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Published: July 31, 2024
Updated: July 31, 2024

WPIL

Robust order book, hinting revenue visibility for 3 years

The outlook for WPIL, a global provider of pumps and systems, is highly positive if its recent performance and the inflow of orders are any indication. The company’s order book as on March 31, 2024 stood at Rs 3,860 crore, indicating revenue visibility for the next 36 months. While the international order book is getting stronger with robust demand for the company’s products and services in the MENA region, and with WPIL South Africa as well as Thailand doing very well, the domestic business is going from strength to strength. The domestic business mix at present is 76 per cent- projects and 24 per centproducts, and the company is looking at a ratio of 66:34.

Of the domestic order book, product orders were Rs 348 crore (up 11%) and project orders stood at Rs 3,054 crore. In FY24, domestic revenues grew by 7.4% year-on-year to Rs 1,077 crore with the domestic product business up 19% to Rs 261 crore and domestic project revenue up 4% to Rs 816 crore. Growth in project revenue was driven by strong order execution in Q4FY24, which saw or der execution to the tune of Rs 343 crore.

The strong domestic product order book gives strong revenue visibility and a positive outlook for FY25. The outlook for the product division has also improved considerably with the successful development of new products for the oil & gas and sewage & drainage segments.

WORK ON TRACK

Project execution has gained strong momentum and the company is ahead of schedule on a few projects in West Bengal. Barring one, the other 8 projects of Madhya Pradesh Jal Nigam are on track. One of the Madhya Pradesh Jal Nigam contracts was terminated by the client due to slow progress. A bank guarantee of about Rs 11 crore has been encashed by the client. However, the company has disputed the termination, citing that the land for construction was allotted only in December 2023, causing the delay. The unexecuted part of the terminated contract was about Rs 155- 160 crore. It is exploring all contractual remedies to protect the company’s interest. The unexecuted portion of the other 8 Madhya Pradesh Jal Nigam contracts, which are in various stages of completion, aggregate to about Rs 1,100 crore.

The unexecuted portion value of the MP Jal Nigam order that got terminated was taken out of the current order book of the company

The outlook for the core industrial pumps business of Gruppo Aturia remains strong, driven by robust demand in the MENA region and strong aftermarket revenues from its acquisition, Finder. The successful divestment of the nuclear business of Rutschi has allowed the company to focus on its core industrial pump business. The company is pursuing inorganic opportunities in the industrial pump business and hopes for positive outcomes by mid-FY25.

WPIL South Africa is also performing well with a continuous focus on the water sector and significant aftermarket contracts from Eskom Power. Both Sterling Pumps and United Pumps Australia have robust order books and are expected to post strong growth in FY25.

WPIL Thailand posted record revenues in FY24 and expects this momentum to continue with opportunities arising from the new Thai government’s focus on irrigation and drainage projects.

The Navy’s order (framework agreement for Rs 17-18 crore for supply of new types of pumps for which type test is completed and ready for shipyards to place orders for subsequent ships) execution is on track and the company expects to supply all these in next 6 months. This will contribute to strong revenue growth from FY25 onwards.

In the domestic business, the mix currently is 76% projects and 24% products. But the company is looking at a ratio of 2:1 (that is, 66% projects, 34% products). So it is working with an active thrust on products. In the case of the domestic projects business, it wants to be margin-focused and not volume-focused. The company typically looks an EBITDA margin of 15-20% in the project business.

Product orders are generally of a shorter duration, tentatively between 4 and 8 months depending on the type of product. The project order book execution timeline is normally 24 to 30 months. Enhancing its execution rates in the domestic project business and in the product business, the strong demand is providing traction. Thus, the company expects strong growth in the domestic business in FY25.

In FY24, the project business execution in the first half was affected by supply chain challenges. But with a strong focus on execution, it has turned in a quarterly burnout of Rs 343 crore in domestic projects in Q4FY24. Based on this strength and the achievement in Q4FY24, the company expects to see good revenue growth for the domestic project business in FY25.

PRODUCT MIX

The India product business earlier used to have more thrust on power and irrigation but now both industrial — especially oil & gas — and municipal — water & sewerage — are giving strong support in the domestic market. “We see a very strong outlook going ahead in these two sectors because the order book remains strong and the inquiry flows are very strong,” said Mr Agarwal.

The two segments that are growing strongly now are Navy and sewage/drainage. This two segments give a margin of about 15-20%.

The project order enquiry pipeline or work that is put out is quite significant in the country, and thus replenishing the project order book is not a challenge. Recently there was a contract worth about Rs 5,000-8,000 crore in Rajasthan for about 10-12 jobs.

Fiscal 2022-23 was a growth year for the company when it grew from Rs 1,100 crore to Rs 1,800 crore. In FY24, it has consolidated and strengthened its execution and hopes to start growing again henceforth. And all its order books are strong enough to support this growth.