SCHNEIDER - SCHNEIDER ELECTRIC INFRASTRUCTURE LIMITED Share Price

In the Q4 FY '25 earnings conference call on May 27, 2025, management outlined an optimistic outlook for Schneider Electric Infrastructure Limited. The company reported a substantial order growth of 13.4%, closing at INR 2,693 crores, and a sales increase of 19.5% at INR 2,637 crores. Gross margins improved significantly to 26%, translating to INR 1,037 crores. Furthermore, EBIT saw a notable rise of 35%, reaching INR 382 crores, with a PAT growth of 55.8%, amounting to INR 268 crores. Free cash flow surged by 85%, totaling INR 245 crores.

Looking ahead, management anticipates stable growth in the Indian economy with a GDP growth rate of around 6.5%. However, they acknowledged a slight decline of 10-12% in private sector announcements for FY '26, attributed to broader economic uncertainties, though inflation dropping to 3.1% could spur demand.

Key forward-looking strategies include substantial investments in plant capacities: INR 100 crores for the Vadodara plant, which will add 6,000 panels, and INR 90 crores for the Kolkata facility, which will enhance breaker capacity by nine times to 45,000 units. Production at both facilities is expected to ramp up by FY '27.

Management emphasized their focus on high-margin segments like data centers, EV infrastructure, and semiconductor solutions, aiming to sustain profitability and improve margins. They connected ongoing advances in digitalization and sustainability to their core strategies. Notably, Schneider plans to leverage governmental initiatives, especially concerning renewable energy and the National Green Hydrogen Mission, committing approximately INR 20,000 crores towards domestic energy transition efforts by 2030.

Overall, Schneider Electric Infrastructure Limited is positioned well for growth, with strategic investments and a keen eye on market demands driving their positive outlook for the financial year ahead.

1. Question: Our order backlog is up only 2% on a Y-o-Y basis. Can you give some comments on that and how we should look at it? Also, how should we assess the margin trajectory for next year?

Answer: Our order backlog reflects that while it's only a 2% increase, we have achieved a 13.5% growth in orders overall. The backlog's modest growth doesn't reflect our optimism for future sales. We've seen significant momentum in our transactional business, contributing to improved profits. Regarding margins, we aim to maintain and improve them by differentiating ourselves and focusing on high-margin segments, although I can't share specific numbers at this point.

2. Question: With the current financial year seeing 90% utilization in our Kolkata factory, how will we augment resources for revenue growth before it becomes operational?

Answer: Even with 90% utilization, we can optimize output through techniques like increasing shifts or enhancing operational efficiencies. Our installed capacity allows flexibility for higher production. We don't foresee limitations on growth due to utilization levels, as our current setup can indeed meet peak demand if needed.

3. Question: What gives you confidence in expanding the Kolkata facility capacity by 9x?

Answer: Our confidence springs from the predicted growth in demand for transformers and breakers, driven by market needs. We're not only expanding for local markets but also targeting international sales. The new facility will enable us to produce next-gen breakers, catering to diverse customer requirements and potentially boosting our revenue substantially.

4. Question: How much incremental turnover do you expect from the INR200 crores capex investment?

Answer: While it's tough to predict specific incremental revenue figures, our investment is strategically aligned with market needs. The staggered approach we're adopting should ensure profitability at the gross margin level. We anticipate a steady increase in revenue as we ramp up production and enter new markets, particularly through the Kolkata facility.

5. Question: On the INR200 crores capex, how many revenues can we expect?

Answer: We can't provide exact figures right now, but this investment targets both local and export markets. Our focus will be on staggered growth as we establish our presence in various sectors, ensuring that the return on this capex is realized effectively over time.

6. Question: Can you elaborate on the increase in other expenses by 33%? Is there a one-time cost involved?

Answer: The rise in other expenses correlates with our sales growth and reflects various operational activities, including marketing and branding. We've increased our investment in internal capabilities to support future growth. Yes, there was a one-time write-back of old payables that contributed to our other income, indicating prudent fiscal management.

7. Question: What percentage of your sales comes from group companies? Will this change in the next 2-3 years?

Answer: Currently, about 18% of our total sales is from group companies. We foresee this percentage remaining relatively stable in the coming years as our strategy focuses on maintaining diverse revenue streams from various sectors without overly relying on group sales.

These questions and answers from the transcript provide a concise summary of critical topics discussed during the earnings call.