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SPML Infra Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤23rd Feb 26

Summary : SPML Infra is poised for significant growth, driven by strong order inflows in water, power, and BESS, supported by improved financials and strategic expansion.

Management Perspective positive : Good afternoon ladies and gentlemen. I welcome you all to the quarter three and nine months of FY'26 conference call for SPML Infra Limited to discuss the operational and financial performance of the company. Our results and investor presentation have already been posted on the Stock Exchange website and I hope everyone had a chance to go through them. Over the last 45 years, SPML Infra has built strong capabilities by delivering 700 plus milestone infrastructure projects across various states and earned valuable qualifications across the water and power businesses. Rebuilding on strength and reshaping for future, we are transitioning to SPML 2.0 focused on disciplined growth, selective bidding and higher margin opportunities. The current fiscal has been pivotal with strong order inflows and steady execution across water, power and the emerging BESS segment. We remain focused on profitable and sustainable growth in these long-term growth-oriented sectors.

Concall Report Analysis & Insights

Business Overview

  1. SPML Infra has 45 years of experience, delivering over 700 infrastructure projects.
  2. Company is transitioning to SPML 2.0, focusing on disciplined, profitable growth.
  3. Core strengths are water, power, and the emerging Battery Energy Storage System (BESS) segments.
  4. Current order book stands at INR4,358 crores, providing healthy execution visibility.
  5. Strategic entry into BESS with end-to-end EPC capabilities and a 2.5 GW manufacturing facility.

Future Growth Prospects

  1. India's infrastructure sector is a key growth engine, supported by INR12.2 lakh crores Union Budget FY'26 outlay.
  2. Water infrastructure has substantial allocations, aligning with SPML's core strengths.
  3. BESS market projected at 236 GW by FY'32, a US$57 billion opportunity.
  4. SPML has a visible pipeline of INR9,000 crores in BESS orders over 6-12 months.
  5. Expects meaningful order inflow conversion from INR5.7 lakh crores opportunities in FY'27.

Management Insights

  1. We are focused on profitable and sustainable growth in long-term oriented sectors.
  2. Strong order momentum and steady execution across water, power, and BESS segments.
  3. Financial position strengthened with steady de-leveraging, including INR317 crores debt repaid.
  4. Credit profile reaffirmed as stable by ICRA, bank facilities enhanced to INR505 crores.
  5. Expecting a strong Q4 performance due to project approvals and accelerating execution.

Risk Factors

  1. Forward-looking statements are subject to inherent company risks.
  2. Project execution timelines can be lengthy, especially for design and drawing approvals.
  3. Interest costs increased due to one-time income tax assessment and mobilization advances.
  4. Working capital discipline is crucial for Jal Jeevan Mission projects.
  5. Competition in BESS and other EPC segments could impact margins.

Good To Know

  1. Union Budget FY'26 allocates INR12.2 lakh crores for infrastructure, with significant funds for water projects.
  2. Company plans to shift to a new tax regime to adjust carry-forward losses and save tax expenses.
  3. ICRA reaffirmed the company's credit profile as stable, with ratings under review.
  4. Sanctioned bank facilities increased from INR205 crores to INR505 crores.
  5. Received approval for INR180 crores surety bond, enhancing bidding flexibility.

Key Drivers

  1. BESS plant commercial production in Q1 FY27.
  2. Strong order book and new project inflows.
  3. Government's massive infrastructure spending.
  4. Improved financial health and liquidity position.

Key Analyst Discussions

Competitive Environment

  1. SPML is a leading player in water and a top 10 in power, leveraging 40+ years experience and 700+ projects.
  2. Strong pre-qualification (PQ) status gives an advantage over mid-sized competitors.
  3. BESS competitive landscape is driven by tenders, with SPML positioning for grid-driven segments.
  4. Company pays 1.75% royalties to Energy Vault USA for technology upgrades and R&D.

Financial Highlights

  1. Company has roughly INR200 crores of accumulated tax losses, sufficient for several years.
  2. Q3 FY'26 revenue was INR231 crores, up 21% YoY, with EBITDA up 86% and PAT up 97% YoY.
  3. Targeting 25-30% revenue growth and 40-50% PAT growth for FY'26.
  4. Minimum 10% margin is targeted for all new projects across water, power, and BESS segments.
  5. INR1,540 crores of the current order book are lower-margin legacy projects, expected to complete next year.

Product Composition

  1. Current new orders are primarily water-related; legacy projects include INR200-300 crores in power.
  2. BESS operations will focus on EPC, including supply, design, fabrication, and construction.
  3. BESS manufacturing facility will produce battery packs for both internal EPC use and OEM sales.
  4. Company is qualified for wastewater management but prefers bulk pipeline projects for faster execution.

Strategic Considerations

  1. BESS manufacturing facility at Supa MIDC Pune is on track for commercial production in Q1 FY'27.
  2. BESS capacity is planned to expand from 2.5 GW (phase one) to 5 GWh, then to 10 GWh.
  3. Evaluation is ongoing for a container manufacturing facility to support backward integration.
  4. Water projects typically have 3-4.5 year execution timelines, power projects 22-24 months, BESS 1-2 years.
SPML Infra Ltd (SPMLINFRA) Concall Report Analysis & Insights | Dhanarthi