Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PPAP Automotive Ltd (BOM:532934, Financial) reported a consistent growth in operating margins over the last six quarters, with EBITDA margins increasing by 330 basis points to 12.7% year on year.
- The company has a healthy order book that will be executed over the next five years, indicating strong future revenue potential.
- New plant expansions are underway in Pune, Sanand, and Chennai to cater to increasing customer demand, expected to start operations in the near future.
- PPAP Automotive Ltd has successfully introduced innovative technology for premium parts, achieving high content per vehicle for Tata Curvy.
- The company has reduced its import content from 35% to 10% over the last five years, enhancing cost efficiency and reducing dependency on imports.
Negative Points
- Revenue for Q2 FY25 showed only a marginal increase of 0.6% year on year, indicating slower top-line growth.
- The consolidated revenue for the quarter declined by 2.4% year on year, reflecting challenges in maintaining sales momentum.
- The company's lead iron business continues to face challenges, with only initial signs of improvement.
- Despite improvements, the company still has a significant debt level of 155 crores, similar to the previous year.
- The aftermarket business, while growing, only contributed 3% to the total revenue, indicating a need for further expansion to meet future targets.
Q & A Highlights
Q: Can you provide insights on the order book flow for the upcoming quarters, including new OEMs and models?
A: We have several new models in the pipeline, such as the Swift Desire and a new model from Honda. We are also developing parts for Renault's upcoming model and are engaged with Tata for their new Sierra project. These developments indicate a promising order book for the coming quarters. - Abhishek Jain, Managing Director and CEO
Q: How do you plan to manage your finance costs to maintain the EBITDA margin guidance of 11-12%?
A: We aim to keep our borrowing levels stable this year, which will help maintain our financial costs. This strategy should allow the EBITDA margin improvements to flow through to the bottom line. - Sachin Jain, CFO
Q: What is the current debt level, and do you plan to reduce it?
A: Our consolidated debt stands at INR 155 crore, similar to last year's INR 157 crore. We plan to maintain this level for now and aim to start reducing it from next year as our business grows and generates more liquidity. - Sachin Jain, CFO
Q: How is the industrial product segment evolving, and what is its current contribution to sales?
A: The industrial product division is expanding our expertise from the automotive sector to neighboring sectors. Currently, it contributes about 1% to total sales, but we expect this to increase to 2-3% next year as we secure more orders. - Abhishek Jain, Managing Director and CEO
Q: What are your plans for the aftermarket business, and how do you see its growth?
A: We aim to grow the aftermarket business by 20-25% annually by expanding our product portfolio, increasing distributors, and enhancing field staff interactions. We also plan to explore international markets, focusing on neighboring and Gulf countries. - Abhishek Jain, Managing Director and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
