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Rico Auto Industries Q4 FY24 Earnings Conference Call Summary
Key Executives • Chairman and CEO: Arvind Kapur • Discussion of macroeconomic challenges: • Raw material price fluctuations • Supply chain disruptions
Company Focus • Expansion into electric and hybrid vehicles • Secured new orders from major clients (BMW, Toyota) • Revenue target missed (INR 2,600 crores) due to: • Early program terminations with GKN and PSA • Disappointing sales from Renault Nissan in India
Financial Performance • Revenue loss: INR 140 crores • Gross contribution loss: INR 58 crores • Improved EBITDA by 50-60 basis points: • Savings in sales and distribution (INR 25 crores) • Savings in repairs and maintenance (INR 10 crores) • Negative impact on profit before tax (PBT): • Increased depreciation costs (up INR 7 crores) • Higher finance costs due to rising interest rates • Debt repayment of INR 100 crores
Future Projections • Projected revenue growth: 15% for the upcoming year • Internal EBITDA margin target: 11.5%, potential to exceed 12% by year-end • Optimism about defense orders despite project approval delays: • Target of over INR 100 crores in defense segment
Investor Concerns • Varma Datala raised concerns about revenue and profit guidance: • Expected growth of 12% to 15% not realized over the past three years • Questioned defense sector's contribution • Kapur acknowledged delays in defense approvals but remained confident in achieving projected revenue figures (INR 2,450-2,480 crores, excluding defense)
Additional Developments • Potential growth in the rural market • New plant in Hosur to support Toyota • Updates on defense business: • Engagement with tenders and manufacturing capacity
Government Tender • Canceled INR 10,000 crores tender due to PSU to private sector transition confusion • Anticipated revenue contributions from fuse housing in FY25: • Projected conservative revenue: INR 60 crores for FY25 • Expectations to exceed INR 200-300 crores in FY26 • Growth driven by business from major clients (Maruti Suzuki, Hero) and new contracts in the electric vehicle sector • Confidence in exceeding targets and improving profitability through cost control measures
Rico Auto Industries Limited Q3 FY24 Earnings Conference Call Summary
Key Executives • Chairman and CEO: Arvind Kapur • Executive Director: Kaushalendra Verma
Financial Performance • Q3 Revenue: INR 528 crores • EBITDA: 12% • Challenges: Reduced demand from Renault Nissan and annual customer shutdowns • New Business Secured: Over INR 1,000 crores (potential annual revenue of INR 225 crores) • Revised Revenue Target: INR 2,300 crores (down from INR 2,600 crores) • FY25 Growth Projection: 15%
Defense Revenue • FY24 Target: INR 100 crores • Future Growth Potential: INR 300-400 crores in subsequent years • Order Execution Uncertainties: Quality checks may delay billing
Operational Insights • Debt Repayment: INR 70 crores reduced; plans to avoid new debt unless necessary • New Projects: Exploring collaborations, particularly with Toyota • Technology Transfer Agreement: 10-year deal with DRDO, potential business of INR 6,000-7,000 crores
Defense Order Book • Current Status: INR 200 crores with additional bids in progress • Export-Domestic Sales Split: Expected stable at 27%-28% for FY25
Market Concerns • Lok Sabha Elections Impact: New tenders may be affected, but existing orders will continue • Artillery Fuses Tenders: Slow process; private companies yet to secure significant contracts
Performance Communication • Flat Year-on-Year Performance: Attributed to restricted supplies to Hero and reduced forecasts from Renault Nissan • Operational Efficiency Focus: Expected improvements by March
Additional Insights • Government Tenders: Company supplies various military organizations • Renault-Nissan Partnership: Skepticism about increasing requirements; equipment reallocation discussed • Shipment Delays: Increased costs due to Red Sea conflict, but sufficient inventory maintained
