Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Indian economy is performing well, with a notable 8.2% GDP growth in the first quarter.
- Rico Auto Industries Ltd (BOM:520008, Financial) has seen increased traction in the rural markets, particularly for 2-wheelers.
- The company has secured new orders from major clients like Hero, Bajaj, TVS, and Maruti, which will help offset export losses.
- Rico Auto Industries Ltd (BOM:520008) is preparing for a significant increase in exports next year, targeting INR 600 crores.
- The company is expanding its hybrid vehicle component production, with new facilities in Hosur to cater to Toyota and other clients.
Negative Points
- Geopolitical issues in the Middle East and Europe have negatively impacted freight rates and export timelines.
- There has been a significant 30% drop in demand for electric vehicles in Europe, contrary to the expected 10% growth.
- Raw material prices, particularly aluminum, have increased, affecting the company's EBITDA.
- The company faced a one-time retrenchment compensation cost for workers at the Dharuhera plant.
- Rico Auto Industries Ltd (BOM:520008) experienced a disappointing quarter with lower-than-expected profits and margins.
Q & A Highlights
Q: Sir, first thing I want to know is regarding the facilities that now we have opened for manufacturing of components for Toyota. That plant and machinery, how much capacity it is running now and how much revenue it has generated in last quarter or is likely to generate in this quarter? Kindly reply, sir.
A: Yes, just a minute. What we are manufacturing in Chennai for Toyota, that is the first facility we have set up. Okay, that facility was primarily for Renault Nissan and then we expanded the facility there for Toyota. And there, at the moment, the utilization is about 56% -- between -- it varies between 56% and 58%. There were some models to be introduced by Toyota which they postponed to January and -- April, April next year. And once those come in, then, of course, the utilization will be around 80% in the Chennai plant. But the further capacity that we are talking about Hosur, that is also for Toyota and for their ancillaries, which is AISIN and the others, and that plant, primarily would be for the Toyota. And there, the orders that have been received is already to the tune of about INR 350 crores and that we would be manufacturing partly in Chennai and partly in -- and mainly in Hosur.
Q: Sir, if I rightly heard, INR 350 crore, kindly confirm because the voice was breaking.
A: So the Hosur facility, the new orders which have been received are for INR 350 crores.
Q: Okay, sir. And what will be the execution period? Is it for 1 year or quarterly basis or how it is going to be?
A: 2026 we start the production in Hosur and the peak value would come in 3 years from the date of start.
Q: Sir, one more question. We are -- also, we have mentioned that we are going to manufacture a lot of parts for electrical vehicle as well. So is it for 2-wheeler, 3-wheeler and 4-wheeler also? That is my first question. And second question, how much turnover we derived in last quarter from electrical vehicles part and what we are going to get from this quarter onwards?
A: So we are primarily supplying parts to the -- for electric vehicles, primarily to BMW, and we were supplying to Stellantis, that is PSA, and also to Renault Nissan, and Renault Nissan we have orders, and we also have orders from the Tatas for the electric vehicles. And the turnover has actually come down in the -- I'm talking about pure electric. But if you look at the hybrids, it has gone up. And we regard hybrids and electric in the same category, we call it as electrification. And the -- but this year, because of the exports is going to come -- the exports to BMW have come down by almost -- and Stellantis has come down by almost 30%. Whereas the anticipation was there would be a growth of 10% this year. And this is primarily because of the preference of the customers in Europe for more dependable vehicles, which are the hybrid vehicles.
Q: Are the parts same for electrical as well as for fuel engine-driven vehicles or they are different?
A: See, the part is designed specifically for a vehicle, but the equipment that we use is exactly the same. The equipment that we use for die casting or machining and -- or for testing or assembly or whatever is totally fungible. We shift one -- the machines from one end to the other end depending on the volume that we get from customers.
Q: Okay, sir. And all the best for the current quarter and future quarters. As you have mentioned that now you have revised prices upward from last quarter, so recovery of cost will be there, so I think here onwards, our margins will improve. Am I right, sir, my understanding?
A: Yes. See, we've not revised the prices. The prices automatically get revised every quarter. So there's a lag of the pricing as far as the aluminum part is concerned. And so the last quarter prices we get for this quarter quantity supply, so that is what happens.
Q: Okay. So there is some cost-plus basis arrangement with the OEMs? Is it like this?
A: It is only the indexation of the raw material.
Q: Sir, I would like to ask a question, when our company is going to achieve INR 5,000 crores revenue per annum? And when our net margin -- net profit margin would be 5%? Are we satisfied what we have achieved or what we have been achieving or we are looking for more? If yes, then what is our -- what we are thinking about that, what we are planning about that? And if we know, then why we haven't thought about that?
A: We are obviously not happy with whatever we did in the last quarter. And -- but that quarter, if you remember, I did announce in the last quarter that the improvements will start happening from the second quarter onwards of this year. And you'll see from this running quarter onwards. And the -- as to your question of INR 5,000 crores, we are -- I have the figures in front of me. The target is by '28-'29, we should be in the region of about INR 4,800 crores to INR 5,000 crores, this is '28-'29 and this is based on the orders in hand and the negotiations which are going on for the further orders that we are expecting. And what we have considered is only where we have 50%-plus surety that we would get those orders. So we are working on that. And the margins, we have been making investments and our turnover this year, technically, we should have been crossing INR 2,700 crores, INR 2,800 crores. At INR 2,700 crores, INR 2,800 crores, our margins would have been around 4% to 5% as is. But that has got delayed primarily because of some of the programs which got canceled and some of the programs which got delayed. And -- but this is the nature of our industry. Toyota delayed some of the -- introduction of some models. And so the investments that we have done and those were obviously -- of course, we keep on asking the customers for some compensations on whatever delays there are, which is very tough to get, but we keep on trying to get those. The disappointing part was the -- we were very happy that we are supplying these electric vehicle components to BMWs and Stellantis, the disappointing part is that the market of electric vehicles in Europe has just come down by 30% to 40%, partly because there are some subsidies which
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
