MMFLNSEQ2 FY2023November 14, 2022

MM Forgings Limited

6,915words
169turns
12analyst exchanges
5executives
Management on call
Annamalai Jayaraj
BATLIVALA & KARANI SECURITIES INDIA PRIVATE LIMITED
Vidyashankar Krishnan
VICE CHAIRMAN
Venkatakrishnan
CHIEF FINANCIAL
Vidyashankar Krishnan
Vice Chairman & Managing Director, and Mr. Venkatakrishnan – Chief Financial
Vidyashankar Krishnan For His Opening Remarks To Be Followed By Question
and-answer session. Also may I remind you of the safe-harbor about the company
Key numbers — 40 extracted
681 Crore
s Vidyashankar Krishnan, MD MM Forgings Limited. We have ended the half year with the turnover of 681 Crores and quarter with 347 Crores and on a consolidated basis we have crossed 704 Crores for half year
347 Crore
MM Forgings Limited. We have ended the half year with the turnover of 681 Crores and quarter with 347 Crores and on a consolidated basis we have crossed 704 Crores for half year. EBITDA stands at 18.9% for
704 Crore
he turnover of 681 Crores and quarter with 347 Crores and on a consolidated basis we have crossed 704 Crores for half year. EBITDA stands at 18.9% for the half year and 19.3% for the quarter ended. We have
18.9%
347 Crores and on a consolidated basis we have crossed 704 Crores for half year. EBITDA stands at 18.9% for the half year and 19.3% for the quarter ended. We have forged about 36,000 tonnes and sold 35
19.3%
ated basis we have crossed 704 Crores for half year. EBITDA stands at 18.9% for the half year and 19.3% for the quarter ended. We have forged about 36,000 tonnes and sold 35,000 so we are on track to c
45%
rts tonnage stands at 18600 tonnes and domestic tonnes at 20000 tonnes so roughly in the ratio of 45% exports and 55% domestic sales so these are the brief numbers and now open the questions. Moder
55%
ds at 18600 tonnes and domestic tonnes at 20000 tonnes so roughly in the ratio of 45% exports and 55% domestic sales so these are the brief numbers and now open the questions. Moderator: Thank you
1350 Crore
at this point of time, but I would say we are still bullish. We expect to end this year at about 1350 Crores to 1400 Crores of turnover and next year we would expect to cross 1800 Crores. We are also conti
1400 Crore
ay we are still bullish. We expect to end this year at about 1350 Crores to 1400 Crores of turnover and next year we would expect to cross 1800 Crores. We are also continuing to launch
1800 Crore
50 Crores to 1400 Crores of turnover and next year we would expect to cross 1800 Crores. We are also continuing to launch and develop new parts even as we speak across the board both w
2000 Crore
be really buoyant coupled with a strong domestic economy we would expect to knock on the doors of 2000 Crores in FY2024. Mahesh Bendra: That is heartening to know Sir. Sir on export side which are the geo
17%
t from Far East so India is positioned to take advantage of any of the trends. Europe constitutes 17% of our sale, India 52%, US 21% and South America 10% approximately. Mahesh Bendra: Thank you
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Guidance — 20 items
Vidyashankar K
opening
“We have forged about 36,000 tonnes and sold 35,000 so we are on track to cross 70,000 tonnes for this year or we should end up between 75000 and 80000 as we had earlier indicated 80,000 tonnes for the whole year as such.”
Vidyashankar K
qa
“We expect to end this year at about 1350 Crores to 1400 Crores of turnover and next year we would expect to cross 1800 Crores.”
Vidyashankar K
qa
“We are also continuing to launch and develop new parts even as we speak across the board both with domestic customers and export and we are seeing huge traction across the board so that is going to be really buoyant coupled with a strong domestic economy we would expect to knock on the doors of 2000 Crores in FY2024.”
Vidyashankar K
qa
“Disclaimer to that the is overall macroeconomic situation but looking at the way things are shaping I think China plus one is becoming a reality and even a trickle will mean MM Forgings will be flooded with orders that you will struggle to cope with at current pace so the order is well in spite of recession I think I expect the situation to be very positive for MMF.”
Sanjay Satapathy
qa
“I could not catch the numbers that you gave for your volume and on the guidance, can you please articulate it again?”
