban waste, then you find it doesn't run well, then you are going to partly switch it with press mud or spent wash that you have sourced. Then the technology that these plants have to use to work on biogas changes. So today, that is going through a bit of a learning. So the scale-up is something that will take time. Having said this, since there is a major commitment for these projects, again, there is a separate scheme. There is an announcement that Government of India, there are at least nearly 5,000 biogas stations, which means 5,000 compressor sets would have to be available. We expect significant pick up. As of now, we have got less than 100 biogas package orders. I would say less than 50. But we are negotiating quite a few big numbers. Let us see how it goes during the year. The last question you had on saying that unallocated expense at INR 65 crores, I am going to request Ramesh to see if he can throw some light on this. Ramesh? Yes. Ramesh Raza here. If you see the comparative numbers for FY 2023 and FY 2024, there is no significant increase in the cost. Though our activity has been increased, but with the various methods of the cost control and cost reduction, we try to maintain the overall cost for this is in the same range. Hardly, INR 30 lakhs increase. Otherwise, it is well under control for us. Sure, sir. Understood. Just lastly, on the Nashik forging plant, if you can quantify, what was the CapEx that we did over there, and what will be the per annum cost savings that we are expecting from the Nashik forging plant? See, Nashik is a capacity that is going to be predominantly used for in-house requirement. The CapEx that we have spent very roughly is about INR 25 odd crores, nothing significant, and that is last year. So before that, we still have spent another about INR 8 to INR 10 crores on the setting it up, fabrication, and all that stuff. So it would largely meet our internal requirement, but in terms of activity level, et cetera, it would be equal to an activity of something like INR 100 crore of internal valuation. Okay. Understood. Thank you. That is it from my side. Thank you. Thank you. Thank you very much. The next question is from the line of Shubham from SIMPL. Please go ahead. Hello. Thanks for the opportunity. If you could just help me out with the revenue mix for FY 2024 versus FY 2023. So what was for the air compressor, refrigeration, and process gas? And within gas compressors, what was the revenue for our CNG business and other oil and gas? And also, if you could provide the number of mother and booster packages which were installed this year. Okay. You are asking between 2023 and 2024 on the air compressor business. Air compressor business sales was by and large, about the same as the previous year. There is no big growth. You have other questions. You said total compressors. Overall, we have been producing about 3,000 compressors a year. That number has also not changed significantly. The total number of compressors we delivered is about 3,000 plus. That has been by and large, same. Which means really the unit price has moved up to a higher value packages. There is no significant growth in the number of compressors that we have made. No, sir. Actually, I meant the revenue mix between our air, refrigeration, and process gas segments, and also the number of mother and booster packages in our CNG business, and what was the revenue between CNG business and other oil and gas. If you could provide that revenue mix. You won't have so much of detail. If you want to say that, let's say, CNG stations and Kelana combined, we have done about 120 compressors. Okay. In the last two, three years, we have launched new products like Khione and Tezcatlipoca. What kind of revenue contribution have these contributed this year, and to our top line? If you look at the new product in our definition, we talk of anything that is launched within 3 years as new product. This is a target that we have taken that the sale from new products should go to about 12%-15%. At the moment, it is less than 6%. Okay, sir. Just last one. We have been seeing a lot of investments in the oil and gas sector globally. How is our inquiry pipeline for these, and do we see any export scale-up for next year? Oil and gas sector, like we mentioned, has been doing well for the domestic market. We have finalized quite a few orders. In exports, the Middle East, there are quite a few inquiries, but the order finalization has been extremely slow, and we have not had any major uptake for the Middle East orders. Okay, sir. Just a follow-up on the biogas question. What is the contribution in our order book? If you could provide any visibility or update about the biogas blending by the Government of India. Do you think this biogas segment for us can scale up to INR 200 crore-INR 300 crore? I think I just answered the earlier question on biogas. I will repeat it again. The biogas business, there is an announcement from the Government of India saying that they will set up 5,000 biogas stations within the next five years. Almost all the major players have announced their investment in this space. However, the technology is dependent on the bio source. At the moment, the known bio sources are landfill, urban waste, spent wash from distilleries, press mud from the sugar plants, as well as poultry litter. This is not a stable availability. Consequently, the kind of biogas compressors they need for each of them is changing. We have got several inquiries. We have finalized about 30-odd packages already, but the numbers will be clearer only as they stabilize. Okay. Got it. Do we see any competition here? There are all the compressor players who are trying to offer something. This is a technology