Quality Power Electrical Equipments Ltd - Mar 2025 Earnings Call Transcript Analysis

March 24, 2025 · 4 min read

Earnings Call Transcript Analysis Report #

Revenue from Operations: INR 726 million
EBITDA: INR 174 million (Margin: 24.0%)
PAT: INR 196 million (Margin: 24.5%) (Note: PAT margin seems unusually high compared to EBITDA margin, potentially due to other income or tax effects not fully detailed in the transcript summary by the CFO, though the CFO does state PAT grew to 196M with a 24.5% margin).

Revenue from Operations: INR 2,283 million
EBITDA: INR 491 million (Margin: 21.5%)
PAT: INR 697 million (Margin: 26.5%) (Note: Similar observation regarding high PAT margin compared to EBITDA margin over 9M).

Q3 Revenue: Declined 49% YoY and significantly QoQ. Management attributed this to a high base in Q3 FY24 (due to project shifts from Q2/Q4 FY24), lack of previous quarterly execution discipline, and customer-side delays on some projects (Turkey). CFO noted Q3 revenue was “partially impacted by product execution cycles.”
Q3 EBITDA: Increased 63.2% YoY. Margins expanded to 24.0%.
Q3 PAT: Increased 44.6% YoY.
9M Revenue: Declined 13% YoY (Consolidated figure based on Q&A, though CFO reported strong 9M figures without direct YoY comparison).
9M EBITDA: Increased 174.4% YoY. Margins expanded to 21.5%.
9M PAT: Increased 83.5% YoY.

Management avoided specific numerical guidance for FY25/FY26 revenue or profit.
Stated expectation for “positive increase on revenue” for the full year FY25.
Projected a significant revenue jump in Q4 FY25 due to the low base in Q4 FY24 and execution timing.
Indicated EBITDA margins are sustainable “around 20%” in the short to medium term, driven by demand-supply dynamics, barring major disruptions.

Significant Q3 revenue decline was the main point of concern raised, attributed primarily to execution timing and base effects rather than underlying demand weakness.
Strong growth in profitability (EBITDA, PAT) and margin expansion driven by “better capacity utilization, operational efficiency and shift towards higher margin products” (CFO), strong demand, and favorable accounting adjustments (FX gains from hyperinflation accounting in Turkey positively impacting ‘Other Expenses’).

Successful IPO completion (first earnings call post-listing).
Acquisition of 51% stake in Mehru Electrical and Mechanical Engineers (INR 120 Cr), integration underway.
Board approval for potential majority stake acquisition in STATCON Energiaa (Power Electronics, ~INR 170 Cr revenue last year), funded via IPO proceeds, primarily through primary infusion. Transaction expected within 3 months.
Significant capacity expansion approved: New 10-acre facility in Sangli and enhancement in Cochin, driven by heavy demand for coil products.
INR 125 Cr soft loan secured from promoter family (Repo + 0.5%, ~7%, 15-year tenure, 2-year extendable moratorium) to fund capex while preserving company cash for growth/M&A.
Formation of an M&A committee (3 Independent Directors, 2 Executive Directors) to evaluate proposals.

Mehru acquisition adds complementary high-voltage instrument transformers (up to 500kV).
STATCON acquisition would add battery energy storage, EV chargers (for substations), green hydrogen rectifiers, renewable/defence inverters/converters, and low-voltage STATCOMs/active filters.
Focus on emerging applications in power electronics, smart grids, and energy transition technology.

Integrating Mehru operations and leveraging combined R&D (Mehru has ~100 engineers).
Discontinued low-margin, high-labour fabrication business within Mehru.
Expanding manufacturing footprint significantly to address capacity constraints.

Current order backlog: INR 5,170 million (as of Dec 2024).
Immediate order pipeline: INR 7,000 million.
Sangli specific order book: INR 180 Cr booked, INR 450 Cr under negotiation/awaiting POs.
Some high-value projects in Turkey (Endoks) delayed due to customer-side issues (civil works etc.), impacting Q3 revenue recognition.

Strong investment cycle in T&D infrastructure globally (India, Europe, US).
Specific mention of large HVDC commitments (e.g., UK’s INR 59,000 Cr order).
Growth driven by renewable energy integration, grid stability needs (FACTS devices), and energy transition.
FACTS market strong in India: “government has made a mandate that 33% of all renewable energy parks will need to have a FACTS device.”
HVDC market strong globally: “HVDC potential of the world is where you need to watch out for.”
Trend towards unmanned substations requiring edge computing technology (Nebeskie investment rationale).

Positioned as a key player in high-voltage equipment and power quality solutions.
Strong export presence (~60% targeted historically)

←

→