Vidyashankar K
qa
“EBITDA for the quarter stands at 19.3% and for H1 for the entire half-year at 18.9% so we expect to end this year approximately 1400 Crores and the next year we are targeting over 800 Crores was really knocking on the doors of 2000 Crores.”
Vidyashankar K
qa
“On the tonnage side we have produced 36000 tonnes in the half year and we expect to across 75,000 tonnes for the full year and in the next year we expect to across 90000 plus tonnes.”
Vidyashankar K
qa
“I would say that margins will be at least static for the reason that we should see growth countered by some inflation on operating level, this is still slightly cooling off and so there should be some relief on that front; however fuel oil could remain sticky and we could see some inflation elements there plus overall the trend on manufacturing side in terms of operation cost could go up a little bit so all that should be counted by increase in sales by and large margin should be steady.”
Peter
qa
“My question then the revenue per tonne which was very high in FY2022 going forward for the FY2023 and 2024 from that level, how do you see the growth or degrowth Sir revenue per tonne?”
Sonal Gupta
qa
“Sir in terms of when we are looking going forward like what is your outlook in terms of the export side of the business given various geographies and how you see things?”
Risks & concerns — 8 flagged
Loaded question not in the negative sense but in the sense of a very difficult question to answer at this point of time, but I would say we are still bullish.
— Vidyashankar K
Just last question from my side in terms of from an operational aspect like raw material cost is anywhere pass through for us but in terms of the conversion cost do you see some further upward pressure in terms of cost which will pressurize the margin or do you think that incrementally we should not see too much pressure?
— Sonal Gupta
When I did explain the outlook I do expect pressures on conversion costs at our end continuously, over the next few quarters for the reason that inflation is likely to pickup over the next two to three quarters and owing to higher base from Q3 of next year onwards we started decline very sharply.
— Vidyashankar K
Commodity prices soften by 5% to 10% that will have a 50% impact on us, 40% to 50% impact, so possibly we could see 100 Crores or 150 Crores so notwithstanding I am projecting this on constant commodity basis.
— Vidyashankar K
Going ahead 25% to 30% fall in the steel prices so as you mentioned that there will be an impact of the 15% on the topline for following the metal prices so despite that you are targeting about this 1800 Crores kind of the revenue?
— Abhishek Jain
If raw material prices degrow does not matter just possible so we should not be too concerned about that.
— Vidyashankar K
It is not going to directly impact but generally speaking the products out of the heavier process are all machined so to that extent yes but not per se directly if you said okay whether that press is going to result in machining no because the product out of that pressure machine yes I might be splitting a little bit of hair here but that is the way.
— Vidyashankar K
We expect the challenge 2000 Crores mark albeit it with on a constant raw material price basis and we are not too concerned about impacting turnover.
— Vidyashankar K
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Q&A — 12 exchanges
Q
Thank you so much for opportunity. I just wanted to know your broad view on the business outlook, I mean compared to June quarter, have you seen more traction on domestic freight and an export site, I mean how is the business outlook on both segment if you look next 9 to 12 months, how do you see the business shaping up on both geography? That is my first question Sir.
Vidyashankar K
Loaded question not in the negative sense but in the sense of a very difficult question to answer at this point of time, but I would say we are still bullish. We expect to end this year at about 1350 Crores to 1400 Crores of turnover and next year we would expect to cross 1800 Crores. We are also continuing to launch and develop new parts even as we speak across the board both with domestic customers and export and we are seeing huge traction across the board so that is going to be really buoyant coupled with a strong domestic economy we would expect to knock on the doors of 2000 Crores in FY2
Q
I could not catch the numbers that you gave for your volume and on the guidance, can you please articulate it again?
Vidyashankar K
We have achieved a turnover of 681 Crores on a standalone basis for H1 FY2023 and for Q2 FY2023 in 47 Crores again on a standalone basis. EBITDA for the quarter stands at 19.3% and for H1 for the entire half-year at 18.9% so we expect to end this year approximately 1400 Crores and the next year we are targeting over 800 Crores was really knocking on the doors of 2000 Crores. On the tonnage side we have produced 36000 tonnes in the half year and we expect to across 75,000 tonnes for the full year and in the next year we expect to across 90000 plus tonnes. Understood and can you give us the spli
Q
Good evening Sir. The last part we did not catch it capacity utilization average Sir? How much was the capacity utilization you just mentioned?
