NETWEB - NETWEB TECHNOLOGIES INDIA LIMITED Share Price

In the Q4 FY25 earnings call of Netweb Technologies, management provided an optimistic outlook, highlighting their highest-ever income and PAT (Profit After Tax) for the quarter and fiscal year. The company's operating income increased by 55.9% year-on-year for Q4 FY25, amounting to INR 4,147 million, while the full fiscal year saw an increase of 58.7%, reaching INR 11,490 million. The management is targeting a compound annual growth rate (CAGR) of 35% to 40% for the next couple of years, driven by robust performance across its business segments.

Key forward-looking points include:

1. A forecasted operating EBITDA margin of 13% to 14% and a PAT margin around 10% for FY26.
2. Significant contributions from the AI segment, projecting it will grow to approximately 19% to 20% of total revenue within the next year, from its current contribution of 14.8%.
3. The company has received a claim of INR 59.4 million under the PLI Scheme 2.0 for IT hardware.
4. A focus on product innovation, with three patent applications filed in FY25 and one design patent awarded, bringing total registered design patents to nine.
5. Anticipation of continued demand for AI solutions, with the company launching Skylus.ai to facilitate GPU-based AI infrastructure.
6. Strengthening of the workforce, with 79 new employees added, including 46 technical professionals.

Management reaffirmed that their growth trajectory is supported by a robust order book of approximately INR 4,000 crores, with a conversion rate of around 60%. They remain focused on maintaining strong operational efficiency while pursuing strategic expansions across key markets.

1. Question: "I want to understand the key drivers for this particular segment (AI) and where do you see this segment three years to 5 years ahead as an overall contributor to our total revenue?"
Answer: I believe AI will become an essential vertical for us. With increasing enterprise and government adoption, particularly for private and local LLMs, we foresee significant growth. Currently, AI contributes about 14.8% to our revenue, and we expect this to grow to around 19% to 20% over the next year or two.

2. Question: "On the patent side, can you explain what kind of patents we applied for and our thought process behind acquiring them?"
Answer: Our innovation journey, spanning over 25 years, involves developing unique features thanks to our robust R&D team. We focus on patenting existing solutions to safeguard our innovations. While I can't disclose specific details as they are under approval, these patents reinforce our current product lines.

3. Question: "What kind of revenue growth can we see over the next 2 years?"
Answer: We have maintained a consistent growth rate of 35% to 40% over the past three years. I expect this momentum to continue, largely driven by the AI segment alongside private cloud and HPC markets.

4. Question: "Could you elaborate on our order pipeline? How do these orders work?"
Answer: Our order pipeline is about INR 4,000 crores, but execution cycles are typically 8 to 12 weeks. While we've seen a conversion rate of about 60%, it's essential to remember that our projects require detailed solution design before RFP publication, impacting the timeline.

5. Question: "What is our strategy for the export market?"
Answer: Currently, exports constitute about 5% to 7% of our turnover. While we plan to maintain this share, it may marginally increase. Our primary focus remains on meeting robust domestic demand first, as we are a production-grade company needing strong support infrastructure for exports.

6. Question: "Can you speak to the improvements we've seen in cash flow, particularly in the second half of FY25?"
Answer: I expect cash conversion cycles to remain in the range of 70 to 90 days. As we grow, part of revenue gets tied up in working capital. However, our focus on efficient management will push us towards achieving positive cash generation in the future.

7. Question: "What is the competitive edge in our higher margins compared to peers?"
Answer: Our margins are strong due to our integrated approach where we design, manufacture, and develop software in-house. This full-stack solution offers better value than competitors, who typically deal with either hardware or software, allowing us to command premium pricing.

8. Question: "Can you elaborate on the adoption of Skylus.ai and its market position?"
Answer: Skylus.ai is designed to simplify GPU-based AI infrastructure management. While similar multi-product combinations exist in the market, we have not seen a direct competitor for Skylus.ai itself, making it uniquely positioned for widespread adoption among diverse users, spanning large enterprises to standalone setups.