Release Date: August 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 significant improvement in EBITDA, rising from INR7.4 crores to INR12 crores, a growth of 62.2% year-on-year.
- The company has started production for new models such as the Maruti Swift and Tata Curvv, with the latter featuring 27 parts produced by PPAP, including 16 new technology parts.
- The industrial parts division saw substantial growth, achieving last year's full-year sales within the first quarter of this year.
- The tooling business, rebranded as Meraki Precision Molds, is gaining traction with orders from both automotive and electrical segments, expected to contribute 4% to 5% to total sales.
- The aftermarket business under the brand ELPIS is expanding rapidly, with significant traction on e-commerce platforms like Amazon and Flipkart, expected to contribute 4% to 5% to total sales.
Negative Points
- Despite improvements, the top line remains challenging due to market conditions.
- The lithium-ion battery business has been a major contributor to consolidated losses, although efforts are being made to turn it around.
- The company's debt has increased significantly from INR50 crores in FY21 to about INR160 crores in FY24.
- EBITDA margins have fallen from 17%-20% during FY16-FY19 to below 10% in recent times, primarily due to rising raw material prices post-COVID.
- Export revenue is currently under 1%, indicating a need for further development in international markets.
Q & A Highlights
Q: Maruti in its earnings call mentioned plans to increase the capacity of Ertiga and launch newer models in FY25. Have you received any business for these models?
A: We are already supplying for Ertiga and have business for Maruti's upcoming electric vehicle model as well. (Abhishek Jain, CEO)
Q: What is the update on the industrial product business? Have we made inroads into market lines, and what is our order book for this vertical?
A: The industrial products division saw good sales in Q1, matching last year's full-year sales. We have secured export orders for the US market and are focusing on the US and GCC markets. (Abhishek Jain, CEO)
Q: The company's debt has increased significantly from INR50 crores in FY21 to about INR160 crores in FY24. What are the reasons and future debt reduction plans?
A: The debt rise is due to expansions in the automotive facility and other projects. We plan to maintain the current debt level unless new committed projects require further funding. (Abhishek Jain, CEO)
Q: During FY16 to FY19, the company had 17% to 20% EBITDA margins. Why have margins fallen below 10% recently, and can they return to previous levels?
A: Margins fell primarily due to raw material price increases post-COVID. With raw material prices softening and better realizations from customers, we anticipate improved EBITDA margins going forward. (Abhishek Jain, CEO)
Q: Can you explain how the company will benefit from higher per part contribution in EVs?
A: Our parts are engine-agnostic, and EVs require more premium products. We have developed new technology parts for Tata Curvv EV, which were previously imported. This will benefit our results over the next year or two. (Abhishek Jain, CEO)
Q: The promoter holding has fallen from 65% to 64.6% in the latest quarter. Is this due to dematerialization of shares or selling?
A: The change is due to ESOPs, not promoter selling. (Sachin Jain, CFO)
Q: Can you provide guidance on top line growth for FY25?
A: We expect to reach 80% capacity utilization by the end of FY25, which will reflect in our top line growth. (Abhishek Jain, CEO)
Q: How much of our revenue comes from exports, and which countries do we export to?
A: Currently, exports contribute under 1% of revenue. We are developing this market, and it should contribute about 1% to 2% this year. (Abhishek Jain, CEO)
Q: What is the amount of CapEx done in Q1 FY25, and how much is planned for the current financial year?
A: We spent around INR5.8 crores in Q1 and expect to spend INR35 crores to INR40 crores for the full year. (Sachin Jain, CFO)
Q: Why has the EV or battery storage vertical not picked up as expected, and what are the plans to make it a meaningful contributor?
A: Initially focused on mobility, we pivoted to Energy Storage Solutions due to limited traction in the mobility segment. We are optimistic about the potential in solar, telecom, and energy storage applications. (Abhishek Jain, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
