Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total income grew by 10% compared to the corresponding period last year.
- EBITDA registered a growth of 75 basis points year-over-year, now standing at 9.85%.
- All joint ventures have become positive at the EBIT level, contributing to the bottom line.
- Overseas business, particularly in Barcelona and Mexico, achieved an overall EBITDA of 12.66%.
- New manufacturing facility for electric vehicle components inaugurated, expected to enhance production capabilities and meet growing EV sector demands.
Negative Points
- Tractor segment is currently a pain area with uncertain growth prospects.
- Inventory levels at the dealer level for passenger vehicles are quite high, around 65 to 70 days.
- Commercial vehicles are expected to grow only in low single digits.
- Despite growth, the first quarter is typically the slowest and weakest quarter of the year.
- Commodity price volatility continues to impact margins, with a lag in passing costs to customers.
Q & A Highlights
Q: Could you provide some details on the new expansion projects and their expected impact on the company's growth?
A: One of the company's expansion projects is in the cabins and fabrication business, which is growing rapidly. We are setting up a new facility to meet the increasing demand. Another project is a die-casting facility in Poland, expected to start in September 2024. Additionally, we are expanding our facility in Halol, Gujarat, to cater to export demand. These projects are expected to significantly contribute to our growth in the coming years. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: Can you provide an update on the readiness and orders for the new EV products?
A: We have started commercial production of battery chargers and are in talks with several customers. We expect to do business worth five to seven crores this fiscal year, with significant growth anticipated in the next financial year. The feedback on our products has been positive, and we expect to roll out motor controllers and DC/DC converters soon. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: How do you see the trend in the auto industry in the coming quarters, given the recent slowdown and high inventory levels?
A: While there was a slowdown in June, July sales picked up, showing positive numbers. Inventory levels are high, especially for passenger vehicles, but the two-wheeler inventory is satisfactory. We expect the festival season to bring more prudence to the market, and we anticipate growth in the range of 10% for two-wheelers and 6-8% for passenger vehicles. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: Are you on track to reduce your debt by 200 crores as mentioned in the last call?
A: Yes, we are on track. Our debt levels have decreased despite the CapEx. We closed this quarter with a net debt of 549 crores, a reduction of 42 crores from the previous quarter. (Yashpal Jain, Chief Financial Officer & Company Secretary)
Q: What is the status of the smart locks project, and what are the expected margins?
A: We expect to start mass production of smart locks by October-November for two of our largest customers. Initially, the volumes will be small, but we anticipate significant growth in the next financial year. The margins for smart locks are expected to be similar to our mechanical locks business, which operates at 12-16%. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: How has the performance been across different geographies, and are there any specific markets showing stronger growth?
A: Our overseas business, particularly in Mexico, Barcelona, and Romania, is expected to see significant growth in the second half of the year due to new orders. In India, we expect the construction equipment segment to improve in the second half, driven by the festival season and increased customer schedules. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: What are the key features of your smart locks, and what is the expected market penetration?
A: Our smart locks offer various functions, including start, locking, and ignition scenarios. Initially, we expect a market penetration of 2-3% this year, with the potential to reach double digits in the next financial year. The cost of smart locks is currently between 4,000-5,000 INR, but we expect it to decrease as volumes increase. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: What is the capital expenditure plan for this year and the next?
A: We have a CapEx plan of around 250 crores for this year, with 44 crores already spent in Q1. For FY26, we expect routine maintenance CapEx, which will be equal to depreciation. (Yashpal Jain, Chief Financial Officer & Company Secretary)
Q: How are commodity prices affecting your margins, and what is your strategy to manage this volatility?
A: Commodity prices have been volatile, but we have seen some stability in the last quarter. Our strategy involves passing through the cost changes to our customers, although there is a lag. We expect this volatility to continue, but it is a part of our business model. (Jayant Davar, Chairman, Managing Director & Chief Executive Officer)
Q: Can you provide a customer-wise revenue breakup and the major customers for your new facilities?
A: TVS is our largest customer, contributing 32% of our total revenue. Other major customers include Hero MotoCorp (19%), and Bosch, Autoliv, and TRW (9.5%). The new die-casting facility in Poland will cater to a new set of customers, which will be reflected in the coming periods. (Yashpal Jain, Chief Financial Officer & Company Secretary)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
