PPAPNSEQ1 FY2023August 12, 2022 PPAP Automotive Limited
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6analyst exchanges
2executives
Management on call
Abhishek Jain
MANAGING DIRECTOR AND
Sachin Jain
CHIEF FINANCIAL OFFICER - PPAP AUTOMOTIVE LIMITED
Key numbers — 40 extracted
33%
on the back of pent-up demand and replacement demand. The passenger vehicle segment has grown by 33% between April and July against the same period last year. The electric vehicle segment is also gr
30%
r. The electric vehicle segment is also growing at a promising rate. By 2030 it is estimated that 30% of the overall industry volume of 10 million units may be attributed to EVs led by two and three-
10 million
o growing at a promising rate. By 2030 it is estimated that 30% of the overall industry volume of 10 million units may be attributed to EVs led by two and three-wheelers with passenger vehicles contributing
5%
units may be attributed to EVs led by two and three-wheelers with passenger vehicles contributing 5% of it. India is expected to feature among the top 10 EV markets globally. The I
9%
cheme, promoting semiconductor manufacturing in India. Auto component industry is expected to see 9% to 11% of its revenue coming from electric vehicles by 2027 amid increasing electrification. We a
11%
promoting semiconductor manufacturing in India. Auto component industry is expected to see 9% to 11% of its revenue coming from electric vehicles by 2027 amid increasing electrification. We are plea
100%
ftermarket segment focuses on development and sale of parts and accessories and is done through a 100% subsidiary called Elpis Components and Distributors Private Limited. In the quarter we have bee
rs,
is also in place. As I was telling you earlier apart from focusing on electric cycles, two-wheelers, and three-wheelers, we are also getting a lot of business from passenger vehicles for our existing
47.8%
nce and key developments for quarter one financial year 2023. For standalone PPAP revenue grew by 47.8% from Rs 78.6 Crores to Rs 116.3 Crores in quarter one financial year 2023 compared to year-on-yea
Rs 78.6
Crore
developments for quarter one financial year 2023. For standalone PPAP revenue grew by 47.8% from Rs 78.6 Crores to Rs 116.3 Crores in quarter one financial year 2023 compared to year-on-year basis. The compan
Rs 116.3 Crore
quarter one financial year 2023. For standalone PPAP revenue grew by 47.8% from Rs 78.6 Crores to Rs 116.3 Crores in quarter one financial year 2023 compared to year-on-year basis. The company clocked higher sa
255.5%
under review and improved capacity utilization which has resulted into an EBITDA margin growth of 255.5% to Rs.12.5 Crores in the quarter. EBITDA margin has witnessed a sharp uptick from 4.5% in quart
Guidance — 20 items
“I hope everyone has had a chance to go through our investor presentation which includes the strategy for making the company and subsidiary companies stronger resulting in higher growth going forward along with financial performance for the quarter ended June 30, 2022.”
“The Indian auto component industry is in a sweet spot and will grow on account of increase in value vehicle production and exports.”
“We are developing approximately 400 plus parts for our customers which will be in production in the next two years.”
“As I was telling you earlier apart from focusing on electric cycles, two-wheelers, and three-wheelers, we are also getting a lot of business from passenger vehicles for our existing product range of automotive parts and we are developing three, we have got three projects for our customers which will be launched soon about till for another two years.”
“During this quarter the capacity utilization stood at 72% we will continue to improve our capacity utilization going forward and achieve operational efficiencies.”
“We will be more than happy to answer any questions that you may have.”
“So, the scheme is broadly framed considering the next five-year requirement of the company and overall limit which we have kept is around 5% so the grant decision which will be taken by the compensation committee based on the recommendation of the management time-to-time considering the company requirement and the percentage of profile of the employees with whom we are going to give these employee stock option plan.”
“So going forward because the base is very small, so we expect that we should be doubling the sales at least for the next two to three years every year.”
“Margin side currently because the sales are kind of low, so the margin is somewhere between 7% to 8% but we expect that when we achieve this critical mass then we should be able to improve the margins in aftermarket business as well.”
“So more or less the expansion side we have completed now the Capex would be more of the balancing equipment side maintenance replacement Capex side and going forward as the capacity utilization would improve then automatically if you see the current percentage is around 7% it will come down correspondingly in terms of utilization for ourselves.”
Risks & concerns — 3 flagged
Currently it is difficult to disclose the initial load because that should be finalized based on the internal discussion and after the recommendation of the compensation committee and is already mentioned that the scheme is just to the approval of the shareholders post that we would be in better position in Q2 to inform how much would be the initial cost of capital or expense side on the P&L.
