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Strong bottom-line show, MDO to drive revenues

Power Mech Projects Ltd. (POWM) is a leading infrastructure construction company based in Hyderabad with a global presence. The company’s orderbook is largely backed by orders from Power segment which accounts for 76.8% of total mix.

* Q2FY25 consolidated revenues grew at 11% YoY to stand at Rs. 1,035cr., aided by strong execution in the erection segment. EBITDA grew at 9% YoY to stand at Rs. 124 cr.; however, margins saw a 21bps decline to stand at 11.9%.

* PAT stood at Rs.70cr. in Q2FY25 and Rs.131cr. in H1FY25, registering 36%/28% YoY growth, respectively. The current order book stands at Rs.58,067cr.

* POWM’s mining business made considerable progress in this quarter, with the H1FY25 revenues from the segment at Rs.26cr. With contributions from the KotreBasantpur mine expected to accrue in Q4FY25, the management expects MDO business to drive revenues.

* The peak revenues at peak rated capacity from both the mines are expected to be at Rs.2,100cr. Kotre Basantpur mine is expected to reach peak revenues in 2028, while Kalyaneswari Tasra mine is expected to achieve peak rated capacity in mid FY2027-28

Outlook & Valuation

As of Q2FY25, the order book backlog is at 13X TTM revenues, providing significant revenue visibility. We forecast execution to scale up in the second half of FY25 as we move past election-induced slack. Additionally, contributions from MDO business can help POWM unlock 23% CAGR revenue growth in the FY24-27E period. We build in EBITDA margin expansion of 252bps in this period enabled by contributions from profitable segments like O&M and Mining (after it reaches peak rated capacity—EBITDA/PAT margins are expected to be in the range of 22%/13%).

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