that is evolving. Unless the technology stabilizes, we cannot say who is going to be the serious competitor. At the moment, there is no specific person who will say that he is leading in the biogas space. Okay, sir. Got it. Thank you. Thank you very much. The next question is from the line of Dhawan Shah from AlfAccurate Advisors. Please go ahead. Yeah. Thanks for the opportunity, sir. My question is on the agreement which you are letting the press release, with PDC Machines. Because if I look at the PDC website, I think they are also manufacturing these kind of machines. So, is this like they will provide us the technology and we'll manufacture over here and we'll supply in the domestic market? Or how is the scope of the work in this agreement? Yeah. It's a good question. Let me clarify. PDC Machines are leaders in the hydrogen compression space. In America and several parts of the world, they deliver complete solutions, which means they can even offer a compressor, dispenser, and even in some cases, a local hydrogen generator, which will actually take electricity and water and generate hydrogen at the site itself. They are in the complete range of business related to hydrogen. Our specific objective in collaborating with them is to actually package their diaphragm compressor for the Indian market. The Indian market, again, in hydrogen, is evolving. We still have to know how this hydrogen compression business is going to develop, because in situ consumption of hydrogen, be it at the refineries or at the places where hydrogen molecule is required, is pretty much stable. There the compression required is also understood, what kind of compressors we need. Very high pressure compression is required where the hydrogen needs to be stored or transported. This is an evolving space, so we have now the capability to offer them packages for various applications. Our work would be to do the design, engineering, scoping, get the base compressors from PDC, and offer a complete solution to the customer. This is our first phase of collaboration. Okay. What would be the size of one compressor over here? Because I think the base business is roughly INR 1 crore, the larger one. Here, what would be the size of opportunity for domestic market? I think we should allow this to evolve, because depending on if somebody is going to have a very small test compressor for just filling up a few bottles locally, et cetera, then it could be an extremely small compressor. Or it could be a huge compressor if they're going to transport cascades across the country. This has to evolve, and we will take some time before we can. That is one of the reasons why we've not even put out saying this will address such a market or this will be the unit price, because this has to evolve for at least one or two quarters before we can start putting out numbers. Do we need to pay to PDC Machines, like royalty or anything like that? No. We don't have to pay them anything. We will buy compressors from them on an exclusive basis, and we will package them for customers in India. Got it. In terms of the order pipeline, can you share what is the order pipeline in the beginning of the year for the domestic market and the export business across all three segments? How much of that do you foresee can be converted into the orders for FY 2025? Okay. Almost the entire order backlog that we talked of INR 1,475, would be predominantly for domestic. I think export would be less than INR 50 odd crores. This is predominantly a domestic market requirement. Okay. This is order book. In terms of the order pipeline, which you are saying that some orders are in the negotiation stage. Any ballpark numbers can you share for the domestic and export? This doesn't make much of a meaning for you because, see, when you talk of a pipeline under discussion, till it becomes an order, it is still only negotiation, right? We have huge pipeline of orders under discussion with Middle East for a long time now, and many of them may not even happen during the year. I would rather not give a number for that. Okay. But, if I look at the last three quarters number, in terms of the order flows, I think we are roughly running at roughly 380 odd crore quarterly kind of run rate in terms of order intake. Do you foresee this 380 odd crore quarterly run rate can move up to 450, 500 crore, maybe two quarters down the line? We have had a few quarters already where we have booked more than INR 400 crores of order. Because when we say that we will do INR 2,000 crores in the next year or so, we need to get order book of at least about INR 500 crores a quarter. I think with all our new products and focus on domestic, we should be able to get there. Okay, so you are confident about this thing? Yes, we are. Okay. Sure. Thank you. That is all from my side. Thank you very much. The next question is from the line of Ankur Kumar from Alpha Capital. Please go ahead. Hello, sir. Congrats for a good set of numbers, and thank you for taking my question. Sir, in the past calls, we have been saying that our annual revenue tends to be 1.2 to 1.3 times the opening order book. So on opening order book of INR 1,475, that would translate to around INR 1,800 crore revenue types. Would you agree with that possibility on this year? I do not know whether you have my business plan with you. Sorry, I don't have that, sir. Okay. You have the number. Because I think in general past calls, you've been saying that 1.2 to 1.3. I said that in a lighter vein. See, you're absolutely right. We generally tend to do, because there are orders that particularly for spares, et cetera, we book and execute in very short notices. So I think the target is very much around the numbers that you're looking