Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Samvardhana Motherson International Ltd (BOM:517334, Financial) reported a significant increase in quarterly revenues, up 18% to approximately 27,800 crores.
- The company achieved a remarkable 336% year-on-year growth in profit after tax (PAT), reaching 880 crores.
- The automotive business has a strong order book with $88 billion in lifetime sales, providing future revenue visibility.
- The company has successfully diversified into non-automotive sectors, including consumer electronics and aerospace, with a revenue run rate of 3,000 crores per annum.
- Net debt has been reduced significantly from 13,500 crores in June 2024 to approximately 10,500 crores, improving the net leverage ratio to 1x.
Negative Points
- The quarter was seasonally weak due to summer shutdowns in Europe, impacting profitability.
- There was a decline in automotive production by 5% year-on-year, affecting overall business performance.
- The company faces challenges from volatile production schedules and geopolitical risks, leading to increased inventory and working capital requirements.
- Margins in the modules and polymers segment declined by 130 basis points, indicating pressure in specific business areas.
- The consumer electronics business is still in its early stages, with significant revenue impact expected only after the main plant becomes operational in 1.5 years.
Q & A Highlights
Q: Can you explain the decline in profitability for the acquired assets this quarter?
A: This quarter is seasonally weak due to summer shutdowns in Europe, impacting operations significantly. Production schedules have been erratic, leading to upfront cost absorption. We anticipate better performance in the second half as we work with customers on solutions and pain-sharing. β Unidentified_5
Q: How should we view the company's leverage and working capital situation?
A: Our net leverage has decreased to 1x from 1.5x. We plan to use proceeds from recent capital raises to pay down debt. The working capital increase is due to uncertain production schedules and geopolitical risks, but we expect a decline in working capital requirements over the next six months. β Unidentified_5
Q: What are the growth opportunities for the company, especially in the non-automotive sector?
A: We are expanding our non-automotive business, aiming for it to constitute 25% of our portfolio. The consumer electronics plant has started production, and we are ramping up. We have a strong order book and are well-positioned to outperform the market. β Unidentified_5
Q: How is the company positioned to work with Chinese auto manufacturers as they expand globally?
A: We have a strong presence in China with 29 facilities and are building relationships with local OEMs. As Chinese manufacturers expand internationally, we are well-positioned to serve their needs due to our existing relationships and capabilities. β Unidentified_3
Q: Can you provide more details on the consumer electronics business and its revenue potential?
A: The consumer electronics business is still small, but we have started production. The larger plant, which will significantly impact volumes, is under construction and will be operational in about 1.5 years. We aim for this segment to be a significant part of our portfolio. β Unidentified_3
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
