PPAPNSEQ2FY23November 16, 2022

PPAP Automotive Limited

4,989words
97turns
14analyst exchanges
2executives
Management on call
Abhishek Jain
MANAGING DIRECTOR AND
Sachin Jain
CHIEF FINANCIAL OFFICER – PPAP AUTOMOTIVE LIMITED
Key numbers — 40 extracted
37%
thy sales in financial year 2023 so far. The Passenger Vehicle segment reported a sales growth of 37% on a year-on-year basis from 17.5 lakh vehicles to 24.07 lakh vehicles between April to October 2
17.5 lakh
so far. The Passenger Vehicle segment reported a sales growth of 37% on a year-on-year basis from 17.5 lakh vehicles to 24.07 lakh vehicles between April to October 2022. The industry has witnessed a str
24.07 lakh
Vehicle segment reported a sales growth of 37% on a year-on-year basis from 17.5 lakh vehicles to 24.07 lakh vehicles between April to October 2022. The industry has witnessed a strong festive season. Howev
rs,
achieving global-level excellence in 1985 with the start of the automotive business. Over the years, the company strives to delight with customers in the automotive industry as well as in the industr
100%
iness with development and sales of spare parts and accessories business. The business is done in 100% owned subsidiary of Elpis Componencs. The focus is on developing a pan-India distribution network
10%
online models. We have received a robust traction for our products and our endeavor is to achieve 10% of total revenue going forward from this business segment. We already have a network of 100-plus
19.6%
s for quarter 2 and half year of financial year '23. For the standalone PPAP, our revenue grew by 19.6% from INR 103.8 crores to INR 124 crores on a year-on-year basis. The company clocked a sales gr
INR 103.8 crore
2 and half year of financial year '23. For the standalone PPAP, our revenue grew by 19.6% from INR 103.8 crores to INR 124 crores on a year-on-year basis. The company clocked a sales growth of 31.8% in the fi
INR 124 crore
f financial year '23. For the standalone PPAP, our revenue grew by 19.6% from INR 103.8 crores to INR 124 crores on a year-on-year basis. The company clocked a sales growth of 31.8% in the first six months of
31.8%
INR 103.8 crores to INR 124 crores on a year-on-year basis. The company clocked a sales growth of 31.8% in the first six months of financial year '23 as compared to the same period last year. EBITDA gr
6.3%
e first six months of financial year '23 as compared to the same period last year. EBITDA grew by 6.3% from INR 11.7 crores to INR 12.5 crores in the quarter. Similarly, it witnessed a sharp uptick fr
INR 11.7 crore
x months of financial year '23 as compared to the same period last year. EBITDA grew by 6.3% from INR 11.7 crores to INR 12.5 crores in the quarter. Similarly, it witnessed a sharp uptick from INR 15.2 crores t
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Guidance — 20 items
Abhishek Jain
opening
“I hope everyone has had a chance to through our investor presentation, which includes the strategy for making the company and its subsidiaries stronger, resulting in higher growth going forward, along with the financial performance for the quarter and half year ended September 30, 2022.”
Abhishek Jain
opening
“The Indian auto component industry is in a sweet spot and will grow on account of the increase in vehicle production and exports.”
Abhishek Jain
opening
“We have received a robust traction for our products and our endeavor is to achieve 10% of total revenue going forward from this business segment.”
Abhishek Jain
opening
“This capacity utilization has seen an improvement trend quarter-on-quarter basis, and we aim to achieve higher operational efficiencies with this utilization getting improved.”
Abhishek Jain
opening
“Going forward, the macroeconomic factors will be favorable, coupled with the industry growth, that will enable us to take the best sreide forward in capturing the market and catering to new models of all the OEMs.”
Abhishek Jain
opening
“We will be happy to answer any questions that you may have.”
Abhishek Jain
qa
“For EV, we've also done one project for developing the charger body for Tata Motors.”
Abhishek Jain
qa
“So soon, we will be starting our business with Okinawa.”
Abhishek Jain
qa
“So I think next quarter, we'll be having a much more better visibility.”
Abhishek Jain
qa
“We intend to develop all the other parts as well.”
Risks & concerns — 4 flagged
Current order book, very difficult to say right now because this market is still going under transformation.
— Abhishek Jain
On the margin side 21% and all what we achieved, I think that is a little difficult to achieve.
— Abhishek Jain
But as we are growing the business, at least in the short term, 21% looks quite difficult, but we are quite comfortable in maintaining margins of about 14% to 15% going forward.