— Sachin Jain
Our gross margins have improved sequentially in a very high rising input cost environment while others have shown sharp decline, so what is the reason for that Sir.
— Saral Seth
So, it would be very difficult to reach again that level, but on the long-term our internal target to have mid teen numbers on the EBITDA side.
— Sachin Jain
Q&A — 6 exchanges
Q
Hello Sir, very good afternoon and congratulations for a good set of numbers. My first question is on you have announced the ESOP 2022 plan can you just elaborate more in terms of detailing how long this is going to last and what the P&L impact it would be having.
Sachin Jain
Thank you for the question. So, the scheme is broadly framed considering the next five-year requirement of the company and overall limit which we have kept is around 5% so the grant decision which will be taken by the compensation committee based on the recommendation of the management time-to-time considering the company requirement and the percentage of profile of the employees with whom we are going to give these employee stock option plan. So, if I understood correctly we are saying 5% of the total outstanding share capital that we are having. Yes. And is that a front loaded or means the f
Q
Hi! Sir, thanks a lot for taking my question and congratulations for a good set of numbers. Sir my first question is as we highlighted in our press release that we are venturing into Honda Hybrid and Brezza. So how is the traction there Sir and with these higher premium cars are we seeing increase in our realizations. So, I am trying to understand are we benefiting from the premiumization of Indian passenger vehicle market.
Abhishek Jain
See these are two models which have been launched by our customers during this quarter. So, the reason to name them was to give you a sense that new model launches PPAP is present in it or not. Your second question regarding premiumization, of course it will benefit us because specification of our products are change when you get into a premium kind of a product, premium segment vehicle. So that results in increase in sales also and somewhat increase in margins as well just because the price is higher and price is higher not just because it is a premium model, but the basic specifications of t
Q
Thanks for taking question. I just would like to know with this year where do we see our capacity utilization inching up, we will be able to make it based on your order profile what you have right now will we be at least processing 80%, 82%.
Abhishek Jain
Quarter one we saw this capacity utilization at 72% and based on the projections which have been given by the customer I think this should increase to about 85% in this year. Okay that means for a year at least will be about 75, 78 levels between around that. Yes, on full year basis we should. And what about next year. Next year also I think current customers they have I think they have good projections in place. So actually, in automotive business we generally try to maintain capacity utilization to a peak of 85% because there are certain peaks and rallies also so maybe if the projections are
Q
Good afternoon, Sir. Sir, what is the estimated Capex over the next couple of years and do we intend to set up any new facility.
Sachin Jain
As we mentioned earlier also that it could be more in line with the OEM requirement so we will be expanding more on the balancing equipment side in future years which would be linked directly linked to the OEM requirement and about creating the facility as of now we have created the facility on the each zone north, south, west, everywhere. So, for the next two years we are not looking to add facility per se, but if there is such a requirement a big requirement it comes up from the customer side then we will definitely look forward to have the facility closer to the customer. In the last one ye
Q
Sir what would be the effective tax rate for FY2023.
Sachin Jain
Effective tax rate is 25 the base rate of 22% we have adopted and we are following the same. 25%. 22% plus the taxes are surcharges so effective taxes will be around 25.17%. And one more thing I mean as we can see that the commodity price has fallen. So could you expect our EBITDA margin go back to let us say 12% to 14% level in FY2023. Yes of course. Okay, fine.
Q
Thank you Aman. I thank everyone for taking time out of their busy schedules to attend this conference call today. Please feel free to approach us with any questions that you may have. We will be more than happy to show you around our existing facilities that we have created to service the customer. I thank SGA Advisors for organizing this call last but not the least a big thank you to the team at PPAP for supporting this call. Thank you very much. Have a good day.
Opening remarks
Abhishek Jain
Thank you very much Aman. Good afternoon, ladies and gentlemen and welcome to our Quarter One Financial Year 2023 Earnings Call. My name is Abhishek Jain and I am the Managing Director and CEO of the company. Joining me on this call is Mr. Sachin Jain, who is the CFO of the company along with the team from SGA Mr. Aakash which is our Investor Relation Advisor. I hope everyone has had a chance to go through our investor presentation which includes the strategy for making the company and subsidiary companies stronger resulting in higher growth going forward along with financial performance for the quarter ended June 30, 2022. The fiscal year 2023 has begun as the dawn of the new beginning all over the world as the effects of pandemic is receding and people are experiencing normalcy in the post-COVID era. The global economy is witnessing a paradigm shift in terms of macroeconomic factors such as elevated crude oil prices, inflationary pressures in other commodities, interest rates, etc. O