Release Date: May 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rane Engine Valve Ltd (BOM:532988, Financial) achieved the highest sales level for the company driven by robust sales growth and enhanced operational performance.
- The company grew its business by 14% in FY24 with strong growth across all market segments, including domestic, aftermarket, and exports.
- The EBITDA margin improved by 157 basis points due to operational efficiency, capacity realization, export growth, and better cost management.
- The company has devised strategies to expand its share in the domestic market with identified customers in the automotive segment and focus on EV insulated sales.
- Rane Engine Valve Ltd (BOM:532988) revised its vision to enhance its product portfolio with non-IT components that have similar manufacturing processes.
Negative Points
- The EBITDA margin of Rane Holdings Ltd consolidated decreased by 38 basis points in FY24.
- The demand for the steering and linkage business was impacted mainly due to the drop in passenger cars, particularly entry-level models, and the farm tractor segment.
- Export sales grew by 10% despite a drop in the off-take of the off-road vehicle segment in the US.
- The EBITDA margin declined due to lower absorption of fixed costs and certain one-off provisions.
- The company faced challenges with warranty claims, impacting financial performance and requiring significant focus on improving product quality and manufacturing processes.
Q & A Highlights
Highlights of Rane Engine Valve Ltd (BOM:532988) Q4 FY24 Earnings Call
Q: Can you elaborate on the qualitative benefits of the merger of the three operating entities?
A: Harish Lakshman, Vice Chairman & Joint Managing Director, explained that the merger aims to create a larger company for future growth. Benefits include reduced compliance costs, stronger balance sheets, tax benefits, and operational synergies. The merger will also enable cross-selling between customers and leverage aftermarket strengths.
Q: What measures are being taken to address recurring warranty claims?
A: Harish Lakshman acknowledged the challenge and emphasized the focus on improving product development and manufacturing quality. He mentioned that the company is working on ensuring better quality to mitigate such issues in the future.
Q: Why has there been a decline in export sales in recent quarters?
A: Harish Lakshman attributed the decline to a slowdown in the off-highway vehicle segment in the US. He assured that while the growth rate may not match the previous two years, exports are expected to continue growing.
Q: Can you provide more details on the acquisition of TRW Sun Steering Wheels?
A: Harish Lakshman explained that the acquisition, valued at INR139 crore, complements their existing product portfolio. The acquisition will help provide comprehensive solutions covering occupant safety and system integration services to domestic customers.
Q: What is the outlook for the tractor segment given the IMD's good monsoon outlook?
A: Harish Lakshman mentioned that based on customer feedback, the company is forecasting zero percent growth in the tractor segment for the year.
Q: What is the status of the Mexico facility and its impact on future revenues?
A: Harish Lakshman stated that the Mexico facility is progressing as planned, with revenue generation expected to start in the second half of 2025. The facility will initially focus on ball joints, with plans for further localization.
Q: How does the company plan to grow its aftermarket and export businesses?
A: Harish Lakshman highlighted the potential for synergies and cross-selling opportunities post-merger. He also mentioned that the company is working on new product introductions and leveraging existing customer bases to drive growth.
Q: What is the company's approach to reducing debt and improving margins?
A: Harish Lakshman emphasized the focus on operational improvements, cost savings, and leveraging the merged entity's stronger balance sheet to reduce debt. He also mentioned ongoing efforts to improve margins through various initiatives.
Q: What is the company's dividend distribution policy?
A: Harish Lakshman stated that while there is no formal policy, the company aims for a 50% payout of its standalone PAT as dividends.
Q: How does the company view the impact of the China+1 strategy on its export business?
A: Harish Lakshman acknowledged an increase in RFQ pipelines due to the China+1 strategy and mentioned that the company has won some new businesses as a result. However, he noted that the full impact is still evolving.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