— Abhishek Jain
Still a few of our customers like MG Motors and Volkswagen, they are finding it difficult to achieve that production volume just because of semiconductor issues.
— Abhishek Jain
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Q&A — 14 exchanges
Q
I mainly have two questions. The first one on the EV business. So what is the current order book for our EV business? And what is our progress with major OEMs in the two-wheeler segment?
Abhishek Jain
Sorry, could you repeat the second question, please? So what is the progress that we made towards tie-up major OEMs in the two-wheeler segment? That would be the second one. Thank you, Akash. For the EV business, apart from focusing on the plastic parts for our basic focus for EV business is, first, we want to extend our product range, which is existing products to all the EV makers. So passenger vehicle side, we already are doing business with Tata Motors and MG for their electric vehicles. And these products are our plastic extrusion system and some of injection-molding products. For EV, we'
Q
For the second focus on EV, we are developing the lithium-ion battery packs for two-wheeler and three-wheeler segments. So in this segment, as you know, that now government has introduced new rules and regulations out of which, Phase I is going to start implement, rolling out from December '22 onwards. So currently, we are developing products according to those regulations and getting them certified from iCAT so that we can be ready for all these according to the new regulations. Currently, we are doing business with one customer on the three-wheeler side. And we are doing business with three
Akash Mehta
And what would be the current order book for the overall EV business? Current order book, very difficult to say right now because this market is still going under transformation. So I think next quarter, we'll be having a much more better visibility. And if I may just ask one last one. What is the percentage share of the revenue that we derive from the core passenger vehicle vertical? And what would be that for the other vertical? Passenger vehicle contribute around 90% of our total revenue. 90%. Okay. That's it from my side. Thank you.
Q
Just wanted to understand if you can give us business breakup for aftermarket and other businesses.
Sachin Jain
On the consolidated basis in this quarter, so the automotive contribute around 92%. And aftermarket is 3%. And the rest 5% is our business in commercial tool room industrial product and the batteries
Q
So I have a couple of questions. The consolidated inventory has jumped from INR 56 crores in March 22 to INR 78 crores in September ’22, can you explain the reason for the same?
Sachin Jain
Basically, the inventory is -- there are two reasons for increasing the inventories the material the material because the EV division is under, we can see that the development phase, so we have bought some material in advance requirement on the customer demand. So that's why the inventory has gone up in that unit. Further in PPAP also case as we know, we are also in the commercial cooling business and the maturation period is quite high and we also need to buy that tool for our customer also. So we develop the tool for the customer also and that's the timing of sales depend on the SOP of the p
Q
So, I just want to ask on the lithium-ion battery pack. So, are we importing cells from outside the market in India and just assembling and providing to the OEMs or we have manufacturing them in-house?
Abhishek Jain
No, this is lithium-ion battery pack business, which we are in. So lithium-ion battery is not available in India right now. So we have to import it from outside. And then we are doing the design and validation part of the battery back and manufacturing it according to the customer specification. Okay. So basically, we are just importing and providing under our brand name, the quality testing only if I get it right. The complete designing of the pacific is being done by us for our customer. It is not just we are buying and selling it in the market, but we designed it along with our customers. S
Q
I just want to understand results from on the consolidated basis side because on the consolidated basis, our operating margin has gone down on Y-on-Y and month-on-month basis also and there's just the share of the JV profit of JV that has -- that loss has increased to 2.5 crores. Could you please just explain this portion?
Abhishek Jain
Sorry, what is your question Mr. Jain? I want to understand results on the consolidated basis because on the consolidated basis, our margins have gone down and this share of the profit of JV, the loss has been increased Y-on-Y and quarter-on-quarter. We have posted some minus INR 2.5 crores figures. So I just want to understand on the consolidated basis, if I look at it. Okay. So consolidation is basically happening of three companies in PPAP. One is our aftermarket subsidiary, Elpis component, which is already positive contribution. Second is PPAP Technology Limited, which is the lithium-ion
Q
So my question is regarding the lithium-ion business. So who are customers right now?
Abhishek Jain
So we have two customers for 3-wheeler business and three customers for the 2-wheeler business. And a couple of customers for the solar side as well. Okay. And what revenue are we doing right now? What is the potential at capacity? Total potential at capacity would be about INR 80 crores to INR 100 crores. We have three lines set up already. Two for making cylindrical cell assembly and one for prismatic cells. Right now, we are doing a revenue of INR 3 crores in this quarter, but things should start improving from next quarter onwards when this new regulation starts coming in, and we are givin
Q
So now that we have reached 80% capacity utilization level, what is the peak utilization we should expect in this financial year?
