MAHSEAMLES - Maharashtra Seamless Ltd. Share Price

During the Q4 FY25 earnings conference call, Maharashtra Seamless Limited's management outlined a cautious but optimistic outlook. Despite a slowdown in order bookings, management reported dispatches of nearly 118,000 tons of seamless pipes, exceeding their annual growth guidance of 7% to 8%.

Key points from management include:

1. Financial Highlights:

   • Revenue increased by 3% to INR 1,456 crores.
   • EBITDA rose 2% to INR 285 crores.
   • Profit After Tax (PAT) surged by 28% to INR 243 crores from INR 190 crores in Q3.
   • Earnings Per Share (EPS) improved to INR 18 from INR 14.

2. Annual Performance vs. FY24:

   • Although dispatches grew over 10%, total revenues remained stable due to substantial declines in sales realization.

3. Other Income:

   • Increased to INR 197 crores from INR 141 crores, a 40% rise, boosting quarterly performance from an average of INR 35 crores in FY24 to INR 50 crores in FY25.

4. Credit Rating:

   • Upgraded from AA to AA+ by ICRA, the highest rating in a decade, indicating robust company health.

5. Order Book:

   • Stands at INR 1,584 crores, reflecting a dip in new orders but a favorable demand environment in the manufacturing and oil sectors.

6. Dividends:

   • Maintained dividend payments despite a 19% annual profit decline, resulting in a payout ratio increase from 14% to 17%.

7. Capex and Future Growth:

   • Plans to maintain current dispatch levels until a new finishing line is operational towards year-end 2025, with growth anticipated thereafter.

Management emphasized that present market conditions should not deter long-term prospects, suggesting an improvement in order flows moving forward.

Question 1: "I just wanted to know about the update on the capex regarding the cold drawn line?"
Answer: The equipment for the cold drawn line has already been ordered, and it will be received by us towards the later part of this calendar year.

Question 2: "Any guidance on the volume growth that we expect to achieve in FY '26 and FY '27?"
Answer: For FY '26, I think we will maintain similar volumes as in FY '25 until our finishing line at Telangana is operational. After that, we expect to see growth in volume.

Question 3: "What's the main reason for this drop in realization?"
Answer: The drop in realization isn't due to diminished demand, as the demand environment is generally good. Instead, it's attributed to industry-wide declines in pipe prices following a spike due to the energy crisis caused by the Russia-Ukraine war.

Question 4: "Are we planning for some acquisition?"
Answer: We plan to deploy cash for acquisition opportunities, but they need to be at a comfortable price. Presently, no such opportunities are available due to the market being good.

Question 5: "What is the expected EBITDA per ton for seamless pipes?"
Answer: Reasonably speaking, I think around INR15,000 per ton should be the guidance based on our current order book.

Question 6: "Could you provide an outlook on the new government policies?"
Answer: The revised DMI and SP policy will notably reduce imports of seamless pipes. They require that all pipes must be domestically manufactured, which will boost local production and opportunities.

Question 7: "What is the status of the rig business?"
Answer: Our rig has not been deployed with ONGC. It is under refurbishment with Jindal Drilling, which has recently secured a three-year contract for it.

Question 8: "What plans do you have regarding cash reserves?"
Answer: We are conserving cash as our plant and machinery are aging and will require significant replacement in the future. Currently, we are attentive to any attractive acquisition opportunities.

Question 9: "What is the timeline for the capital expenditure projects?"
Answer: We are focusing primarily on the cold drawn project, with delivery of equipment expected later this year. The finishing line at Telangana is also ongoing, and we'll update further on other capex items afterwards.

Question 10: "Can you share insights into the overall market dynamics?"
Answer: The market is growing at a rate of about 3% to 4%, but orders from the oil and gas sector are not growing at that pace. Exploration activities have not ramped up aggressively, which impacts order flow.