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Knowledge Marine & Engineering Works Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤25th Feb 26

Summary : Knowledge Marine & Engineering Works reported strong Q3 FY26 results with significant revenue and profit growth, driven by new orders, fleet expansion, and strategic tax benefits, positioning for continued growth in India's marine sector.

Management Perspective positive : Management repeatedly highlighted 'strongest quarters,' 'accelerated growth,' 'profitable and sustainable,' and 'renewed optimism.' They expressed confidence in converting opportunities into long-term value and achieving higher revenue and profit margins.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 revenue increased 56% year-on-year and 79% quarter-on-quarter to INR90 crores.
  2. EBITDA reached INR38.54 crores with a 43% margin, reflecting strong operating efficiency.
  3. Profit after tax stood at INR32.89 crores, with a 34% margin, significantly higher QoQ.
  4. Secured over INR230 crores in shipbuilding orders from Inland Waterways Authority of India.
  5. Received long-term orders worth INR700 crores for green tug construction and chartering.

Future Growth Prospects

  1. Order book stands at INR1,500 crores, with INR3,000 crores in bids pipeline.
  2. Capital raised (INR285 crores) will fund fleet expansion and new projects.
  3. Company aims to be a sustainable dredging and marine engineering leader in India.
  4. Inland waterway dredging demand is projected to increase multifold over 5 years.
  5. Investing INR100 crores in shipyard expansion to reach INR500-700 crores top line in 3 years.

Management Insights

  1. Q3 FY26 was one of the strongest quarters, showing accelerated growth and scaling efficiencies.
  2. Growth is profitable and sustainable, supported by disciplined cost management.
  3. Company adopted tonnage tax scheme, expecting significantly lower tax implications.
  4. Current strong performance is considered the new benchmark going forward.
  5. Fleet utilization is 100% across dredgers and workboats, with no idle equipment.

Signs of Skepticism

  1. Analyst questions regarding the Bahrain project's status and vessel redeployment suggest some concern.
  2. The exact percentage of DCI subcontracting revenue was not immediately available.
  3. The tonnage tax benefit is not a specific percentage due to varying vessel numbers.

Risk Factors

  1. Forward-looking statements involve risks and uncertainties that are difficult to predict.
  2. Maintaining consistent vessel utilization for dredgers (270-300 days) is crucial.
  3. Potential for delays in vessel acquisition for new projects like Bahrain.
  4. Market share in dredging is currently less than 2% of the overall market.

Good To Know

  1. Company subdivided shares from INR10 to INR5 to improve liquidity and retail participation.
  2. Owns and operates 45 crafts, including 16 dredgers and 15 port ancillary crafts.
  3. Debt outstanding is INR166 crores; fixed assets are INR207 crores.
  4. The company is foraying into cruise services, focusing on vessel operations, outsourcing hospitality.
  5. DCI's large vessel investments do not directly overlap with KMEW's smaller dredger focus.

Key Drivers

  1. Strong order book provides revenue visibility.
  2. Government focus on waterways drives demand.
  3. Fleet expansion supports future growth.
  4. Tonnage tax scheme boosts profitability.

Key Analyst Discussions

Competitive Environment

  1. Government push for DCI is due to huge demand, not direct competition for KMEW's segment.
  2. DCI invests in larger vessels (12,000 cubic meter TSHDs), KMEW in smaller dredgers.
  3. No overlap with DCI's assets; subcontracting opportunities from DCI will continue.
  4. Market demand is sufficient for multiple players, including DCI and KMEW.

Market Trends & Consumer Behavior

  1. Government's increased focus on the industry and DCI revival indicates huge demand.
  2. 20 more national waterways are to be made navigable, increasing dredging demand multifold.
  3. Maintenance dredging market in major ports is INR1,500-2,000 crores annually.

Financial Highlights

  1. Tonnage tax scheme adopted, expected to reduce tax implication to less than 1% of turnover.
  2. Receivable days are expected to decrease from 45-60 days to 30-45 days.
  3. Q3 performance is considered a new norm for higher revenue and profit margins.

Product Composition

  1. Cruise services are part of the small crafts operation vertical, not a diversion from core business.
  2. Shipbuilding includes building vessels for government and green tugs for self-operation.
  3. Company will actively participate in green tug tenders floated by major ports.

Strategic Considerations

  1. Bahrain project vessel was redeployed to India for higher revenue and tax advantages.
  2. Company is actively seeking a new vessel for the Bahrain project to recommence operations.
  3. Capex of INR180 crores from fundraise will be spread over 3 years.
  4. Shipyard investment of INR100 crores will enable building tugs and smaller vessels.
Knowledge Marine & Engineering Works Ltd (KMEW) Concall Report Analysis & Insights | Dhanarthi