Automotive Axles Limited
8,669words
88turns
8analyst exchanges
3executives
Management on call
Sailesh Raja
Securities India Private Limited
BATLIVALA & KARANI
N Muthukumar
Operational Officer
Limited
Mr. Nagaraja Gargeshwari
PRESIDENT & WHOLE
S Ranganathan
CHIEF FINANCIAL OFFICER - AUTOMOTIVE AXLES LIMITED
Key numbers — 26 extracted
20%
we started our journey in 2017. As you can see we started introducing green energy. We were about 20% at that point of time but over the last 5 years significant improvement have been made. Now we ar
70%
point of time but over the last 5 years significant improvement have been made. Now we are about 70% of our energy is coming out of renewable energy and then we are also focusing heavily on controll
475 Crore
e seen the performance, but to just give a quick snapshot. The revenue for the quarter is about 475 Crores as compared to 310 Crores the last year same quarter. The revenue growth of 54% and EBITDA is ab
310 Crore
but to just give a quick snapshot. The revenue for the quarter is about 475 Crores as compared to 310 Crores the last year same quarter. The revenue growth of 54% and EBITDA is about 51 Crores as compared
54%
is about 475 Crores as compared to 310 Crores the last year same quarter. The revenue growth of 54% and EBITDA is about 51 Crores as compared to 23 Crores last year the same quarters. The EBITDA pe
51 Crore
compared to 310 Crores the last year same quarter. The revenue growth of 54% and EBITDA is about 51 Crores as compared to 23 Crores last year the same quarters. The EBITDA percentage what we see is about
23 Crore
he last year same quarter. The revenue growth of 54% and EBITDA is about 51 Crores as compared to 23 Crores last year the same quarters. The EBITDA percentage what we see is about 10.7 which is 7.5 close
45%
ar the same quarters. The EBITDA percentage what we see is about 10.7 which is 7.5 close to about 45% increase with PBT stands at 8.5 as compared to 4.5 last quarter. So PBT level the percentage gr
89%
ands at 8.5 as compared to 4.5 last quarter. So PBT level the percentage growth is close to about 89%. Thanks to the volumes and also the cost performance. As far as the half year performance is conc
927 Crore
t performance. As far as the half year performance is concerned the half year revenue growth is 927 Crores as compared to 566 last year same quarter. EBITDA is about 104 Crores for the 6 months at 10.7%
104 Crore
half year revenue growth is 927 Crores as compared to 566 last year same quarter. EBITDA is about 104 Crores for the 6 months at 10.7% and compared to 39 Crores last year 7% the same year. PBT we were at
10.7%
Crores as compared to 566 last year same quarter. EBITDA is about 104 Crores for the 6 months at 10.7% and compared to 39 Crores last year 7% the same year. PBT we were at 8.4 for the first half year
Guidance — 20 items
“All of you know that we will be eager to hear from this.”
“Our focus going forward will be more on the off highway where we are looking at developing specific solution and having Cummins knowledge and capability in the off highway is going to really help us.”
“We will be at the market, we try to work on to grow beyond the market growth.”
“We hope the market will be better than the previous quarter.”
“The same thing will happen when the commodity comes down and we will be passing on to the customers in the commodity.”
“My last question is Sir, looking at the performance we already are crossing the all time high numbers of our revenue hopefully by this year which we have done in 2018-2019 and looking at the overall economy and the demand would you like to talk about the industry demand scenario on the ground what you are observing, what is your expectation for maybe next year how you see this medium to heavy and other products moving on.”
“As you rightly said with the current indication of what we have completed first two quarters we already crossed about 950 Crores and as you rightly said looking at the market projection for the next two quarters we will definitely cross our previous peak of 2018 even though the market has come back only to 70% to 75% of 2018 peak.”
“So your company will continue to focus on the growth and we will reach the milestones much before our competition does it, but in terms of the industry growth as you said the industry is growing very, very strong and steady while the commodity prices in India is softening, steel prices is coming down.”
“We are getting a bigger truck, bigger axle and new ICV platform are coming in so I believe that the market between this year and next year is set to grow at least about 15% next year it will grow.”
“The industry predicts that by FY2024 itself we will reach the previous peak.”
Risks & concerns — 11 flagged
Though COVID has softened and more or less it is got off settled down but we are also continuously taking care of the entire system as well as employees that the COVID pressure on the whole system is low.
— Ranganathan
I think Ranga touched upon the point that commodity is softening and it is going to ease out a little pressure, but all of you know when the commodity went up, all of you have appreciated that we are able to do back to back with the customers and trying to recover the company.
— N Muthukumar
The Russian Ukraine war continuing is putting a lot of pressure on the European system and cost of Europe in terms of power everything has gone up.
— N. Muthukumar
We are going to get distinct advantage for India in terms of export but in terms of local inflation because of that even though the fleet utilization is at peak now still the fleet operators are finding it extremely difficult to take a decision to invest money in terms of buying vehicle.
— N. Muthukumar
The availability of funds is also concern for them in terms of growth.
