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Knowledge Marine & Engineering Works Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤12th Jun 26

Summary : KMEW delivered strong FY26 results, secured a record order book, and is strategically expanding into Green Tugs and shipbuilding, projecting robust future growth.

Management Perspective positive : Management consistently highlights strong financial performance, record order wins, strategic expansion into high-value segments like Green Tugs and shipbuilding, and expresses confidence in future growth and profitability. They emphasize long-term value creation and disciplined capital allocation.

Concall Report Analysis & Insights

Business Overview

  1. KMEW transformed into an integrated maritime infrastructure platform.
  2. Capabilities span dredging, marine chartering, and shipbuilding.
  3. Completed 10-year milestone, entering new growth phase.
  4. Focus on scale, integration, long-term contracts, and National Maritime opportunities.
  5. Executing major Inland Waterways Authority of India orders for dredgers.

Future Growth Prospects

  1. Secured record ₹1,075 crores in new orders, highest in company history.
  2. Current order book of ₹1,400 crores provides multiyear visibility.
  3. Entered Green Tug segment with two 15-year contracts worth ₹650 crores.
  4. Backward integration into shipbuilding with new state-of-the-art shipyard.
  5. Projecting 30% year-on-year revenue growth for next two years.

Management Insights

  1. FY26 saw strong financial and operational execution with healthy growth.
  2. Maintained robust profitability with 38% EBITDA margins and 31% PAT margins.
  3. Highly selective in project bidding, focusing on margin-accretive opportunities.
  4. Successful capital raise enhanced ability to pursue growth while maintaining prudent leverage.
  5. Building an institution for long-term value creation, not just a larger company.

Signs of Skepticism

  1. Q4 revenue and EBITDA margin dip attributed to project billing delays to Q1.
  2. Debtor days target of 45-60 days not yet achieved, with one large outstanding claim.
  3. Bahrain operations halted due to unstable situation, vessel redeployed.
  4. Myanmar revenue significantly dropped, vessel redeployed to India.
  5. Short-term borrowing increased despite significant cash reserves.

Risk Factors

  1. Geopolitical instability in Bahrain prevents current operations.
  2. Potential for slower order booking if demand environment changes.
  3. Execution risks associated with large, long-term projects.
  4. Dependency on government subsidies for shipbuilding margins.
  5. Short-term borrowing increase for specific projects.

Good To Know

  1. Consolidated revenue for FY26 was ₹256 crores, up from ₹201 crores in FY25.
  2. EBITDA was ₹97 crores (38% margin), PAT was ₹79 crores (31% margin).
  3. Acquired 15 acres near Saphale for a state-of-the-art shipyard facility.
  4. Green Tug projects align with India's sustainability agenda and offer recurring revenue.
  5. Shipbuilding subsidiary (51% owned) will increase to 75% ownership.

Key Drivers

  1. Record order book provides multiyear revenue visibility.
  2. Entry into high-value Green Tug segment.
  3. Shipbuilding expansion enhances vertical integration.
  4. Strong revenue and EBITDA growth projections.

Key Analyst Discussions

Competitive Environment

  1. Q: Is there a slowdown in order booking or demand environment?
  2. A: No slowdown, bid pipeline exceeds ₹2,000 crores expected in next 3 months.
  3. Q: How is KMEW positioned in the Green Tug Transition Program?
  4. A: Strategically positioned among select domestic players with capability to participate.
  5. Q: Any impact of the West Asia war on operations?
  6. A: Fuel price rise offset by fuel pass-through contracts, no negative impact.

Market Trends & Consumer Behavior

  1. Q: What is the status of the Bahrain sand mining project?
  2. A: Project on hold until situation stabilizes, vessels redeployed to India.
  3. Q: What is the new normal for quarterly revenue given monsoon impact?
  4. A: Q1 and Q2 typically lower due to monsoon; management prefers yearly guidance.

Financial Highlights

  1. Q: Rationale for increased short-term borrowing and non-current financial assets?
  2. A: Short-term borrowing for specific contracts, repaid this year; non-current assets are fixed deposits and preferential equity.
  3. Q: Reason for Q4 EBITDA margin dip and revenue fall?
  4. A: Due to single-stage payment contracts, revenue recognition shifted to Q1; actual EBITDA for Q4+Q1 is over 40%.
  5. Q: Guidance for FY27 and FY28 revenue and EBITDA margins?
  6. A: Projecting 30% year-on-year revenue growth; EBITDA margins to remain 35-40%.
  7. Q: What is the funding mix for the ₹500 crores FY26 capex?
  8. A: Current cash, aligned debt, and potentially equity if needed.

Product Composition

  1. Q: What type and size of ships are planned for shipbuilding?
  2. A: Smaller vessels (10-120m length) like mooring boats, tugs, survey boats, oil tankers, barges.
  3. Q: What is the expected revenue mix from shipbuilding, dredging, and chartering?
  4. A: Current year mix: 20% shipbuilding, 80% dredging and chartering services.
  5. Q: What EBITDA margin is expected from the shipbuilding business?
  6. A: 25-30% without subsidy, 35-40% with government subsidy.

Strategic Considerations

  1. Q: Plans for expansion after preference issue and capital raise?
  2. A: Capital deployed for growth, including new dredgers and shipyard development.
  3. Q: Asset utilization plan for River Pearl 47 dredger?
  4. A: Utilized for rock dredging in various ports with hard strata, 240+ days/year utilization expected.
  5. Q: Progress on Green Tug construction and timeline?
  6. A: Major components ordered, yard construction started, physical construction post-monsoon, fully constructed by mid-2027.
  7. Q: Shareholding and capital infusion in the shipbuilding subsidiary?
  8. A: KMEW holds 51%, increasing to 75%; capital infused proportionally to shareholding.