Release Date: February 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 23% year on year to INR892 crores.
- EBITDA increased by 34% year on year to INR91 crores.
- Achieved double-digit EBITDA margin of 10.2% in Q3 FY24.
- PAT grew by 43% year on year.
- Strong focus on innovation and sustainability, particularly in the electric vehicle (EV) space.
Negative Points
- Capacity utilization in some new projects remains low, such as Romania at 10-20%.
- High debt levels with gross debt at INR553 crores and net debt at INR539 crores.
- Potential pullback in commercial vehicle market due to upcoming elections.
- Incremental capacity growth required for proprietary items, indicating ongoing CapEx needs.
- Challenges in scaling up new plants, such as the Mysore plant, which is still at low levels of capacity utilization.
Q & A Highlights
Q: Can you share the capacity utilization and customer-wise revenue breakup for quarter three?
A: For quarter three, our largest customer is TVS Motors at 30%, followed by Hero Motocorp at 19%, JCB at 9%, Bosch at 4.6%, and others. Capacity utilization varies: new projects in casting and sheet metal have crossed mid-level utilization, while proprietary items require incremental capacity growth. Romania is still underutilized at 10%-20%, but Indian sheet metal and casting plants are at 50%-60%.
Q: What is the progress on EV projects and client engagement for product launch timelines?
A: We have one product set to launch in the first quarter of the next financial year, with trials ongoing. We are engaging with two customers, and pilot lots have been sent. We are awaiting mass production from the client side.
Q: What is your outlook for Q4 and FY25 in terms of production levels and customer feedback?
A: The fourth quarter is historically the strongest, and we expect it to be robust. While there might be a pullback in commercial vehicles due to elections, we don't foresee significant impact on two-wheelers, passenger vehicles, or construction equipment. For FY25, we anticipate late single-digit growth in passenger vehicles and slightly higher for two-wheelers.
Q: What is driving demand for new capacities in die casting and sheet metal, and what is the potential revenue from these segments?
A: New capacities are set up based on customer commitments. Die casting and sheet metal capacities are filling up with predetermined orders. Proprietary items like smart locks are expected to see significant growth. Current utilization is 50%-60% for sheet metal and 70%-75% for die casting.
Q: What is the current debt of the company and the repayment plan?
A: The current gross debt is INR553 crores, with net debt at INR539 crores. This includes both short-term and long-term debts. We plan to repay approximately INR40 crores in FY24 and target around INR100 crores in FY25, including additional repayments.
Q: What are the potential savings from plant consolidation and the impact on margins?
A: Plant consolidation is part of our strategy to achieve double-digit margins. While exact figures are not provided, this exercise is expected to contribute significantly to margin improvement in the coming financial years.
Q: What is the status of the Mysore plant and its capacity utilization?
A: The Mysore plant started commercial production in October and is gradually increasing volumes based on customer requirements. We have also integrated two manufacturing facilities into one to improve efficiency.
Q: What is the roadmap for CapEx in new EV products over the next couple of years?
A: We plan to spend around INR21 crores on EV products, with INR10 crores in the current year and the balance in the next year. This is an asset-light model, focusing on assembly operations, leveraging our existing component manufacturing capabilities.
Q: What are the expected savings from migrating to solar power?
A: The migration to solar power is expected to save approximately INR2.5 to INR3 per unit. This is a zero CapEx initiative, leveraging agreements with solar generation companies.
Q: When is the Romania plant expected to scale up its capacity utilization?
A: The Romania plant, currently at 10%-20% utilization, is expected to see incremental growth in capacity utilization month on month, following delays due to the Ukraine war.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