Management Commitment • Transparency in Communication: Addressing concerns about stagnant revenue and profits • Cost Reduction and Revenue Enhancement Strategies: Aggressive approach for future profitability improvements
Rico Auto Industries Limited Q2 FY24 Earnings Conference Call Summary
Key Highlights • Date of Call: November 16, 2023 • Submission to Stock Exchanges: Transcript submitted on November 22, 2023 • Key Personnel: Chairman and MD Mr. Alvind Kapur and Executive Directors
Financial Performance • Improved Margins: • Standalone EBITDA margin increased to 11% • Consolidated margin rose to 11.1% • Increased Customer Orders: • Notable growth in orders from Maruti Suzuki (business share increased from 8.5% to 12%) • Profitability Optimization: • Resource optimization efforts underway • Anticipated further margin growth through better pricing negotiations for alloy wheels
Defense Sector Developments • Government Tender Cancellation: • Cancellation led to reliance on current suppliers • Company became a vendor for these suppliers • Direct Orders: • Defense sector placing direct orders for fuses • Expectations of significant future orders from Army, Air Force, and other forces • Stock Management: • Approximately 1,000 fuses in stock linked to ongoing trials
Strategic Focus • Capital Equipment Utilization: • Maximizing utilization of existing capital equipment • Electric Vehicle Component Supply: • Currently constitutes 15% of turnover • Future Projects: • No immediate plans for new Greenfield projects • Exploring potential partnerships for growth
Rico Auto Industries Q1 FY24 Earnings Conference Call Summary
Conference Call Details • Date: August 16, 2023 • Announcement Date: August 22, 2023 • Key Personnel: • Mr. Arvind Kapur (Chairman, CEO, MD) • Mr. R.K. Miglani (Executive Director) • Mr. Rakesh Sharma (CFO) • Mr. B.M. Jhamb (Company Secretary) • Moderator: Mr. Vijay Gyanchandani • Format: Recorded session with Q&A
Key Highlights from Management Remarks • Delay in Call: Due to a board member's travel; future calls to be scheduled more efficiently. • Market Trends: • Positive trends in passenger vehicle market. • Challenges in two-wheeler sector with fluctuating sales. • Turnover Impact: • Significant drop due to a major customer's production decline. • Efforts to diversify customer base by engaging with other motorcycle manufacturers. • Cost Management: • Rising manpower costs from wage settlements. • Confidence in recovering costs by year-end. • Stabilization of power costs through solar and wind energy solutions. • EBITDA Projection: Aiming for double-digit EBITDA by year-end.
Q&A Session Insights • Revised Turnover Projection: Decreased from INR 2,700 crores to INR 2,600 crores (including INR 80-100 crores from defense). • Customer Production Issues: • Renault's output down by 25-26%. • Hero's supplies curtailed due to pricing issues. • Future Outlook: • Anticipated sales growth of 12%-13% with defense contracts. • Stable debt situation; Hero accounts for 28% of sales. • Expected increase in EV sales from 12% to 15%. • Capital Expenditures: Maintenance capex of INR 60-70 crores expected.
Strategic Developments • Supply Distribution Shift: Reducing reliance on Renault, increasing supplies to Honda, Suzuki, and Bajaj. • Land Sale in Gurgaon: No significant updates; inconclusive discussions with potential buyers. • Investor Confidence: Management reassured investors despite projected INR 100 crore loss in sales.
Component Contributions • Hero's Revenue Share: Decreased from 30-35% in FY '23 to 28-29% in Q1 FY '24. • Component Contributions to Turnover: • Clutch: ~10% • Wheels: 15-20% • Total: 25-30% • Proactive Customer Engagement: Seeking new customers due to previous tensions with Hero; positive developments with Maruti, Toyota, and Kia.
Conclusion • Optimism for Future: Encouraged open communication with shareholders; confident in achieving targets and improving bottom lines.