at, anywhere between INR 1,700 crores to INR 1,800 crores is what we would do. Got it. Sir, our raw materials generally have been going up. So are we kind of booked things, so 17%-18% margin we can sustain, or how should we look on that front? See, we will have to look at our input material costs in a little different from what you would look at raw materials. See, except for our forgings and foundries, we don't actually buy unprocessed commodity material. What we buy would be manufactured items. It could be controllers, it could be bearings, it could be parts of machinery. We have running contracts, and we make these price arrangements before we quote and take up orders. That's the reason why we are able to control our cost and have some bearing on our final selling price. Because our final selling price is a tender-based price. We can't change it once we get the order. So we have also a similar kind of a leverage with our buying. So there is a back-to-back kind of an arrangement. So we are not so, let's say, commodity price-driven. It either goes up or down very quickly. Got it, sir. So you're saying that margin kind of sustained from 17. Margin is largely driven by our product mix and also on improvements in our processes, which allows us to sort of put things together more efficiently. Got it, sir. Nothing else from my side, sir. Thank you and good afternoon. Thank you. Thank you very much. The next question is from the line of Darshan Zaveri from Crown Capital. Please go ahead. Darshan, you are not audible. Darshan, we can't hear you. Hello. Is it better, sir? Yes. Yeah. Hi. So sorry, sir, for that. Most of my questions have been answered. Just one, a bit maybe long term where we are targeting maybe INR 2,000 crores next year, which I think maybe we are already at the run rate of doing it maybe this year. Maybe a longer-term vision after maybe three years down the line, any long-term vision that we could quote? Because I think all our sectors are firing. Any comment on that would be great, sir. Yeah. I have mentioned this in a couple of other calls as well, and I will take a few minutes to explain the whole thing. First thing going for our favor is that we are in a sector, capital goods sector, particularly in manufacturing. That is doing well. It is doing well in the geography we operate. We are dependent almost entirely on how India does. To that extent, we are in a good place at a good time. Manufacturing is growing. Capital goods in particular will grow even ahead of the manufacturing sector growth. That's a tailwind that's available for us. Second is we are in a sector which is driven by a couple of major transitions. There is an energy transition out there, and we will get to benefit from it. Be it from solid fuel to liquid to gas, any kind of a gaseous form, be it natural gas, biogas, hydrogen, all this is really up our alley. There is an energy transition, and we are in the thick of things as far as that is concerned. Then internal capability building, ability to make our own designs, ability to make our own products is another advantage that we have. Fourth is our supply chain business. Most of our competitors in India have supply chains that extend between 7,000 to 12,000 kilometers. Critical parts for them have to be all imported from different places, be it Europe, be it China. We are having a supply chain within 200 kilometers. All that I make is between Nashik, Saswad, and Hadapsar. My supply chain is within 200 kilometers compared to competition who has to grapple with significantly long supply chain. I am not impacted by what happens in Red Sea. I am not impacted by what happens in any other part of the world. I am only largely worried about what happens in the area I operate. Everything seems to be going in our favor. With that, I have been always saying that the market size is huge. Addressing it with a 20% growth year on year for a long period of time is something that is possible and very doable. That is what we are working on, and that is broadly what we are looking at. Does it give you a good answer? Yes. That answered the question perfectly, sir. Thank you so much for that. Sir, just in relation to our growth. Our margins, as we say, are maybe being driven more by a change in product mix. With our forging and new products, what is the aspirational margin and can we now touch 20%? Is something that we could look at? We have been saying this in other calls as well. Aspirationally, we will get to company first to 18%-20%. We can go higher than that, but that's a trade-off that we will take a call as we get to that between more aggressive growth as well as improvement on margin. There would be some kind of a trade-off based on how fast we would aspire to grow as well as how big the margin growth can be. Directionally, getting to 18%-20% is a thing that we'll work on first then. Perfect. Thank you so much, sir. That answers all my questions. All the best, sir. Thank you. Thank you very much. The next question is from the line of Sahil Sanghvi from Monarch Network Capital. Please go ahead. Yeah. Good evening, sir, and congratulations for a very good set of numbers. While I have understood what are the input components for you, there is a dip in the gross margins when I look at year-over-year or quarter-over-quarter basis. I think we ended at 44% versus 45% and 48% year-over-year, quarter-over-quarter. So any explanation on this front? I will have to take Ramesh's help. The only thing I will say, looking at a gross margin, Yeah not operating margin, then there are several issues that will have to come up. First is, we have taken a one-time as far as the RoadRailer is concerned, which is about INR 8.9 crores that we have taken. Also, you will find