Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sandhar Technologies Ltd (BOM:541163, Financial) reported a total income growth of 11.5% year-on-year for Q2 2025 and 10.9% for the first half of FY 2025.
- The company's EBITDA margin improved by 110 basis points year-on-year for the quarter, reaching 10.6% in Q2 2025.
- Six out of seven joint ventures are now profit-positive, with consistent performance improvements.
- The Romania plant is expected to reach break-even by the end of the financial year, indicating progress in overseas operations.
- The company has started commercial production of battery chargers for electric vehicles, receiving positive market feedback.
Negative Points
- One joint venture, Kwong San, remains marginally in losses, though it is expected to turn around.
- The company's expansion projects in Pune are delayed, with commercial production expected to start by January 2025.
- There is uncertainty in the automotive market due to geopolitical situations and fluctuating demand.
- The company faces challenges in achieving higher margins and returns on capital compared to industry peers.
- The EV business's future growth is uncertain, as it depends on the establishment of electric vehicles as a permanent fixture in the automotive industry.
Q & A Highlights
Q: What is the growth outlook for the sheet metal and cabin and fabrication business in Q2 and H1?
A: The sheet metal business has seen significant growth, with monthly revenues doubling from 20 crores to 40-42 crores. The cabin and fabrication business is expected to close at around 550 crores for the current financial year, with a growth rate of 10-12%. (Respondent: CFO)
Q: How do you see top-line growth and margins evolving over the next 2-3 years, and why are margins lower compared to peers?
A: The company expects margins to improve by 50 basis points annually, reaching around 11-11.5%. The nature of the business, which involves core manufacturing, affects margins. Revenue guidance for the next year is between 4,500 to 4,600 crores. (Respondent: CFO)
Q: What is the expected growth in the EV business in the coming years?
A: The EV business's growth depends on the establishment of EVs in the market. The company is supplying components like DCDC converters and motor controllers for the two-wheeler industry, which is expected to grow faster. However, specific revenue projections are not included in the current business plans. (Respondent: CEO)
Q: What is the company's strategy for managing debt and working capital?
A: The company is operating with a working capital of around 30 days and expects to maintain debt levels below 700 crores. There are no plans for accelerated debt repayment, and the focus is on generating sufficient cash flows to fund expansion plans. (Respondent: CFO)
Q: How is the company performing in terms of capacity utilization and future growth potential?
A: Current capacity utilization in sheet metal ranges from 55% to 82%. With new capacities coming online, the company expects to achieve a 20-25% higher output than the current year. The focus is on utilizing existing capacities and developing new business lines. (Respondent: CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
