Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Suprajit Engineering Ltd (BOM:532509, Financial) achieved a 13% growth in stand-alone revenue and an 8.1% increase in consolidated revenue.
- The company's stand-alone EBITDA grew by 9.5%, while consolidated EBITDA saw a 16.1% increase.
- Suprajit Engineering Ltd (BOM:532509) announced a share buyback of 15,00,000 equity shares at INR750 per share, amounting to about INR113 crores.
- The Phoenix Lamps Division saw significant margin improvement due to reduced material costs and restructuring efforts.
- Suprajit Electronics Division secured new business wins and demonstrated good EBITDA growth, particularly in the electronic throttle area for a major two-wheeler EV in India.
Negative Points
- The two-wheeler market in India still lags behind pre-COVID levels due to factors like rising incomes, availability in the used car market, and tepid rural growth.
- The nonautomotive sector, particularly outdoor power equipment vehicles, continues to struggle due to the shift from ICE to electric drives and high inflation.
- Suprajit Engineering Ltd (BOM:532509) faced higher effective tax rates and lower other income, impacting overall profitability.
- The company's other expenses increased significantly due to higher freight costs and the expansion of the Suprajit Technology Center.
- The DCD division reported lower than industry growth and margins due to price reductions and increased costs associated with the Suprajit Technology Center and corporate expenses.
Q & A Highlights
Q: What is the reason for higher effective tax rate and lower other income? What would be the sustainable numbers for the same? Also, why have other expenses increased?
A: The higher tax rate is due to deferred tax provisions, not current tax. The lower other income is due to MTM and investment income, which can vary quarterly. The increase in other expenses is due to the expansion of the Suprajit Technology Center and increased freight costs.
Q: Can you provide an update on the Indian aftermarket and the revenue contribution from PLD and DCD?
A: The Indian aftermarket has been flat but is showing signs of growth. PLD's aftermarket contribution is around 70%, while DCD's is about 30-35%.
Q: Why did the DCD division report lower growth and margins?
A: The drop in DCD's EBITDA is due to increased costs at the Suprajit Technology Center and corporate levels. Additionally, there were price adjustments with customers due to commodity price changes.
Q: What is the outlook for the SCD business given the market conditions?
A: Despite market challenges, SCD is gaining strong orders due to consolidation in the industry. The strategy of onshore, nearshore, and offshore operations is appealing to customers, and we expect to grow in a shrinking market.
Q: Can you comment on the Wescon business and the synergies achieved?
A: Wescon has seen margin recovery due to cost synergies with LDC, such as in-house injection molding and consolidated supplies. Operational improvements have also contributed to the turnaround.
Q: What is the status of the SCS acquisition and its expected impact?
A: The first stage of the SCS acquisition is complete, and the business is expected to stabilize over the next two to three quarters. The full-year revenue run rate is expected to be around USD 45 million.
Q: Can you provide more details on the new order wins in the electronics division?
A: The electronics division has secured a significant order for electronic throttles from a major two-wheeler EV manufacturer in India. The division is also seeing traction in sensor business for international non-automotive customers.
Q: What is driving the margin improvement in the Phoenix Lamps Division?
A: The margin improvement is due to reduced material costs and restructuring efforts in Luxlite. The division has also benefited from price increases and improved operational efficiencies.
Q: How is Suprajit positioned in the global cable market, and what are the future growth prospects?
A: Suprajit is one of the top two cable makers globally. The company is well-positioned to benefit from industry consolidation and expects to grow by winning new contracts, especially as smaller players find it difficult to compete.
Q: What are the key growth drivers for Suprajit over the next two years?
A: Key growth drivers include strong order wins in the automotive and non-automotive sectors, growth in the electronics division, and continued performance in the Phoenix Lamps Division. The company aims for a 10% business growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