that there is a INR 4 crores that we took in Q1, which is related to the employees thing. One-time settlement of all the dismissed employees, et cetera. I think there has only been an improvement in margin, but let me ask Ramesh to check what you are asking. We will take the next question, we will come back to you. Ramesh, do you have an answer for this? Yeah. If you check with the FY 2023 and fourth quarter FY 2024, you are comparing the same thing what I am saying? Fourth quarter FY 2023 and fourth quarter FY 2024, right? Well, it may be there, but even now. Okay. This is mainly change in the product mix, wherein the FY 2023 and FY 2024, where we are saying that in FY 2024, quarter 4, it is mainly we increase the CNG packages and not lower, but it is stabilizing the O&M business. That is why it is reflecting the change in the ratio to RMSP, raw material to selling price. Got it. That explains. Also, if you would give me the split for Q4 when it comes to the equipment versus the packages split. We have been saying that we will get it to a 60/40 in favor of equipment. It has not happened yet. We are still about 50/50. Similarly, can you give me the split of air compressors, refrigeration, and process gas for Q4 only? I understand someone else may have asked this, but would it be possible or? It is possible, but I think it is more safer to stay within a range. Because what happens, these quarterly numbers are something that keeps changing. So I would not give too much of weightage to it. It is still within the range that we talked of, roughly 20-25 for air, 30-35 for refrigeration, 45-ish for gas. So just we are feeling, yes, Q4, our gas packages were significantly higher than the traditional numbers. If you want, I can elaborate on the full year number from FY 2023 and FY 2024 full year number. The air compressor division, which is roughly in the same range of INR 257 crores. The ACR, refrigeration, it is almost in the same range of INR 275 crores and major driven by the gas systems where we have got the major increase and our another non-reportable segment of transmission business, where we have got the major improvement in the top line. My question would be, when do you expect the order booking for CNG stations to pick up? Would it be after elections? What kind of ground traction are you seeing on that front? Like I said, the order booking is there. Clearance for shipping to install is what is waiting. Most of them have placed orders. We have orders. We have orders for CNG stations, we have orders for Kelana. But we need to get clearances as and when they have their site ready, they have their gas allocation, and then we will commission them. We will ship it and commission them. margins, right? If whenever that gets- So it is very difficult to answer the question when they will give clearance. There are so many things. That is why I said in the opening comments, there have been so many promises, so many announcements, we are waiting for them to happen. Does that answer your question, Sahil? Thank you very much. The next question is from the line of Digant Haria from GreenEdge Wealth. Please go ahead. Yeah, thanks for the opportunity. My question is on the large gas packages, primarily, which last time you said that we do around 12 to 15 gas packages is the total market size in India, and in Middle East, it is even larger. On this export side, the negotiations have been going on for so long, and if you can just give some idea of when do they fructify or do they not, do we change strategy there, and do we look at any other regions? Any such color would be useful. Domestic, these 15 large packages and several smaller ones improvement, that stays, continues, and we have a fairly high visibility on this. We also win a significant share of these orders. We lose very few. In international business, we operate primarily in the MENA region, Middle East, North Africa. We do not have such a clear visibility on how and how fast they finalize and who gets the order, because we are one among maybe a host of participants. Many of the orders do not even get finalized. Some, eventually we realize the EPC contractor bought it partly from China, partly he did it himself. So there is still a lot of market operating gaps that we are unable to understand fully. Is the market still very clear? I think that is also evolving, because a lot of what happened in the last two, three years, they are first time. Because there was a crisis and they all had to do things quickly. We won some orders, we lost a lot of them. This is evolving still. Now, I would say it's getting more and more to a steady state. Having said it, the last at least three months or so, practically no major order has been finalized for anybody. Even what people have finalized and announced, they have all been put on hold. So there is an uncertainty out there, and that is coming from multiple reasons. We have to wait and watch. I can't say that, look, that's why when somebody says, "Tell me what is the pipeline? How many you're likely to win?" I don't have a ratio which I can share reasonably with you and expect it to happen. If I know that, look, if I have INR 2,000 crores of quotation out there, I'll get 10%, I can share that with you. I don't have such ratio now. Right. All right, sir. That's good enough an answer. Second is, for FY 2024, we see that the proportion of air and refrigeration compression has gone down versus last year. It's probably because the gas division has done much better. But in terms of these new launches, the Khione screw compressors, earlier we said that we might be able to launch around eight or nine SKUs, and then the market acceptability was a little slower than expected. If you can just give