Decoding Titagarh Rail Systems Q4 Earnings | NDTV Profit - video Dailymotion

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00:00 T-Tugger Rail Systems is a stock that is doing well in trade today.

00:10 The revenues were up 8% in and around the expected lines, but I think on the margin

00:18 front on that business versus the estimates of 11% to do 11.4 and versus a 9.8% number,

00:27 I think that may have helped the street confidence a little bit more.

00:32 Pritish Choudhury joins in to talk about the quarter and the year gone by and the outlook

00:37 ahead.

00:38 Pritish, thanks so much for taking the time out and being with us.

00:39 I want to start off with a comment that came in into the presentation that you guys made

00:46 post results, wherein you've said that the passenger rail system segment got impacted

00:53 on account of near completion of Pune Metro contract, Bangalore Metro and some of the

00:59 others in various stages of execution.

01:01 And when I see the mix as well, there is the revenue contribution that also has seen a

01:06 bit of a downtick there.

01:07 So can you explain, is this an accounting mix?

01:09 Is it one order getting over, newer orders coming in?

01:12 What's happening here?

01:13 Sure.

01:14 So thank you very much for having me with you today.

01:17 And so this is a very known phenomenon that we've been also expressing publicly for a

01:23 while because we got the order for Pune Metro in 2019.

01:27 And now that order is almost entirely executed with I think one train pending to be delivered.

01:34 As far as the other orders that we were awarded, for example, Surat Metro or Ahmedabad Metro

01:39 or Vande Bharat, or even the Bangalore Metro project that we are executing in collaboration

01:43 with CRRC, those will start execution towards the Q2 of this financial year.

01:51 So that is why we see a small impact in the revenue numbers of the passenger rail system

01:57 vertical.

01:58 It is only on account of one order execution and the other orders being in the design stage

02:04 and waiting to start execution in the subsequent quarters.

02:07 Got it.

02:09 So in effect, this business might be lumpy in nature because when a project gets executed,

02:14 it doesn't, I mean, there is little revenue to book, but there is new projects starting

02:17 at some point of time and therefore things will get back to a higher share for the passenger

02:23 rail systems.

02:24 Would that be a fair assessment?

02:26 Going forward, we see actually a lot more growth potential in the passenger rail system

02:31 vertical.

02:32 As you said before, yes.

02:34 So in the next, let's say five years' time, we expect the passenger rail system vertical

02:38 to be almost 60-65% of our total revenues.

02:43 So that is the kind of potential that the passenger rail system business has.

02:46 And as for it being lumpy, it was just, you know, we are the newcomers in this field and

02:51 this is a business that we effectively started in 2019 in India.

02:56 So it is just a ramp up period that you see now.

03:00 And going forward, you will see the execution of all the orders that we've won in the subsequent

03:05 quarters that come up now.

03:07 Got it.

03:08 Now, I'm sticking to the quarter first, the exit margins are looking very strong.

03:14 You guys have always said that it's very difficult to cross the 12% number here.

03:17 You hope to maintain a number between 10 and 12.

03:19 11.5 is very neat.

03:23 Is this, I mean, would this be similar that you would probably clock in at some quarters

03:27 10.5, some quarters 11.5, some quarters 12?

03:30 Difficult to predict that.

03:31 And then therefore, as an average, what do you hope for FY25?

03:36 So I'm going to split this up into the two verticals, which is freight rail system and

03:40 passenger rail system.

03:42 In the freight rail system, we've maintained always that a fair EBITDA margin to look at

03:46 would be between 9 and 11%.

03:49 But now we actually revise that to about 10 to 12% because of the operational leverages

03:54 that we get.

03:55 You know, now we are in the month of March, we produced about 1080 wagons, which is the

04:00 industry highest ever recorded production.

04:02 So with the numbers being, with the production numbers being where they are, we also get

04:07 operational leverage because of which the margins in the freight rail system business

04:12 can be around 10 to 12% on an annual basis.

04:15 Of course, quarter to quarter, they may vary depending on the mix of products delivered,

04:21 you know, whether that's to the railways, whether that's to the private sector, what

04:24 kind of wagons we've made.

04:26 So on an annualized basis, between 10 to 12% is a fair margin to hope for on the freight

04:32 business.

04:33 Now on the passenger business, as of today, we actually have a disadvantage of operational

04:40 leverage, because we've already incurred all the fixed costs to set up the facilities and

04:45 train our people.

04:46 But the production of the orders that we have will only start in this or in the coming quarters.

04:54 So once those projects start execution, and once we're able to produce, let's say 15-20

05:00 which is a month by the end of this year, or by next year, hopefully, we hope that we

05:07 would be at a 10% EBITDA margin.

05:09 Now going forward, once we're able to backward integrate and fully absorb the propulsion

05:14 technology that we have with ADB, at that point, we expect a further enhancement in

05:19 EBITDA.

05:20 So on a company level, we expect that the same 10 to 12% EBITDA margins that we've been

05:26 mentioning on an annual basis would be a fair estimate.

05:28 When do you reach 65% on the passenger rail systems as an aggregate?

05:33 In about five years from now.

05:34 In about five years from now.

05:35 Okay.