Rico Auto Industries Limited Q4 FY23 Earnings Conference Call Summary
Date and Participants • Date of Call: June 3, 2023 • Key Participants: • Arvind Kapur (Chairman and CEO) • Kunal Patel • Anand Agarwal • Ashwini Agarwal • Suraj Nawandhar • Pritesh Chheda
Company Performance Highlights • Sales Growth: 24% increase, reaching INR 2,320 crores • EBITDA: 12% • Future Growth Forecast: Anticipated growth of 15-16%, with an internal target of over 20%
Market Context • India's Automotive Growth: Third-largest automaker with a GDP growth forecast of 7% • Challenges: • Russia-Ukraine war • Semiconductor shortages • Fluctuating crude oil prices
Export and Revenue Insights • Export Numbers: • FOB figure of INR 122 crores (up from INR 110 crores) • Toyota Operations: • Current revenue of INR 110 crores, expected to rise to INR 135 crores by 2025 • Electric Vehicle (EV) Orders: • 53% of order book, totaling INR 380 crores annually
Capital Expenditure and Financial Outlook • Capex for FY '23-'24: INR 55 crores (excluding die investments) • Debt Reduction: Expected decrease by year-end • Revenue Guidance: Revised to around INR 2,700 crores with a target of 16% growth • Margins: Expected to remain stable at around 12%
Electric Vehicle Sector Insights • 2-Wheeler Market Growth: Anticipated to grow faster than other segments • Battery Price Decline: Expected to reduce vehicle costs • Long-Term EV Market Projection: EVs could represent 15% of the passenger vehicle market by 2030
Defense Sector Engagement • Opportunities: Ongoing efforts in the defense sector with potential breakthroughs anticipated • Market Opportunity for Fuses: Adjusted from INR 10,000 crores to INR 3,500 crores
Shareholder Engagement • Dividend Payout Ratio: Increased to 21%, with a long-term policy of 30% • Concerns Addressed: • Discrepancies in reported capex figures • Return on capital employed (ROCE) currently at 8-9%
Future Outlook • Net Profit Expectation: INR 100 crores next year • Optimism for Revenue Growth: Particularly from Toyota and pending orders from BMW • Management Confidence: In achieving better results in upcoming quarters despite challenges.
Conference Call Details • Date: February 15, 2023 • Announcement Date: February 20, 2023 • Key Personnel: • Mr. Arvind Kapur (Chairman and CEO) • Mr. Kaushalendra Verma • Mr. R.K. Miglani • Mr. Rakesh Sharma (CFO) • Mr. B.M. Jhamb (Company Secretary) • Host: S-Ancial Technologies • Format: Presentation followed by Q&A session
Performance Overview • Q3 Performance: Met expectations despite challenges in the two-wheeler segment. • Export Challenges: Improved shipping times to the US and Europe; inventory stabilization noted. • Mergers: Recent merger of Rico Jinfei and Rico Auto required restating previous quarters. • Future Projections: • EBITDA growth anticipated. • Export growth projected to exceed Rs. 600 crores for FY2024.
Financial Targets • Revenue Targets: • FY2023: Rs. 2,400 crores • FY2024: Rs. 3,000 crores • Margins: Targeting over 10% in the next quarter, with hopes for over 12% internally.
Inventory and Export Insights • Current Inventory Issues: High levels of stock in transit and warehouses; efforts to reduce stock by March. • Export Expectations: FY2023 exports expected around Rs. 500 crores; two-wheelers (33%) and four-wheelers (51%) contributions noted.
Margin and Cost Management • Margin Improvements: Expected consistent improvements; potential for double-digit margins by year-end. • Other Income: Lower due to merger adjustments; stable depreciation expected, slight decrease in interest costs anticipated.
Tax and Capital Expenditure • Tax Rate: Currently around 34.5%, expected to improve post-merger to 25% in 2-2.5 years. • Capex Plans: Maintenance capex of Rs. 50-60 crores; quarterly depreciation estimate of Rs. 30 crores.
Debt and Growth Strategy • Debt Repayment: Expected repayment of Rs. 90-100 crores next year; working capital needs may limit immediate debt reduction. • Growth Targets: Confidence in achieving a minimum of 15% annual growth; 20% growth rate suggested as reasonable.
Defense Sector Insights • Defense Products: Involvement in fuses, firing ranges, and tank systems; minimal current revenue but expected growth. • Future Revenue: Significant sales in the defense segment anticipated in FY2024.
Conclusion • Merger Approval: Announced approval of a merger expected to enhance future results and overall performance. • Closing Remarks: Thanks to participants for their engagement.