BHARATFORGNSEQ2 FY23November 15, 2022

Bharat Forge Limited

6,302words
105turns
9analyst exchanges
2executives
Management on call
Amit Kalyani
BHARAT FORGE LIMITED
Subodh Tandale
BHARAT FORGE LIMITED
Key numbers — 40 extracted
Rs. 1,863 crore
ur finance and investor relations teams as well. So, some highlights. We had total sales of about Rs. 1,863 crore, which was a growth of about 6% over last quarter. We had exports of about Rs. 1,066 crore, whi
6%
ll. So, some highlights. We had total sales of about Rs. 1,863 crore, which was a growth of about 6% over last quarter. We had exports of about Rs. 1,066 crore, which is the highest we've had so far
Rs. 1,066 crore
about Rs. 1,863 crore, which was a growth of about 6% over last quarter. We had exports of about Rs. 1,066 crore, which is the highest we've had so far. Domestic revenues also grew about 13% over last quarter.
13%
f about Rs. 1,066 crore, which is the highest we've had so far. Domestic revenues also grew about 13% over last quarter. And we've seen overall growth in our passenger car business, our commercial ve
Rs. 80 crore
, some of the highlights are the highest export revenues this quarter, domestic revenues includes Rs. 80 crore of vehicle sales to the Armed Forces MOD. So, in our overall business, we have an EBITDA of 24.3%
24.3%
crore of vehicle sales to the Armed Forces MOD. So, in our overall business, we have an EBITDA of 24.3% where we have some one-offs, including LDE of about Rs. 13 crore or Rs. 130 million charged on ou
Rs. 13 crore
overall business, we have an EBITDA of 24.3% where we have some one-offs, including LDE of about Rs. 13 crore or Rs. 130 million charged on our Defense business, which is a one-time issue, and it is being
Rs. 130 million
we have an EBITDA of 24.3% where we have some one-offs, including LDE of about Rs. 13 crore or Rs. 130 million charged on our Defense business, which is a one-time issue, and it is being contested because thi
25.4%
with COVID. Therefore, that impact, if it were reversed, our EBITDA margin would move up to about 25.4%. RM inflation has impacted margin by about 40 to 45 basis points. Our rupee realization was at
45 basis point
, our EBITDA margin would move up to about 25.4%. RM inflation has impacted margin by about 40 to 45 basis points. Our rupee realization was at Rs. 81 to the dollar. Passenger vehicle revenue is now at about 18
Rs. 81
. RM inflation has impacted margin by about 40 to 45 basis points. Our rupee realization was at Rs. 81 to the dollar. Passenger vehicle revenue is now at about 18% of total sales, which is about Rs. 34
18%
nts. Our rupee realization was at Rs. 81 to the dollar. Passenger vehicle revenue is now at about 18% of total sales, which is about Rs. 340 crore which is almost 7x of what it was in FY16. We've had
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Guidance — 20 items
Amit Kalyani
opening
“We expect that this will get addressed and come back to steady state by first quarter of next year.”
Amit Kalyani
opening
“So, the next 2 quarters will be quarters where we see improvements.”
Amit Kalyani
opening
“We are addressing all these issues and we expect this to improve over the next 2 quarters as I mentioned.”
Amit Kalyani
opening
“And in fact, we expect to see very strong double-digit growth Y-o-Y for this company over the next 2 to 3 years.”
Amit Kalyani
opening
“These orders will be executed in a 36-month period from the time of order placement.”
Amit Kalyani
opening
“And the integration, testing and supply will be done by KSSL.”
Amit Kalyani
opening
“Next year will be also growth here, but it is the beginning of the growth phase.”
Amit Kalyani
opening
“We see all our EV vertical, whether it is repowering or 2-wheeler, 3-wheeler or power electronics, control electronics, all beginning to start taking off by the second half of next year.”
Amit Kalyani
qa
“Next year, we will see a growth upwards of I would say 20%, maybe even 25%.”