Vidyashankar K
57% on an annualized basis assuming we'll do 75K tones our capacity, on a first capacity of last in 120,000 tonnes. We would virtually have added the last 10,000 tonnes of capacity in the last month of the year so capacity available right through the year if you see is 75 plus 120. In terms of raw material have you been able to go through your high cost inventory or you are still holding any high cost inventory and do you have any pass through? Inventory is what is there in stock and that remains you cannot reduce it or increase it beyond the point, you can increase it recklessly that is not a
Q
Sir just on the tonnage that you spoke about I do not know if I noted down correctly, you said export tonnage was 13600 tonnes for the first half or 16000 tonnes?
Vidyashankar K
13600 tonnes and domestic was 22,000. Okay so that is how you get to 36. Sir so then what was it for Q2, total tonnage? I do not have the number with me specifically for the quarter. Domestic and export I do not have it specifically in front of me from quarter. We can message you or mail it to you. The other thing I wanted to understand was there is a big sharp increase in other expenses compared to the first quarter of this year so can you explain the reason for this almost 8 Crores jump? Travel has gone up considerably and so have some donations done other than that there is nothing specific
Q
It is really good news, is there. Just a few days back we figured out, first vehicle directly at our end and we have been good traction literally and this is under development. We see a lot of positivity over there in fact it is an auto and I prepared the0 auto myself really amazing and there is no vibration nothing and we feel really excited about it and there is a great future for our products in that space looking at translating this into revenue we have done some forecasting calculations. We expect to have a modest 2023-2024 at somewhere under 25 Crores of sales and thereafter we expect to
Vidyashankar K
Rs.100 Crores in the next 18 to 24 months in EV space and largely be in testing, prototyping and serial production, batch production and serial production facility. We initially probably set up facility on a leasehold property and then launch our own move into our own facility once it is ready. Ramakrishnan Seshan: Would you at all like to name customers you are engaged to it on an ongoing basis at all? No not right so later because policy to disclose customer names, customers do not want us to do it as well. Prospects are really looking good. Ramakrishnan Seshan: That is good to hear Sir and
Q
First of all congratulations for continued strong set of numbers. My first question was on the segment wise mix so what was the mix for CV and PV in this quarter?
Vidyashankar K
Harsh, decimal points there they are holding let us say 82% CV, 11%, PV and 7% off highway. Is it PV segment seems to be performing well right now, is it more towards the domestic market or the export market Sir? Mixed both. Both domestic and export. What is that outlook on the PV segment going ahead what kind of mix are we targeting in the next few quarters? PV will go up but the silent thing that we have not performed is the off highway segment. You see it was 4% for the last couple of years, 4.4% in FY2022 now it is 6.5% followed by 2% so off- highway something is there focused on globally
Q
Thank you Sir for taking my question. I want your a little bit more color on this China plus one opportunity and also some opportunities that might come in Europe so could you touch upon in which geography where we can see this opportunity coming from because this will be largely for the export market so could you give us some granularity as to we are already seeing some orders which are shifting from China or are we already seeing some inquiries which are coming from Europe, could you spend some more time on this particular aspect?
Vidyashankar K
China, yes we have landed a couple of orders from customers based in North America and their team to look at more purchase from India number one and as far as Europe is concerned every customer we have been talking to is very clearly aware that energy prices are up for renegotiation between manufacturers in the Euro zone and energy deliverers particularly gas etc., these contracts come up for renewal we are told by February so come January and February there will be real mayhem in the market because prices have gone up sky high and everybody or other will be trying to look at we will be lookin
Q
Thanks for opportunity Sir. During this quarter we have seen a smart expansion in the EBITDA margin and this is despite the higher revenues from the domestic and OEM site so just wanted to understand what is the region of this sort of the margin and how much it will be sustainable?
Vidyashankar K
See what has happened is realization has increased per tonne that is the basic fact though domestic sales has gone up and everything ultimately realizations have increased. What is the region of the increase in realization despite that the basic geography makes and plus that? Focus on machined products, huge investments made in the past and we continued investments on machine products that have resulted in higher realization. That will continue with the higher side because you are adding a lot of the capacity in the machining side right Sir? Yes we would expect it to go up. Going ahead 25% to
Q
Congratulations on a good set of number. In HI I calculated so we have done around 35,000 per tonne EBITDA margin roughly so can we expect the rate to continue in the second-half also?
