Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CE Info Systems Ltd (BOM:543425, Financial) has received board approval for a joint venture with Funai, which is expected to generate multimillion-dollar revenue over the next five years.
- The company's Q2 FY25 revenue from operations increased by 14% year-on-year, indicating strong growth.
- The automotive and mobility tech revenue saw a significant increase of 19.3% year-on-year in the first half of FY25.
- The company's IOT-led business EBITA margin improved significantly from 7% to 14%.
- CE Info Systems Ltd (BOM:543425) is on track to achieve its fiscal year FY 2,728 goals, demonstrating confidence in long-term growth.
Negative Points
- The company's EBITA margin decreased from 43.2% to 39.1% due to continuous investments in the consumer business.
- There was a sharp decline in the C&E business during the quarter, raising concerns about potential structural changes.
- The company is experiencing a decline in profitability despite revenue growth, attributed to increased investments in various business segments.
- The growth rate of 13.5% in the first half was below market expectations, raising concerns about meeting long-term growth targets.
- The company has not provided clear guidance on margin expectations for the current financial year, leading to uncertainty among investors.
Q & A Highlights
Q: What has led to a sharp decline in the C&E business during this quarter? Is this just quarterly lumpiness or are there structural changes? Do you expect the C&E revenue to come back in the coming quarters?
A: The answer is yes to both. Every quarter has its unique challenges, and we are building the business for the long term. We have a healthy open order book, and while some orders may be realized in different quarters, there is no structural issue affecting the C&E business.
Q: Can you provide more details about the joint venture with Hyundai? Will it provide maps only to Hyundai cars, or will it be open to other OEMs as well? What kind of revenue can be expected from the JV in FY26?
A: The JV with Hyundai is our first foray into international markets. It will initially serve Hyundai and Kia as captive customers in Southeast Asia, providing immediate revenue. The JV will also offer solutions to other automotive OEMs and C&E companies, potentially expanding to the Middle East and Africa. Revenue specifics will become clearer as the JV progresses.
Q: There has been a decline in EBITDA margins. Can you explain the factors affecting profitability and how you see margins evolving?
A: Our profitability is impacted by investments in allied businesses like IoT and consumer apps, which are essential for future growth. While these investments are currently expensed, they are crucial for achieving our long-term revenue targets. We are focused on building a sustainable business for FY28 and beyond.
Q: Regarding the Hyundai Kia contract, what is the incremental business from this new contract compared to previous engagements?
A: The new contract is independent of the JV and involves a direct agreement worth approximately 400 crore over five years, translating to an average of 20 crore per quarter. This is a significant increase from previous levels.
Q: How do you plan to monetize the consumer app, and what are the long-term plans for this segment?
A: We are focused on increasing downloads of the Mappls app, which has reached 28 million. Monetization strategies include potential advertising revenue, increased API adoption, and leveraging the app's popularity to enhance our brand and product acceptance. The consumer app is a strategic asset that will drive future growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
