BEML - BEML Ltd Share Price

Management's outlook for BEML Limited indicates a strong growth trajectory, targeting a 20% compound annual growth rate (CAGR) across various sectors. The order book is expected to double, supported by numerous tenders already in the pipeline, especially in Rail, Metro, Defense, and Mining sectors. Specifically, the a breakdown of expected contributions for FY26 shows 20% from Mining, 20% from Defense, and 60% from Rail and Metro.

For FY25, the management highlighted a projected order inflow of approximately Rs.6,800 crores, representing a 28% growth over FY24. The total order book is anticipated to be about Rs.22,000 to Rs.23,000 crores at the end of the fiscal year. Additionally, BEML is set to execute an order for high mobility platforms valued at over Rs.1,500 crores.

On operational metrics, the management guided for an EBITDA margin improvement of 150 basis points, estimating margins to rise from 9.2% to 11.9%. One major shift in strategy involves focusing more on complete systems rather than just individual products, such as moving from high mobility vehicle platforms to comprehensive systems like mechanical minefield marking equipment.

The sustenance business is expected to contribute over 30% to the top line, with notable growth in defense sustenance sales growing by 50% last year. The management aims to enhance manufacturing capabilities and recruit additional skilled workers, anticipating a substantial increase in the workforce to accommodate future growth in sectors like aerospace, maritime, and high-speed trains.

In terms of capital expenditure, BEML plans to spend Rs.1,800 crores in phases to bolster capacity, aiming for complete delivery of trains with enhanced efficiency. The first phase aims for around 150 cars, with further expansion planned.

Overall, management displays optimism regarding both top-line and margin growth as well as operational efficiencies in the following fiscal years.

Q&A Section Summary:

Analyst: If I understand correctly, what gives you confidence regarding order book growth? Shantanu Roy: We expect mining to contribute 20% and defense 20%, while rail and metro could rise to 60%. Last year, our order inflow was Rs.6,800 crores, a 28% growth, and we anticipate at least double that this financial year, ending with an order book around Rs.22,000-Rs.23,000 crores.

Analyst: What about the Bangalore Metro delivery? Shantanu Roy: We plan to deliver all trains by December. The first train cleared inspection in April, and we expect to start delivering the remaining 9 trains from July.

Analyst: Can you clarify the capex plans? Shantanu Roy: We're targeting a total capex of Rs.1,800 crores in 5 phases, starting with Rs.225 crores. The first phase should yield around 150 cars, aiming for positive cash flow within 12-14 months.

Analyst: What is your inventory management strategy? Shantanu Roy: We aim to reduce inventory, especially for items over a year old, which is currently approximately Rs.500 crores. However, we cannot aim for zero inventory due to the nature of our custom projects.

Analyst: How do you plan to reduce employee costs? Shantanu Roy: We expect to lower employee costs to around 17%. Although challenging, this will depend on turnover growth. We're hiring selectively to ensure a skilled workforce aligns with our future needs.

Analyst: What challenges do you face with forging and casting? Shantanu Roy: Quality and deliverability are major issues with our Indian forging partners, necessitating imports. For castings, quality is critical, especially for safety-sensitive components, making it a significant challenge.

Analyst: When do you expect new defense orders? Shantanu Roy: If we execute our current orders, we could see more than double the defense turnover in FY26, with indigenization exceeding 95%. Upcoming orders, including emergency ones, will significantly impact growth.

Analyst: How is your receivable collection cycle? Shantanu Roy: Receivables are quicker in mining but slower in metro projects due to milestone alignments that often hold payments for warranty periods. We're actively pursuing quicker payments.

Analyst: Can you provide guidance for FY26 revenue? Shantanu Roy: We are optimistic about achieving over Rs.6,000 crores in revenue, factoring in a 20% increase this year as our EBITDA guidance is also supported by a better order mix and reduced material costs.

Analyst: Can you commit to quarterly investor meetings? Shantanu Roy: We can conduct quarterly meets if needed, but we already have two scheduled"”one in June and another in December, along with additional interactions as necessary.