Vidyashankar K
Yes we should be able to sustain that and we will be looking at maintaining about 38,000 tonne for the end of the year and Rs.25000 per ton for the whole year. I mean, for the quarter, we can more or less maintain according to our target of 75000 tonnes right? Correct. Second question is on CV side of the Europe business how is it panning out, management are expected that there will be around 10% to 25% fall so what is the number right now, is it even worse than we expected? Surprisingly CV in Europe has done quite well. We do not see too much of a fall, it is because of this I got a whole veh
Q
Thank you again for giving me this opportunity. One question is on your interest cost typically if I look at your interest cost as a percentage of overall borrowings it is somewhere close to 5% to 6% right for the past two to three years, this is much lower than typically the rate at which corporates borrow, could you help us understand what is the reason and going forward also can we assume that the incremental depth of around 200 Crores – 250 Crores that you are planning to take would come at a similar cost?
Vidyashankar K
Nice question. So basically what we have done is we borrowed largely we converted all our borrowings to Euro zone borrowings and when interest rates we sense were low we chose to lock in floating rates into fixed rates paying a small premium. As of today the loans that it has been insulated from any interest rate changes because we have interest rates swaps in place from floating to fixed but I have been paying points about 250 basis points additional but generally it was struck again and anyway it is a method of derisking the organization so looking at runaway inflation runaway interest rates
Q
Thank you for the opportunity. I had a few questions. Firstly on the realization part so what would be the realization per tonne for the quarter?
Vidyashankar K
What would be the realization? Realization per tonne for the quarter? Realization per tonne for the quarter about 1,90,000. Should we see this as a sustainable number for coming two quarters? It should given static raw material prices since there have been a lot of discussions on degrowth in steel prices so given on a constant raw material basis this should grow or at least be static. But if steel prices fall overall it is good for the organization. Well I would not be too concerned about this falling on account of raw material or even sales dropping on account of raw material, raw material in
Q
Thank you all for joining us this evening on the call to review our performance or analyze our performance for Q2 FY2023. We hope to be in this year positively with more growth coming our way. We expect the challenge 2000 Crores mark albeit it with on a constant raw material price basis and we are not too concerned about impacting turnover. We would be rather more focused on getting more tonnes out and managing costs. Thank you very much and we also expect our EV foray to start bearing results over the next 6 to 12 month range. Thanks and good bye. Jai Hind.
Management
Speaking time
Vidyashankar K
76
Prolin Nandu
21
Moderator
14
Sonal Gupta
11
Harsh Gemavat
11
Abhishek Jain
8
Gautam Gosar
8
Peter
6
Sanjay Satapathy
5
Mahesh Bendra
4
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Opening remarks
Annamalai Jayaraj
Thank you, Tanvi. Good evening everyone on behalf of B&K Securities welcome to 2Q FY2023 Post Results Conference Call of MM Forgings Limited. I also take this opportunity to welcome the senior management team of MM Forgings Limited. We have with us today Mr. Vidyashankar Krishnan – Vice Chairman & Managing Director, and Mr. Venkatakrishnan – Chief Financial Officer. I would now invite Mr. Vidyashankar Krishnan for his opening remarks to be followed by question-and-answer session. Also may I remind you of the safe-harbor about the company may be making some forward-looking statements that are to be understood in conjunction with the uncertainty and the risks that the company faces. Over you, Sir!
Vidyashankar K
Good evening everybody. This is Vidyashankar Krishnan, MD MM Forgings Limited. We have ended the half year with the turnover of 681 Crores and quarter with 347 Crores and on a consolidated basis we have crossed 704 Crores for half year. EBITDA stands at 18.9% for the half year and 19.3% for the quarter ended. We have forged about 36,000 tonnes and sold 35,000 so we are on track to cross 70,000 tonnes for this year or we should end up between 75000 and 80000 as we had earlier indicated 80,000 tonnes for the whole year as such. Sales between exports and domestic have been roughly equal. On tonnage basis exports tonnage stands at 18600 tonnes and domestic tonnes at 20000 tonnes so roughly in the ratio of 45% exports and 55% domestic sales so these are the brief numbers and now open the questions.
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