Release Date: August 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alicon Castalloy Ltd (BOM:531147, Financial) achieved its highest-ever quarterly revenue of INR440 crore in Q1 FY25, marking the third consecutive quarter surpassing the INR400 crore milestone.
- The company reported a 24% increase in revenue from INR354 crore in Q1 FY24, driven by scaling up production for new parts, particularly for passenger and commercial vehicles.
- EBITDA for Q1 FY25 was INR58 crore, a 46% increase from INR40 crore in Q1 FY24, with an improved EBITDA margin of 13.2% compared to 11.3% in the previous year.
- Alicon Castalloy Ltd (BOM:531147) has successfully diversified its customer base, adding prestigious global names including leading OEMs and Tier-1 companies.
- The company is making significant strides in new technology platforms, expanding into new geographies, and focusing on value engineering and capability enhancement, which are positively impacting its business.
Negative Points
- Employee costs have risen by 19% year-on-year, driven by increments, a rise in minimum wages, and costs of new hires aligned with operational growth.
- Finance costs increased by 9% year-on-year to INR10 crore due to increased borrowing, although they are lower by 5% on a quarter-on-quarter basis.
- Depreciation rose by 22% year-on-year to INR22.44 crore, driven by new asset additions comprising machines and tools added or replenished in production lines.
- The EBITDA margin moderated from 14% in Q4 FY24 to 13.2% in Q1 FY25, despite the rise in employee costs and other expenses.
- There were temporary additions in European operations that drove up employee costs, impacting overall profitability.
Q & A Highlights
Q: What is the new business contribution for the quarter? Will the trend of focusing on four-wheelers and international markets continue in FY25?
A: Rajiv Gupta, Assistant Manager: This quarter, we booked around INR650 crore in new business, with significant contributions from the global market, particularly in the premium two-wheeler segment. Shyam Agarwal, Chief Marketing Officer: We are focusing more on four-wheeler customers due to higher value addition compared to two-wheelers.
Q: What has been your volume growth for the quarter, and what are your future revenue targets beyond FY26?
A: Vimal Gupta, CFO: We expect a CAGR of approximately 15% to 16% in the top line beyond FY26. Rajiv Gupta, Assistant Manager: This quarter, we saw a 24% growth over the same quarter last year, driven by ramp-ups from customers like Toyota and Maruti, and increased volumes from the two-wheeler market.
Q: What is the one-time item affecting the quarter-on-quarter EBITDA drop, and will it recur in future quarters?
A: Vimal Gupta, CFO: The one-time item mainly pertains to increased operational and manpower costs in Europe due to a shortage of operating personnel. This had a temporary impact in Q1, but we expect the situation to stabilize by Q3.
Q: What is the share of SOP (Start of Production) in revenue for FY25, and can you provide an update on the JLR e-Axle housing order?
A: Rajiv Gupta, Assistant Manager: We expect approximately INR1,200 crore in sales from new parts added this year. The JLR project is progressing well, with proto-sales on track and sample supplies from India expected to start next quarter.
Q: How is the revenue mix evolving, particularly in the two-wheeler, four-wheeler, and commercial vehicle segments?
A: Rajiv Gupta, Assistant Manager: In Q1, two-wheelers contributed 37% to revenue, down from 40% last year. Four-wheelers and commercial vehicles increased to 57%, up from 50% last year.
Q: What is the current share of EV and hybrid vehicles in your revenue, and what are your expectations for FY25?
A: Rajiv Gupta, Assistant Manager: In Q1, hybrids contributed around 9% and EVs around 10% to revenue. We expect this combined share to remain around 19% for FY25, with further growth anticipated.
Q: What is the share of the US market in your total revenue, and how do you see it evolving over the next three years?
A: Rajiv Gupta, Assistant Manager: Currently, exports account for 30% of our revenue, with 10% from the US. We expect the US share to increase to 14%-15% in the next three years.
Q: How do you view the competition in the die-casting business, especially with recent acquisitions by competitors?
A: Shyam Agarwal, Chief Marketing Officer: We have strong entry barriers due to lead time, investment, and technical competency. We are single-source suppliers for critical parts to major customers like Maruti Suzuki, Toyota, and Stellantis, which mitigates competitive risks.
Q: Can you elaborate on the benefits of the new cold core box manufacturing facility?
A: Rajiv Gupta, Assistant Manager: This technology is used for structural parts and offers better results in terms of strength and quality. It positions us to capture new business opportunities, particularly in high-end motorcycle components.
Q: What is the share of cylinder heads in your order book and revenue?
A: Rajiv Gupta, Assistant Manager: Cylinder heads account for approximately 20%-25% of our order book and around 30% of our revenue, primarily in the passenger vehicle segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
