Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rane Brake Linings Ltd (BOM:532987, Financial) maintained its market leadership in the passenger vehicle segment and increased penetration in the two-wheeler segment.
- The company capitalized on favorable demand environments to drive top-line growth, particularly in the international aftermarket business.
- EBITDA margin improved by 501 basis points due to favorable material prices and cost-saving initiatives.
- Strong order bookings worth 170 crores during the quarter indicate robust future demand.
- The company is enhancing its international aftermarket business with strong orders from the US and other regions.
Negative Points
- The group's aggregate sales decreased by 4% year-on-year, with revenue from Indian OE customers declining by 3%.
- Revenue from international customers decreased by 10%, primarily due to the divestment of the LMC A business last year.
- The commercial vehicle segment continued to decline, affecting overall performance.
- The EBITDA margin for Rane Madras declined by 171 basis points due to lower material costs offset by one-off provisions.
- Export sales declined by 6% compared to last year due to lower offtake of steering products in the US market.
Q & A Highlights
Q: The share of profit from the JV has been declining significantly. What is causing this, and how do you see it going forward?
A: Harish Lakshman, Chairman, explained that margins will remain under pressure for the next one or two years due to the end of profitable businesses and unprofitable new programs. However, from a long-term perspective, they are optimistic about the business due to new opportunities and better profitability in future programs.
Q: Why has the PAT shown a decline despite strong EBITDA growth?
A: Harish Lakshman, Chairman, stated that the decline in PAT is largely due to increased interest and depreciation costs following the acquisition of the steering wheel business. The margins have started to improve due to localization efforts, and they expect continued margin improvement in the coming quarters.
Q: What is the rationale behind the merger of Rane Madras, Rane Engine Valve, and Rane Brake Lining?
A: Harish Lakshman, Chairman, explained that the merger aims to achieve scale and leverage synergies. Rane Engine Valve has turned around after years of losses, and Rane Brake Lining will benefit from access to new markets and export capabilities. The merger will also strengthen the overall balance sheet.
Q: Can you provide an update on the debt position and future debt reduction plans?
A: Harish Lakshman, Chairman, mentioned that the consolidated debt is approximately 1,052 crores. They plan to reduce debt by at least 150 crores during 2025 through various initiatives, including the sale of non-core assets.
Q: What is the outlook for the automotive market and Rane Group's growth prospects?
A: Harish Lakshman, Chairman, expressed optimism for a better second half of the fiscal year, with expectations of a 10% CAGR in the domestic market over the next five years. They also anticipate continued export growth and aim to achieve an EBITDA margin of 11% in the combined business in the coming years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