— N. Muthukumar
The actual market for the axle is quite good and even if we capture about 20% of the market it will give a substantial increase in our top line but you see the biggest challenge is most of the off highway customers in India they have a captive axel manufacturing.
— N. Muthukumar
That is where the biggest challenge, Beml has a captive manufacturing.
— N. Muthukumar
These are things that are very very difficult, challenging but is not achievable.
— N. Muthukumar
I do not think we have any concern on it so we are more focusing on it in terms of the volumes and the commodities that are natural to the market conditions.
— Ranganathan
Kothari for bringing that to our notice and your concern.
— N. Muthukumar
I fully understand your concern definitely we will take in the right spirit and then take it up to the management.
— N. Muthukumar
Q&A — 8 exchanges
Q
I wanted to understand what are the initiatives to we took grow ahead of the CV industry and to increase our content per vehicle that is the first one. Second question is with respect to our new suspension product and products to increase our share in the LCV market what is the update on this and if you can also share the revenue break up between brakes and axles that would be great. JA Automotive AxlE
N. Muthukumar
Thanks for your questions. I will answer one by one. I think in terms of growth in revenue Ranga explained to you what are the areas and initiatives that we are doing and we want to be ahead of the market. We would have very well seen that our growth in the market in terms of top line is better than the market growth in commercial vehicle segment particularly 7.5 tonnes and above so the company will continue to innovate the products, introduce the products that are needed for new application and keep on growing. The second question in terms of addition of the suspension in addition of the valu
Q
Thanks for opportunity Sir. Congratulations for good numbers. Sir in presentation Mr. Ranga clearly mentioned that commodity price softening will definitely help us by second half. Up to now we were not able to take any benefit. So would you like to talk about the possibility of maybe margin if not numbers what is the scope of reducing cost and what type of benefits it will give. JA Automotive AxlE
N Muthukumar
Thank you Mr. Kothari for asking this questions. I can understand your anxiety in getting the margins expanded. I really appreciate. I think Ranga touched upon the point that commodity is softening and it is going to ease out a little pressure, but all of you know when the commodity went up, all of you have appreciated that we are able to do back to back with the customers and trying to recover the company. The same thing will happen when the commodity comes down and we will be passing on to the customers in the commodity. Of course there is a little time difference which goes in this but I wa
Q
Yes Sir just two questions. First is on the off highway piece so with Cummins coming in you briefly talked about off highway being an opportunity for growth. Can you elaborate what is adjustable market opportunity, what kind of products one can look at and who are the major players who are currently serving on the market?
N. Muthukumar
Thank you for this question. It is very good and I would like to say that yes Cummins do have a very strong presence in off highway forget about the global market in India market and there is a big avenue for Automotive Axles to get into this. In terms of the product there will be backward loader in terms of crane. We are continuing to have the product bringing into India and trying to see the market. As you see we have definitely grown both in terms of export and off highway when compared to what we were about 2014 or in 2018 but the thing is it takes a lot of times because lot of new product
Q
Thank you for the opportunity. Sir I just have a few followup question. First thing is that if the commodity prices rises then you have a pass through effect which is generally with a lag. Well now the prices are correcting itself so in terms of percentage if you could give us a guidance as to how much your top line would also be affected.
Ranganathan
I did not get the last part, can you repeat. If the commodity prices now softens or corrects then say suppose the commodity prices fall say 5% then your top line I also believe I also will be affected because of the park through agreement that you have with your customers. Yes quite natural that definitely will be there. As effect we have to take into the system obviously that will have a correction to reduction in top line as well as in the middle cost. Say if 1% if it corrects then your top line shall be affected by an equivalent percent or little higher because there is obviously a processi
Q
Hello Sir congratulations to the entire management team for good results. Sir my first question was regarding exports so I believe in exports apart from Meritor we have two major clients that is Volvo Thailand and also you mentioned UD Trucks in your opening remark so given that this is one of the major drivers for our growth is there any other customer addition to this list.
N Muthukumar
Okay we have secured the business of Volvo Thailand way back in the year 2018 for supplying brakes and axle from our competition and this is a customer which Meritor globally was not servicing there. If you look at our strategy today Meritor has launched in China, in Australia. Europe, South America and we do not go and compete with them in other regions where we want to supply. While we are continuously working, Nagaraja and team is continuously working on innovation to identify the product along with engineering to see that what more we can do. Isuzu and Volvo now you read both are same comp
Q
I am asking in the LCV passenger vehicle domain a lot of new orders are flowing in the electric buses domain so how does our content per vehicle changes for us electric versus a traditional IC run buses.
