Earnings Call Transcript Analysis Report #
AJAX Engineering Limited Q3 & 9 Months FY25 Earnings Call Analysis #
Financial Performance #
Key Financial Metrics #
- Nine-Month FY25:
- Total Revenue: INR 1,318 crores (21.6% YoY growth)
- SLCM Revenue: INR 1,098 crores (21.5% YoY growth)
- Non-SLCM Revenue: INR 122 crores (20.6% YoY growth)
- Spares and Service Revenue: INR 98 crores (23.5% YoY growth)
- EBITDA: INR 207 crores (24.6% YoY growth)
- EBITDA Margin: 15.7% (40 bps YoY improvement)
- PAT: INR 169 crores (23.6% YoY growth)
- PAT Margin: 12.5% (20 bps YoY improvement)
- Q3 FY25:
- Total Revenue: INR 548 crores (37% YoY growth)
- SLCM Revenue: INR 470 crores (37% YoY growth)
- Non-SLCM Revenue: INR 44 crores (71.5% YoY growth)
- Spares and Service Revenue: INR 34 crores (13.6% YoY growth)
- EBITDA: INR 88 crores (31.8% YoY growth)
- EBITDA Margin: 16.1% (70 bps YoY decline)
- PAT: INR 68 crores (26.3% YoY growth)
- PAT Margin: 12.3% (90 bps YoY decline)
Comparison with Previous Periods #
- Nine-Month FY25 shows consistent growth across all revenue segments compared to the previous year.
- Q3 FY25 demonstrates accelerated growth in total revenue, particularly in the non-SLCM segment. However, EBITDA and PAT margins experienced a slight decline YoY.
Revised Guidance #
- Tuhin Basu:“we expect that AJAX will grow in the range of, let’s say, mid-teen plus in FY25 and also, let’s say, as a look ahead.”
- Shubhabrata Saha “I think we have given a broad outlook when we discussed earlier, and I think that broad outlook stays.”
Areas of Growth/Decline #
- Strong growth in SLCM and non-SLCM revenue, both for the nine-month period and Q3.
- Spares and Service revenue also showed healthy growth.
- Q3 margins (EBITDA and PAT) declined slightly YoY, attributed to product mix.
Strategic Initiatives & Business Updates #
Strategic Announcements #
- Focus on maintaining leadership in the SLCM market.
- Strengthening capabilities in the non-SLCM business.
- Expansion in international business footprint.
New Products/Services/Markets #
- Transition from CEV-4 to CEV-5 emission norms, launching new products in the CEV-5 category.
- Early start of sales for 4,500 variant SLCM.
- Testing a product on the lower end in production of concreting, “democratization of mechanization”.
- Continued focus on international markets (South Asia, Southeast Asia, Africa, Russia).
Operational Changes #
- Continuous focus on lean and technology-led processes (Andon system, just-in-time production, Kaizen, Poka Yoke, online traceability).
Ongoing/Completed Projects #
- Commercialized 3D printing machine, partnering to build potentially one of the world’s largest 3D printed campuses for the Border Roads Organization.
- Sold pavers in Gabon and Russia.
Market & Competitive Landscape #
Industry Trends #
- Infrastructure and real estate development driving demand for cement, concrete, and construction equipment.
- Transition from manual mixers to mechanized mixing (SLCMs or batching plants).
- The Indian mechanized concrete equipment market is projected to grow significantly (INR 6,100 crores in FY24 to INR 17,800 crores by FY29).
- Mechanized mixing share expected to increase (25% in FY24 to 41% by FY29).
Competitive Positioning #
- AJAX is the leading supplier of SLCMs in India, commanding a retail market share of around 75%.
- “We sell our equipment through a network of dealers with a presence across India as well as select overseas markets.”
- Shubhabrata Saha: “We sell at a premium from our nearest competitor…”
Market Challenges/Opportunities #
- Opportunity: Growth in infrastructure, real estate, and shift towards mechanized equipment.
- Challenge: Short-term slowdown in government capex due to elections.
Market Share/Positioning #
- Dominant market leadership position in the SLCM market in India.
- Largest dealer network among leading concrete equipment manufacturers in India.
Risk Factors & Challenges #
Concerns/Challenges Acknowledged #
- Government capex slowdown due to elections.
- Impact of transition from CEV-4 to CEV-5 emission norms.
- Potential pressure on gross margins in FY26 due to new emission norms.
Regulatory Issues #
- Transition from CEV-4 to CEV-5 emission norms impacting cost and inventory.
Supply Chain/Operational Constraints #
- Less than 10% of total material procurement from imported material.
Market Uncertainties #
- Slower recovery in capex in key states.
Forward-Looking Statements #
Outlook/Future Projections #
- Expect business momentum to regain stronger pace from the second half of FY26.
- Expect the long-term growth averages to settle to what we have experienced over the decade, which is around 18%
- Expect operating EBITDA to remain stable in the mid-teens range.
Commitments/Targets #
- Strive to maintain leadership in the SLCM market.
- Strengthen capabilities in non-SLCM business.
- Expand international business footprint.
Planned Investments/Strategic Priorities #
- Continued focus on design and development.
- Strengthening B2B channel.
Sentiment about Future Performance #
- Confident in the longer-term trajectory of the business.
Q&A Insights #
Most Pressing Analyst Questions #
- FY26 growth outlook.
- New product development in SLCM and non-SLCM.
- Export growth drivers.
- Strategy for gaining market share in non-SLCM products.
- Impact of CEV-4 inventory build-up.
- Gross margin pressures and pricing.
- Geographic expansion strategies.
Management’s Responses to Challenging Questions #
- Addressed concerns about growth by emphasizing long-term structural story and expected recovery in H2 FY26.
- Explained margin fluctuations as a result of product mix rather than pricing pressure.
- Provided details on inventory management and plans for CEV-5 transition.
Questions Evaded/Answered Indirectly #
- Specific FY25 revenue target was not provided.
New Information Revealed #
- Average SLCM ownership cycle is around 8-9 years.
- Cost increase for CEV-5 engines is in the range of 10%-15%.
- 70% revenue contractor segment government projects, 30% private.
Management Tone & Sentiment #
Overall Tone #
- Confident and optimistic about the long-term prospects, despite acknowledging near-term challenges.
Areas of Confidence/Concern #
- Confident: Long-term growth potential, market leadership, product quality, dealer network.
- Concerned: Short-term impact of elections and emission norm transition, potential margin pressure.
Key Takeaways #
- Strong Financial Performance, Short Term Challenges. AJAX reported strong growth in Q3 and 9-month FY25 revenue. Near term pressures from elections and shift to CEV-5 emissions are expected.
- Market Leadership. The company is maintaining a dominant position in the SLCM market and focusing on its core competence.
- Inventory Position. Management has proactively managed CEV-4 inventory and is well-positioned for the CEV-5 transition.
- Strategic Growth Focus. Emphasis on long-term growth, export market development, and product diversification through their dealer network.
- Positive Outlook. A confident outlook on long-term industry growth and AJAX’s ability to capitalize on market opportunities.