Gunjan Prithyani
qa
“In your comments you mentioned, we expect the subsidiaries, the aluminum business heading back to track.”
Risks & concerns — 2 flagged
Second one is this is more for a disclosure point of view considering that Defence is a completely new sector and it's very difficult to get handy on the what you guys are negotiating or in the sense the order size and all.
— Pramod Amte
I like to be a little cautious, I prefer to be a little cautious when talking about such things because it takes a lot of time and effort before these things fructify.
— Amit Kalyani
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Q&A — 9 exchanges
Q
Two questions from my side. Firstly, on the Class 8 truck outlook. Clearly, there's been a big positive surprise in terms of the order intake in the last 2 months, which is at a disconnect with the general industrial macro indicators. So, any color on this will help us understand how should we be thinking about production, because if I annualize the order intake, then it shows a very meaningful growth. So, maybe some color on how we should be thinking about Class 8 US truck production over the next 12 months or so.
Amit Kalyani
I’m going to let my colleague, Subodh, answer this. Subodh, please go ahead. So, by now there are the orders that come in there for production at a later date. And this is more of a sales orders that are booked by the OEMs. We have seen ups and downs in the last, I would say, 8-10 months. But if you look at the statements that all OEMs have been making, their production slots for most of ‘23 have been booked. And they are all following a discipline to maintain a steady monthly bill trade, which varies between somewhere in the region of 28,000 to 29,000 trucks. So, from that perspective, there
Q
Good afternoon. First of all, congratulations for winning the defense artillery guns export order. It's great to see the progress. I had a few questions on Defense. Are there more countries with which we are negotiating such type of orders? And what is the ordering time period that we normally see because this has come in a fairly short period, I would guess. Also what is the asset turn in this type of business?
Amit Kalyani
Yes. So, your second question is actually a very good question, because to execute this order, we don't need large investments. We need investment in a facility which is already underway of about Rs. 30 crore to Rs. 40 crore because this will be an assembly facility. A large part of the high value components will be made in Bharat Forge and be supplied and designed, I mean integrated in this new company. So, the asset turns are very, very high and the margins are good for both, BFL as well as for the supplying company. So, that's the second question of yours. First question is this whole Make
Q
I missed on the artillery gun order what you’ve been talking about. I believe you guys make some 4 or 5 different types of artillery guns and this one is clearly not the ATAGS which is like the main or the showpiece in terms of the technology. So, if you can just help us understand what kind of potential is there in ATAGS, because I believe the supply to the Indian Defence Forces is not recognized in the quarter in the revenues yet. So, how should one look at the revenue potential from that gun in the domestic market and also in the international market prospecting for ATAGS?
Amit Kalyani
So, look, ATAGS was developed as the main line gun for the Indian Armed Forces. There is a requirement of something like 1500 guns of ATAGS, of that category to replace all the other guns, which are of various vintages starting from 60s onwards. So, the revenue potential is tremendous, I mean, 1500 guns is a very large amount, and we also have the opportunity to export the same product. So, this is a tremendous long-term opportunity. And this is not an opportunity, which has yet fructified or is in our order book in any way. And besides that, we have 5 other guns. And there are discussions hap
Q
Some more details from the same is, what is the rule of thumb in terms of value add for these guns? How much Bharat Forge will be adding the value versus the assuming the Rs.100 of sale value?
Amit Kalyani
I'm not going to get into that because there's too much competitive knowledge and information in that. Whoever supplies things it will be supplied on an arm’s length basis with the right returns that it takes for both the entities. But please remember the KSSL is 100% subsidiary of BFL, so everything comes under BFL in one way or the other. Second one related to same is considering these are like government orders, how are the payment terms for them, will there be a long receivable cycle or how are you billing into it? No, it's actually quite clear and simple and there are no such issues. We t
Q
Can you share any demand outlook for CVs in Europe market? Also, can we talk about the opportunity that is happening because shift towards India due to energy crisis in Europe and also some challenges in China as well?