05:36 By then, the margins could maybe nudge higher to 11.5%.

05:39 Okay.

05:40 Fair call.

05:41 Now, you are enhancing the passenger rail piece in your overall pie.

05:50 You've done this JV with RK forgings.

05:53 At a point of time in the last 12 to 18 months, when we had spoken to you, you guys had spoken

05:58 about how you are getting into backward integration for producing some other products as well,

06:05 which will get retrofitted into the wagons as well.

06:08 So now tell us, the wagon story is well known.

06:12 You've guided to some numbers.

06:14 You're executing on these numbers in a good way.

06:16 The revenue run rate for the last four years has shown exceptional growth, even on a higher

06:20 base.

06:21 Where does all of this lead to?

06:23 And how do the newer segments contribute to this?

06:28 Sure.

06:29 So on the freight rail system front or on the wagon front, we've hit a production of

06:36 1000 wagons a month in the month of March and in the months preceding that.

06:42 And this year, we hope to stabilize at that run rate.

06:45 So about 1000 wagons, between 950 to 1000 wagons a month.

06:48 Last year, we made about 8400 wagons, which is roughly 700 wagons a month and going up

06:57 to about 950 to 1000 wagons a month in this financial year.

07:01 Now if we come to the other businesses, such as the JVs or the passenger rail system, I

07:05 come to the JVs first, JVs and consortiums that we have.

07:09 So we have a JV with Ram Krishna forging for the forged wheels.

07:12 Now contractually, the deliveries for that would start in June of 2026 or in May of 2026.

07:20 So we still have some time because that factory is currently being set up.

07:23 You know, it's a brand, it's a Greenfield project, and that factory is currently being

07:27 set up.

07:28 When we come to the consortium that we have with BHEL for Vande Bhar, now that prototype

07:34 gets delivered in June 2025.

07:38 So we still have about a year until that prototype is delivered.

07:42 And the production ramp up for that actually happens in FY 26 and 27.

07:46 So the major revenue that would come from the Vande Bhar would actually happen in FY

07:51 26 and 27, not even the coming financial year.

07:55 So you know, as I mentioned just a little while ago, going forward, we expect about

08:01 65% of our revenue to come entirely from the passenger rail system business.

08:06 When I say passenger rail system business, that is not just the coaches, but that is

08:10 also the propulsion systems that we are making.

08:12 We are already supplying traction motors to the Indian railways.

08:14 We're hopeful that we are able to supply our prototype for the EMU propulsion system

08:20 soon, very soon.

08:23 So with all of these things happening now, we expect that in the next few years, the

08:27 passenger rail system vertical will really be our lever for growth.

08:32 Sure.

08:33 Okay, so therefore, how do we look at what kind of growth numbers could come in?

08:38 Because one is to reach 65, 35, but 65 on a base of what?

08:42 Let's say in five years, you're at 65.

08:44 I mean, I don't know what targets you're setting, whether you're setting three year targets

08:47 or five year targets, but at the end of FY 24, it's imperative to try and understand

08:51 what are the targets being set.

08:54 So we ordinarily don't give forward looking numbers or guidance to the markets.

09:00 But what I can comment on is the trend that we managed to establish.

09:03 So if you look at our performance last year, we were at a turnover of a revenue of 2700

09:09 crores, which this year is almost 3850.

09:13 On the EBITDA margins, we're at a 450 crore almost EBITDA this year.

09:19 Just to share an interesting data point with you, in 2018, we were at a revenue of 300

09:24 crores, and today we're at a PAT of 300 crores.

09:28 So that's the kind of potential that exists.

09:30 And that's the kind of growth that we definitely aim to keep providing to the market and to

09:38 the investors.

09:39 So today's revenue is 3800 crores, you become 3800 crores of PAT in five years?

09:50 I mean, if what is signed in the markets are kind, then we'll find out five years later.

09:54 But on a serious note, I mean, you reckon a 30-35% odd kind of growth number is possible

10:01 on the revenue front for FY25?

10:03 I would really not be able to comment on that at this point in time, because we don't give

10:08 any numbers.

10:09 Okay, but I'm just trying to gather from your numbers, you saying that from a 700 wagon

10:15 number, right, on an average, you move to 1000 wagon number, that's roughly 35 to 40%

10:21 growth, give or take?

10:24 Unfortunately, so my maths is not that strong.

10:27 So it could be a 35 to 40% number, but I leave that to the experts.

10:31 Okay, fair call.

10:34 Last question, any fundraise that might happen on the equity side in the next 12 months?

10:40 Not that we envisage at this point of time, last year, we already had a couple of rounds

10:44 of fundraising from the capital markets.

10:46 And at this point in time, we think that should be enough that coupled with our internal approvals

10:51 should be more than enough to sustain the company in terms of the capex plans and all

10:55 of the other plans.

10:56 Great, Pritesh, good chatting with you.

10:58 Thank you so much for taking the time out and all the best for the year ahead.

11:00 Pleasure's all mine.

11:02 Thank you.

11:03 Thank you and viewers, thanks for tuning in.

11:05 [MUSIC]

Decoding Titagarh Rail Systems Q4 Earnings | NDTV Profit

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