us some progress on this particular front, the Khione screw compressor. The first part of your prognosis is correct, that yes, the gas business grew faster than the other two within that same broad range that we have been maintaining, because that allows us to do the business modeling. So it is within that range, but it is an area that, yes, the gas grew faster, the other two was relatively slower growth. That's a fact. The reasons are many. Several of the new announcements that we made as product development, which were largely in air and in the refrigeration area, have not scaled up as quickly as we expected. Having said that, I also know that we have picked up several orders which will allow me to come back to the growth rate in the current year, FY 2025. So it will come back. It's been a lag, but it is not a failure kind of thing. The products have not failed. The products have not taken off as fast as we expected, but they are scaling up now. All right, sir. Lastly, I do not know if this was asked earlier, what is our play in the compressed biogas? India is going to have 500 plants and 100 plants Reliance is putting up. Do we have any play in this compressed biogas plants, the small INR 100 crore plants which are coming up? Yeah. I have answered this, but I will repeat it for you. Yes, we have gas packages for all kinds of bio sources. The technology that will be used would depend on the bio source. Unfortunately, this is not fully stabilized, and so it is evolving. We have compressors if people use PSA, we have compressors if they use molecular sieves, we have compressors if you use washing cleaning systems. We have compressors for all ways of generating biogas. We have a full Jarilo range. We are the only people who have customized biogas specific compressors. We are in discussion with almost all the major package builders, so we are happy to be in this industry. You said it right. Government's announcement is 5,000 biogas stations in five years. Hopefully, a significant part of that should be our compressors. Right, sir. Sir, any ballpark of per plant, what is the revenue opportunity if INR 100 crore is the total CapEx in one biogas plant? I think, like I said, technology is evolving. I have compressors starting at INR 60 lakh, going up to INR 2.5 crore. Okay. No, that's a good range. This number depends on what is the feedstock which is used, right? Whether it is the press mud or whether it is the biomass or The bio source will determine the technology that is used to clean it and process the biogas. Then the compressor comes in. There could be two compressors, there could be one. Then it depends on the offtake. Are they going to put it into the pipeline? Are they going to fill it, cascade the 250 bar, and ship it around? There are multiple variables out there. Like I said, we have a compressor package system for every which way they go. But they should go somewhere first. Right. No, thank you, sir, and thanks always for answering in such detail and the vivid description about all the processes. Thank you so much. Thank you. Thank you very much. The next question is from the line of Abhinand Anand from CP Invest Management. Please go ahead. Yes, sir. First of all, you talked about what is working in your favor as a sector and as a firm as well. In that, you mentioned that the market size is huge, and addressing with a 20% growth is a possibility. Here you are talking about the gas part, right? Because ref and air compressor type has been flat for the last few years. If you can throw some light in terms of how big is that gas part and are we gaining market share or something of that sort, that would be helpful. Okay. If you look at the air compressor business, Indian market is roughly INR 5,000 crore plus. Our current share is less than 5%. There is enough headroom for us to grow. That is the first one. If you look at the refrigeration market, today we currently address only the cold chain ice plants as well as the hydrocarbon-driven biogas packages. There is a huge play out there for commercial refrigeration, where we will eventually come up with several products to address. This industry also, if you look at, I am leaving out the comfort. I am looking only at industrial and commercial. That alone is worth about INR 3,000 crore. If you look at the gas business, if you split it into two parts, one is the upstream, midstream, and downstream. That is a INR 2,000 crore market. That has got a whole lot of things. We are not into everything, but we are only into a relatively smaller part of that package. Then, of course, there is the distribution of CNG gas. Then there is biogas. Then there is hydrogen. All these are growing areas. The market is evolving. There is not a specific number that you can put at this stage, but they are all significant in size. Overall, like I said, the market is huge. I am only talking of India, and India is less than 2% of the global opportunity. If you have a robust, winning product profile here, then we can aspire to take it to other parts of the world in a phased manner. We will not run all over the place to sell something, but we can do that in a phased manner, and that is how we strategize. I think when the other gentleman asked me, how do you see it on a medium-term, India-focused, 20% is a reasonable number to look at. Okay, thanks. Secondly, sir, in terms of there are three numbers that you talked about. One that will grow at double digit, which is obviously a very large range. Second, you did mention about, because exports we are not expecting much even in this year. So domestic, you indicated a 20% growth. Thirdly, this- Overall. Not only domestic. Okay, overall. This 1,700 to 1,800 that you talked about actually indicates