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Skipper Ltd

| Q4 FY '26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤5th May 26

Summary : Skipper Limited achieved record FY26 financial performance, driven by strong execution and strategic initiatives, with robust future growth prospects despite near-term export and execution challenges.

Management Perspective positive : FY '26 has been a defining year, marked by record financial performance. We are confident of delivering a significant better FY '27. A multiyear growth runway ahead lies ahead of us.

Concall Report Analysis & Insights

Business Overview

  1. FY26 was a record year with highest ever annual revenue of INR5,552.8 crores, up 20% year-on-year.
  2. Q4 FY26 saw highest ever quarterly revenue of INR1,666 crores, growing 29.4% year-on-year.
  3. EBITDA margins expanded to 10.3% for FY26 and 10.4% for Q4 FY26, reflecting improved profitability.
  4. PAT increased 42% year-on-year to INR207.3 crores for FY26 and 70% to INR75.6 crores for Q4 FY26.
  5. Closed the year with a record order book of INR8,501.9 crores, with INR5,678 crores in annual inflows.

Future Growth Prospects

  1. Guiding for 15% revenue growth and approximately 30% bottom-line growth for FY27.
  2. Capacity expansion to reach 450,000 tons per year by June '26 is progressing well.
  3. Strong bidding pipeline of over INR33,000 crores provides significant future order visibility.
  4. Expect bidding activity to be robust from next year, returning to 20-25% growth rates.
  5. Diversifying export markets to North America, Europe, and LatAm for future growth.

Management Insights

  1. FY26 was a defining year marked by record financial performance and strong execution across segments.
  2. The company has built a scalable manufacturing platform, yielding margin expansion and stronger cash generation.
  3. Financial profile strengthened with reduced finance costs due to better working capital efficiency.
  4. Significant progress made in manufacturing capabilities, including commissioning Test Bed 2.
  5. Power transmission sector outlook remains very strong with sustained demand visibility from multiyear capex.

Signs of Skepticism

  1. The 15% revenue growth guidance for FY27 seems conservative given the record order book and market opportunities.
  2. Management acknowledges geopolitical challenges and sea freight increases impact exports, but downplays margin impact.
  3. The explanation for doubled trade receivables includes a technical reason that might mask underlying issues.

Risk Factors

  1. Geopolitical challenges currently impact export growth, especially in the Middle East.
  2. Increased sea freight costs cause customers to delay decisions, affecting export orders.
  3. Extended timelines for critical equipment (transformers, HVDC) slow bidding activity.
  4. Right-of-way (ROW) constraints and forest clearances delay project execution on the ground.
  5. Temporary moderation in ordering due to execution size constraints in FY26.

Good To Know

  1. Received 'Great Place to Work' certification for the fifth consecutive year.
  2. Commissioned Test Bed 2, making them the only company globally with dual test bed facilities at one location.
  3. Successfully completed plant audits across North America, Middle East, LatAm, Australia, and Europe.
  4. Went live with SAP S/4HANA RISE for better process control and real-time visibility.
  5. Expanding into substation portfolio to increase total addressable market.

Key Drivers

  1. Record order book provides strong visibility.
  2. Capacity expansion drives future growth.
  3. Diversifying export markets globally.
  4. Robust power transmission demand.

Key Analyst Discussions

Competitive Environment

  1. Domestic order book is predominantly Power Grid, with less than 10% from private players.
  2. Aiming to increase business with private players like Tata Power, Adani, and Resonia.
  3. PGCIL maintains a 50% market share in Tariff-Based Competitive Bidding (TBCB) projects.
  4. Seeing increased private sector interest in TBCB projects, including lower voltage intrastate projects.
  5. Company is competitive in engineering-heavy, manpower-intensive products in export markets.

Market Trends & Consumer Behavior

  1. Power transmission sector outlook is very strong, driven by renewable energy integration and grid expansion.
  2. Underlying tender pipeline remains robust, with order awarding expected to accelerate from FY27.
  3. Shortages of critical equipment (transformers, HVDC) are a global bottleneck for project execution.
  4. PGCIL capex guidance suggests INR90,000-INR1 lakh crores bids annually.
  5. Demand for building transmission networks remains high from end-users.

Financial Highlights

  1. Trade receivables increased due to INR260 crores received in April and 45% domestic revenue growth.
  2. Finance costs reduced to 3.3% of sales in Q4 FY26 from 4.4% last year.
  3. EBITDA margins expanded to 10.4% in Q4 FY26, with a long-term aspirational target of 12%.
  4. New capacity utilization typically takes a couple of quarters to reach full potential.
  5. Polymer business margins are low single digits, aspiring for double-digit with higher volumes.

Product Composition

  1. HVDC projects are part of the current order book, with more expected to be bid this year.
  2. Almost all current projects are EHV focused (400 kV, 765 kV, 800 kV).
  3. Expanding into the substation segment to address a larger portion of transmission line capex.
  4. The dual test bed facility allows testing of highest voltage towers and heavy capacity towers.
  5. Better product mix, more monopoles, and export markets offer opportunities for margin increase.

Strategic Considerations

  1. Diversifying exports from the Middle East to North America, Europe, and LatAm.
  2. Capacity expansion is balanced with execution capability, considering engineering and manpower needs.
  3. Aiming for 20-25% growth from FY28 onwards, after a conservative 15% for FY27.
  4. The new 75,000 MTPA capacity expansion is expected to add INR1,000-1,200 crores in yearly revenue.
  5. Company's raw materials are 100% indigenous, ensuring no supply disruptions.