Zodiac Energy Limited Q1 FY25 Concall Highlights: Strong Growth Fueled by Solar Energy & Expansion
Zodiac Energy Limited kicked off FY25 with a strong performance, delivering impressive top-line and bottom-line growth. The company's Q1 FY25 results showcased a 144.56% year-on-year (YoY) surge in total income to INR79.59 crores and a remarkable 184.36% YoY increase in net profit to INR2.33 crores. This robust performance was primarily driven by the company's expanding presence in the solar energy sector, with a diverse range of offerings and new initiatives.
a. Financial Performance:
Zodiac Energy's Q1 FY25 financials demonstrated a significant improvement compared to the same period last year. Total income climbed to INR79.59 crores from INR32.68 crores in Q1 FY24, representing a robust 144.56% YoY growth. The company's EBITDA expanded by 76.68% YoY to INR4.44 crores, although the margin contracted to 5.58% compared to 7.72% in Q1 FY24, primarily due to increased investment in growth initiatives. Net profit surged by 184.36% YoY to INR2.33 crores, with the net profit margin improving to 2.93% from 2.52% in the corresponding quarter of the previous year. Earnings per share for the quarter increased by 183.93% to INR1.59.
Management attributed the margin contraction to increased investment in talent acquisition, higher interest costs, and expenses related to projects with higher working capital requirements. They expressed confidence that the EBITDA margin would improve in subsequent quarters as new projects come online.
b. Operational Updates:
Zodiac Energy continued to expand its presence in the solar energy sector, executing projects across diverse verticals including residential, commercial, and industrial rooftop installations, as well as ground-mounted open access and utility-scale solar projects. Notably, the company secured a power purchase agreement (PPA) with UGVCL for a 26.56 MW AC capacity project under the PM KUSUM scheme, representing a significant step into the Independent Power Producer (IPP) segment.
The company emphasized its commitment to expanding its footprint outside India, particularly in Africa, and expects to convert existing leads into confirmed orders soon. Management also highlighted the operationalization of its Lucknow office and the impending launch of its Pune office as part of its strategy to establish a stronger national presence.
c. Management Insights:
Mr. Kunj Shah, Chairman and Managing Director of Zodiac Energy Limited, provided key insights into the company's performance and outlook. He attributed the strong Q1 performance to increased customer confidence in the solar energy sector, fueled by initiatives like the PM Surya Ghar Yojana and supportive government policies.
He highlighted the rising demand for solar energy, with the industry growing at a rapid pace and prices stabilizing after a period of volatility. Shah emphasized the company's commitment to contributing to India's renewable energy goals, emphasizing the importance of the PM KUSUM scheme and its role in driving growth.
d. Strategic Initiatives and Future Plans:
Zodiac Energy's strategic focus remains on expanding its presence in the solar energy sector, leveraging the growth of the IPP segment and its robust order book. The company is actively pursuing investment opportunities in PM KUSUM and other C&I solar projects.
Management also indicated plans to continue investing in talent and adopting new technologies to support its growth trajectory. Expanding its geographical reach, especially in Africa, remains a core focus area, with management confident in converting existing leads into confirmed orders.
e. Q&A Session Highlights:
- National Presence and Employee Costs: Management confirmed the operationalization of the Lucknow office and the imminent launch of the Pune office. They acknowledged the modest increase in employee costs despite a significant rise in turnover, highlighting investments in talent acquisition the previous year.
- Client Base: Beyond Adani, Torrent, and RBI, Zodiac Energy serves a diverse clientele, including Nirma, Honda Motorcycles, UGVCL, IRM Energy, and GIFT City, amongst others. Management highlighted the substantial repeat business from key clients, demonstrating strong client relationships and project pipeline.
- Credit Ratings: Management addressed concerns regarding the withdrawal of credit ratings by Informatics, stating that the company had not engaged them for a formal rating and that the issue was resolved with the intervention of SEBI and RBI.
- Operating Margins: Management explained the reasons for the decline in operating margins in Q1 FY25, attributing it to a combination of factors including reduced solar panel prices and a lean period typical for the first quarter. They expressed confidence that margins would improve in the following quarters.
- Future Capex: Management emphasized the focus on investing in promising opportunities, including PM KUSUM and C&I solar power projects, with future capital expenditure plans to be determined as opportunities arise.
- Order Book & Government Contracts: Zodiac Energy boasts a healthy order book of more than 50 MW across captive projects and the PM Surya Ghar Yojana. The company confirmed its involvement in government contracts, representing about 70% of its total order book. They highlighted the standard inclusion of Operations & Maintenance (O&M) contracts with C&I and government clients.
- QIP & Funding: Management outlined the purpose of the Qualified Institutional Placement (QIP) as a funding mechanism for its PM KUSUM projects and highlighted the project's size and anticipated funding sources.
- Top Client Contribution: Management clarified that approximately 12-15% of the company's overall revenue is contributed by its top 10 clients.
Conclusion:
Zodiac Energy Limited's Q1 FY25 results signify a promising start to the fiscal year, driven by the company's continued focus on solar energy and a robust project pipeline. The company's expansion into the IPP segment, strengthened national presence, and continued growth in a dynamic market position it well for future success. While challenges like margin pressures remain, management's confidence in the long-term growth trajectory and commitment to innovation and expansion bode well for the company's prospects. The upcoming quarters will likely bring further clarity on the company's ability to navigate potential challenges and continue delivering on its growth targets.
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