N. Muthukumar
There is a government announcement that government is going to buy about 45 to 55,000 buses in this year and of course predominant of that is going to be electrical. At this point of time if you look at the Indian electrical vehicles or buses most of them are remote mounted and we are present our regular axles is being used. For Ashok Leyland electric vehicle our axles are being used. There is a remote mounted configuration. We are also working with lot more new companies who are into this business and continue to see how we can present so while we know that the buses are going to come in more
Q
Thanks again for the opportunity. Sir being on the call Mr. Muthukumar is Cummins Meritor chief for India. My request or my message is to convey we are taking efforts internally, the way we our strategy, vision, we have our e-mobility or hydrogen driven vehicles every products we are having. The market we as an investor are not able to get the right valuation the reason being you are the only company which is manufacturing your own base and marketing also is done by parent and other group organization so it is giving JA Automotive AxlE little bit discounting to the valuation so with the change
N. Muthukumar
Thank you Mr. Kothari for bringing that to our notice and your concern. While we will definitely convey your message, your perception about this to the board of both the JV partners I would also like to reiterate that what we are doing is completely as per the process and law and believe me it is going to be beneficial for us. I think this process has been evaluated by both the JV partners to make sure that it brings more and more transparency into the business and more and more conversion to India but however we have taken note of your concerns and feedback which we will definitely take it ba
Q
Thank you all for attending this session. We especially thank the Automotive Axles team for their time. Muthu Sir would you like to make any closing comments.
N Muthukumar
Yes thank you very much. Thanks ladies and gentlemen for all of you for joining this call. I personally thank all of you for the confidence that you have kept in this organization and kept on the leadership team and your continuous support is the one which makes us to perform. Trust me and believe me that this acquisition by Cummins into this company is going to bring lot more technology, lot more turn around for this organization which is going to be for good. We all know that Cummins has a very strong aspiration not on the top line revenue, bottom line everything is there but the destination
Opening remarks
Sailesh Raja
Thanks Inba. Good afternoon and thanks to everyone who have logged in to Automotive Axles 2Q FY2023 earnings conference call. Today we have the senior management team of the company Mr. Muthukumar N. President & COO, Meritor HVS India Limited, Mr. Nagaraja, President and Whole Time Director Automotive Axles and Mr. S Ranganathan, CFO, Automotive Axles. Now I would like to turn the call to Mr. Muthukumar for the opening remarks followed by the Q&A. Sir you may begin now.
N. Muthukumar
Thank you Sailesh. Good afternoon ladies and gentlemen. Once again happy to be back with you and I am sure that every one of you are good and safe. Just wanted to give you before starting about Cummins Meritor better together. All of you know that we will be eager to hear from this. As indicated earlier the integration process is going on smoothly. We are around day 90 after the official integration between both the companies and the statements of both Cummins President and CEO Ms. Jennifer Rumsey says we are excited to welcome Meritor employees into Cummins. Together Cummins and Meritor will move further and faster in developing economically viable de-carbonized powertrain solution. Ladies and gentlemen you all know that Cummins is targeting toward going to destination zero in order to make this mother Earth much much better place to live for the future and the same is with Meritor, a great combination working. The chairman of our JV Dr. Baba Kalyani conveyed his wishes to the team an
Nagaraja
Thanks Muthu. Thanks everyone again good afternoon Nagaraja here. As you can see here while Ranga is going to touch upon the revenues separately. We have been during reasonable well in terms of our revenue, EBITDA, and PBT and just to give you a brief background about our manufacturing location and everything. We have four manufacturing locations, mother plant is in Mysore and we have satellite plants in both Jamshedpur and Pantnagar and have a warehouse in Hosur mainly to support to the customer for the last mile. So we have 2000 plus employees. We have customers in all the major OEs. We supply our products and our products consist of axles, brakes and suspension systems and as you can see as far as independent manufacturer is concerned excluding the OEs who have got a backward integration, we are number one in axle and number two in brakes. So Muthu did mention about green initiative and especially sustainability roadmap. It is not just we are supplying the product to meet the market
Ranganathan
Thank you Nagaraja. Thank you Muthu. The financial results hope all of you would have seen the performance, but to just give a quick snapshot. The revenue for the quarter is about 475 Crores as compared to 310 Crores the last year same quarter. The revenue growth of 54% and EBITDA is about 51 Crores as compared to 23 Crores last year the same quarters. The EBITDA percentage what we see is about 10.7 which is 7.5 close to about 45% increase with PBT stands at 8.5 as compared to 4.5 last quarter. So PBT level the percentage growth is close to about 89%. Thanks to the volumes and also the cost performance. As far as the half year performance is concerned the half year revenue growth is 927 Crores as compared to 566 last year same quarter. EBITDA is about 104 Crores for the 6 months at 10.7% and compared to 39 Crores last year 7% the same year. PBT we were at 8.4 for the first half year with 82 Crores on absolute values. Last year the same 6 months the PBT at 3.8% with 21.7 Crores as in ab
N. Muthukumar
Thank you Ranga just before we open for questions ladies and gentlemen slide #5 where the circular economy where Nagaraja presented. We go to the bottom of the slide which shows what is the initiative that the company is taking towards migrating to renewable power. There is a small spelling mistake. They replacing with LPG with LNG is not in December 2022 it is by December 2023. I just wanted to bring it to your notice. Sorry for the typo error. With that I think Sailesh you can take it forward for the question and answer.