Sachin Jain
On the full-year basis, we are expecting to achieve around 80% capacity utilization as we are expecting a demand in H2 in that as well capacity utilization of 72% in first quarter. So full-year basis, we are expecting somewhere between 80% to 85%. And sir, what is our current debt-to-equity ratio? And what will it be by the end of FY '23? Sorry, can you repeat? Debt equity ratio, Current debt-equity ratio at the end of the year So the current debt-equity ratio on the stand-alone basis is 0.38 and end of the year, we are expecting somewhere around 0.35.
Q
First, our contribution for Maruti, it ranges from INR 2,500 to INR 3,000. For Honda, it is INR 6,000 to INR 7,000. Similarly for MG also, there are models which we've gone up to INR 6,500. And currently, Tata is about INR 1,400. Next year, this INR 1,400 will go up to INR 3,000 per vehicle.
Management
Q
Just wanted to get a sense what is the production schedule you're getting from Maruti per se for November, December and going forward.
Abhishek Jain
Maruti still continues to be strong. We do not have any revision or something from them. Demand is quite strong for them. Are producing at the rate of... Line specific numbers or... So they have been produced at the rate of 1.7 lakh per month. So do you see an uptick from here on or the steady-state number which will be retained for the rest of the year? Yes, in October, they did about 1.65 lakhs. November, we are planning, including SMG is 1.72 lakh. And INR 1.72 lakh, I think includes the vehicles which we are producing in Toyota plant as well. So just one for maximum for this year, any mont
Q
Okay. I have a few questions. One is regarding the lithium ion battery business. So we have a few customers already, but are we also reaching out to the bigger automotive players on that?
Abhishek Jain
Currently, we are trying to reach out, but they already have their supply chain systems already full. So it is going to be a slow process in getting hold of the big players. Most of them have their own R&D in-house and they set up this facility in-house by themselves. All right. And the second, that you just talked about you have a talk with Maruti and other players for the increase in price. But if I'm not mistaken, I'm just hearing this from the last three quarters. So what is the issue in that? They are not willing to raise the price? They require a lot of documents and proof and all that.
Q
Things are getting better. It's not 100% resolved and it's not as bad as what it was last year. Still a few of our customers like MG Motors and Volkswagen, they are finding it difficult to achieve that production volume just because of semiconductor issues. Even our other customers, they are unable to make high-end vehicles because of this issue. So it's not completely overlay, but availability is getting eased out. And maybe by next quarter, things should stabilize down...
Management
Q
And wanted to ask one more thing. How long do you think it's going to take for this to get back to normalcy?
Abhishek Jain
The semiconductor problem? Yes. Our original expectation was, I think by quarter 1 of next year. So let's hope that happens.
Q
Thank you, Steven. I thank everyone for taking time out of their busy schedules to attend the conference call today. Please feel free to approach us with any questions that you may have. We be more than happy to show you around the facilities that have been created to service the customer. Last but not the least, I thank SGA Advisor for organizing this call and my team for a PPAP for supporting this call. Thank you very much, everyone. Have a good evening. Thank you all.
Management
Speaking time
Abhishek Jain
35
Moderator
16
Anirudh Singhi
9
Sachin Jain
7
Shashank Kanodia
6
Akshay
6
Akash Mehta
5
Raghvendra Goyal
3
Anuj Shah
3
Biraj Shah
2
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Opening remarks
Abhishek Jain
Yes. Thank you, Steven. Good afternoon, everyone, and welcome to our quarter 2 financial year '23 earnings call. I am joined by my colleague, Mr. Sachin Jain, who is the CFO for the company; and SGA, our Investor Relations Advisor. I hope everyone has had a chance to through our investor presentation, which includes the strategy for making the company and its subsidiaries stronger, resulting in higher growth going forward, along with the financial performance for the quarter and half year ended September 30, 2022. The global economy is still witnessing multiple headwinds such as elevated crude oil prices, inflationary pressures on the raw material front, higher interest rates etcetera. Despite such challenging macroeconomic scenario, the Indian economy is resilient and growing steadily. The automobile industry recorded healthy sales in financial year 2023 so far. The Passenger Vehicle segment reported a sales growth of 37% on a year-on-year basis from 17.5 lakh vehicles to 24.07 lakh v
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