Amit Kalyani
No sorry. Shift of demand to India from Europe because of energy crisis in which area? So, basically the shift happening, you just mentioned in the initial commentary, the shift happening from Europe and China towards India, can you talk about the opportunity on that? For supply chain, yes. The demand in Europe is at-least on commercial vehicles is flat as compared to last year. Even for next year it is expected to remain at similar levels. We are of course monitoring them because there is a lot of talk in Europe about other challenges. As far as supply chain goes there are some small opportun
Q
My question is on the Defence side. Last con-call you had given some rough guidelines in terms of how we see the business scale from 500 to 1,000 and then eventually say 1,800 crores kind of number you have talked about, out of which exports was around 300-400 crores. But given the order we have already got there. Do you think we can cross that number much sooner in export side?
Amit Kalyani
Obviously as of now we have seen tremendous growth in our addressable market because of this order that we have received. I expect that we will continue to receive orders going forward. I like to be a little cautious, I prefer to be a little cautious when talking about such things because it takes a lot of time and effort before these things fructify. Let's say that was the base lining and hopefully this baseline will provide some headroom for growth with these kinds of developments. On the domestic side. Does this because we have been doing trials for a long time now and does this export orde
Q
My first question is slightly different one. Now that we have lot of businesses originating from India whether for international markets or domestic markets, is there a thought process of restructuring the way complete structuring design or most of them are 100% subsidiary but are you looking to consolidate them so that we have a different reporting structure?
Amit Kalyani
That’s a good point you made because we have many different verticals and business areas under the same company so right now, we are looking at this. First, we will do it internally and then we'll look at it externally. Second question was Amit again coming back to Defence and apology for hopping on. Just for recap kind of a purpose; between KSSL and Bharat Forge how should we look at the overall capital investment in Defence. I know you indicated KSSL is more of an assembly business and the large thing would be done, a lot of things would be done by Bharat Forge. How should we look at the ove
Q
My first question pertains to the European aluminum forging business. In the first half any indication of what utilization we would have operated, 30,000 tons capacity?
Amit Kalyani
About 50%-55%. The large part of impact on margins is also because of energy cost there or its largely because of the de-utilization? All the inflationary impacts, energy, trade, material everything and increased manpower and because of large absenteeism etc. that we had, larger number of manpower. Would it be fair to say at least from energy and freight perspective we have seen the peak in 2Q and expect some savings from 3Q onwards? It's not going up anymore as of now at least and there are lots of very complicated things taking place right now in Europe. So, I don't think we can and winter i
Q
So, ladies and gentlemen thank you very much for all your questions and your interests. I would be very happy to answer your questions even more during our investor conference or analyst meet which we will have in person on December 9 in Pune. Thank you for your interest in our company and please do continue remaining in touch and we look forward to seeing you in Pune very soon. Thank you. Bye.
Management
Speaking time
Amit Kalyani
42
Moderator
11
Chirag Shah
8
Subodh Tandale
7
Pramod Kumar
7
Aman Vij
7
Jinesh Gandhi
6
Gunjan Prithyani
4
Kapil Singh
4
Pramod Amte
4
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Opening remarks
Amit Kalyani
Good afternoon, ladies and gentlemen. And thank you for attending our Q2 investor call. As usual, I'll take you through a short introduction and then open up for Q&A. I have with me our management team heading our component business, our industrial business and our finance and investor relations teams as well. So, some highlights. We had total sales of about Rs. 1,863 crore, which was a growth of about 6% over last quarter. We had exports of about Rs. 1,066 crore, which is the highest we've had so far. Domestic revenues also grew about 13% over last quarter. And we've seen overall growth in our passenger car business, our commercial vehicle business between India and Europe. And on the engine side, on the higher horsepower engine side, we are seeing growth. And in Aerospace and Defense, we've seen significant growth. Our domestic revenues on both commercial vehicles and passenger car have grown very nicely, and our Aerospace and Defense business also continues to grow well. So, some of
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