somewhere around 25%-35% growth. Which one is the most realistic that we should be considering, sir? I think you must take the lowest as a regular thing, and then quarter by quarter, we will try and get better. Okay, thanks for that, sir. Thank you very much. The next question is from the line of Manish Goel from Thinqwise Wealth Managers LLP. Please go ahead. Yeah. Thank you so much. Sir, congratulations on great numbers for Q4. So a few questions. First one, just a clarification that we probably mentioned that the gas business saw decent growth in the current year. So this was despite the decline in the export revenues, what we saw in the current year by INR 100 crores? Yes. Is that number INR 790 crores for the full year? It has decent. No, we don't give a specific number for any of the three verticals. We said that we have by and large been in the range of about 45%. 40%-45% is what we always give as a guidance. We don't give specific numbers for each, and there is a reason for it. It's not that we want to hide anything from you. Internally, when we track it, let's say I do a lot of my biogas manufacture in what I internally call as a air compressor division, because that is manufacturing-wise a reciprocating compressor. So it's so confusing to put out these numbers outside. So we give a range within which these businesses operate. Sure. That is more reasonable for an external person to understand. So we have not given specific numbers for air, refrigeration, or gas. Oh, sorry. I probably was calculating from the number what Mr. Ramesh gave, that INR 257 crores for air and INR 275 crores for refrigeration. No. Refrigeration, actually, what we externally talk of includes, like I said, other things. There is about 300 and odd number for that as well. That is why I said we got to be a little more careful. We will give you a range which is more meaningful. Sure. Okay, sir. On the revenue breakup-wise, how much was it between projects and products for the Q4 and for the full year? I think we give only for the full year. We do not give for quarter, like I said, because it again confuses. The split is approximately 50/50 for this year. This year, there has been a clear movement towards more equipment compared to our usual 40/60. It has moved towards about 50/50. Okay. With the new product launches, like for the centrifugal compressor, Tezcatlipoca, Atmos Aria, how will we increase our addressable market probably in recent past? When you mentioned that we expect revenue from new products to increase from, say roughly 6% to 15% over the next couple of years. Just want to get a sense, because on a INR 2,000 crore number, that will be nearly INR 300 crores revenue from new products. Just wanted to get a sense that probably from how we are looking to arrive at this number. So let me give you a few numbers. I said new product is what we launched within the previous 3 years. So this year, Kelana also remains a new product. It will probably stop being a new product the next year. Next year means 2026. Tezcatlipoca is 2027. So we have to keep understanding the new product is a continuously moving thing. This year, if you look at the market, Tezcatlipoca centrifugal compressor market in India is roughly our estimate is anywhere between INR 300 crores to INR 500 crores, and this excludes what can go into oil and gas sector. So that's the market size. When you're looking at an opportunity of building about 10%-12% of new products in our sales, it's a continuous process. New products will continue to happen based on our IP creation. As they scale up, you will end up with these numbers. Addressable market we pick are generally for markets of significant size. Each of the new products we take generally tend to address markets anywhere between INR 100 crores to INR 500 crores. Sure. Okay. No, because of the shelf screw compressors, what we have launched with the smaller range, ideally it's been very competitive and has been seeing a lot of import from China, and we have just recently entered. Just probably wanted to- The point is 100% right. India imports anything between 30,000 compressors or air ends from China and package them. You can calculate how big that market is, and that's the market we seek to address, because these are markets which people in India have currently not making anything for. If we don't become more and more India-dependent as the Chinese price also keeps going up, you will find these are relatively easier markets to address and break in once you have your cost positions right. Right. Sure. Thank you so much, sir. In addition to this, if you see the talk by the MD, the biogas, which is an upcoming market, and for that, we are already ready with the compressor. Whichever be coming with this biogas packages or the system, we are ready to provide the whole package to them. Before asking for the competitor, we are ready, and we are ready to implement the entire biogas package to any of the company here. Well ahead of all competitors, we are ready with the product. Wonderful, sir. Thank you so much. Thank you very much. Due to time constraint, that will be the last question. I would now like to hand the conference over to management for closing comments. Let me thank all of you for your patience. I think we have had a very checkered year when we had poor sales for three quarters, and then we started getting a better package for the last quarter. Hope that the current year that we are starting should be far more smooth as we go across so that the numbers are little easier for people to understand and appreciate. Thank you all for your patience and hope to come up with good numbers in the next quarter as well. Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.