MSUMINSENovember 4, 2022

Motherson Sumi Wiring India Limited

4,917words
75turns
10analyst exchanges
0executives
Key numbers — 12 extracted
31%
he moment you see the half yearly results with the first quarter. The turnover is up almost about 31% with cost net figure of Rs. 1,800 crores which is very heartening. We have 2 new branches that ha
Rs. 1,800 crore
early results with the first quarter. The turnover is up almost about 31% with cost net figure of Rs. 1,800 crores which is very heartening. We have 2 new branches that have been started in this quarter, so the
10%
onal costs to meet increase volume because at least on a Q-on-Q basis, what we have seen is about 10% increase in revenues, so was there some element like excess capacity requirement which led to h
rs,
number one, when the volumes come, the matching revenues will come more likely from next 2 quarters, more so in quarter 4 as well as the efficiency level was up, whatever is the front uploading of th
Rs. 30 crore
ket, but surely we will try if we can put it in some form, but on a ballpark, you can say between Rs. 30 crores or so plus minus. Kapil Singh: And sir, one question, the second question was on the commodity
15%
on, the second question was on the commodity cost as well, we have seen copper prices dropping by 15% for the quarter, but we have seen an increase in raw material to sales for the company, so if you
85 crore
please. Jinesh Gandhi: Second question is on the CAPEX side, so first half we incurred close to 85 crores of CAPEX , would you expect similar run rate for second half or last part of this CAPEX for Beng
Rs. 125 crore
second half would be much lower than that? G. N. Gauba: Jinesh, as we had given a guidance for Rs. 125 crores plus minus 25 plus or minus, but so we have Bangalore and Chennai, most of the CAPEX is already
Rs. 125
should remain within our range what we guided originally. Jinesh Gandhi: So, primarily between Rs. 125 to Rs. 150 crores is what it should be for FY23? Vivek Chaand Sehgal: Yes. Moderator: Thank
Rs. 150 crore
ain within our range what we guided originally. Jinesh Gandhi: So, primarily between Rs. 125 to Rs. 150 crores is what it should be for FY23? Vivek Chaand Sehgal: Yes. Moderator: Thank you. The next qu
Rs. 17 crore
here were two new facilities which have started and there was an initial startup cost, should the Rs. 17 crores are employee cost in this particular quarter what we have seen, should we see this as a normaliz
17.5%
te over here as a percentage of sales, employee cost should ideally in what range currently it is 17.5%, what should be the ideal numbers which one should work with? G. N. Gauba: That would be too
Guidance — 11 items
Vivek Chaand Sehgal
opening
“A brief about this year it is a work in progress kind of a quarter, good indication will be available at the moment you see the half yearly results with the first quarter.”
G. N. Gauba
qa
“Surely, there will be some additional cost which goes including the raw material when you are training the people or when you are setting up of the units.”
Jinesh Gandhi
qa
“And secondly, with respect to commodity side, so would it be fair to say we saw some increase in commodity cost in this quarter because of reasons like sale purchase effect which is there and which may normalize the cost stabilizers going forward?”
Jinesh Gandhi
qa
“Second question is on the CAPEX side, so first half we incurred close to 85 crores of CAPEX , would you expect similar run rate for second half or last part of this CAPEX for Bengaluru and Chennai plant is done, so second half would be much lower than that?”
G. N. Gauba
qa
“Jinesh, as we had given a guidance for Rs.”
Raghunandan NL
qa
“Sir, with reference to the new projects company has been focusing on high voltage wiring harness for EVs and earlier you had indicated that supplies have commenced to customers in EVs, two-wheelers and buses, if possible can you provide some color in terms of how the customer additions are proceeding and what portion of revenues or future order books will be EV related projects?”
G. N. Gauba
qa
“That would be too micro guidance for me to give because product mix as well as the ramp-up of the new programs or those things, so as of now, we have not been guiding on a quarter or for a year basis.”
G. N. Gauba
qa
“One, as far as the copper contractual is concerned, as you might be aware the wiring harness part numbers are too many, too large, no two harnesses go into one model, so you have given the number of path numbers where the copper is being used and one needs to carry out the adjustment, there is normally a quarter lag, so something like may be in a simple word this quarter will, average copper price will apply to the next quarter.”
Vivek Chaand Sehgal
qa
“I don’t think we ever mentioned that, but these are for both, the EV and the ICE engine, also for the hybrid engine, so I don’t think Pankaj, have we advised on what the harness we will be making because that is contrary to Motherson?”
Kapil Singh
qa
“So, can you talk about these new facilities, Bangalore and Chennai by when can we expect a reasonable level of ramp-up at this time, this is going to happen in the current financial year itself or it could take a year or so?”
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Risks & concerns — 3 flagged
When we are talking about a comparison either with the previous quarter as well as from the last year, while there is a decline, but there is also a Japanese Yen movement which is also impacting the sales price or the material consumption.
— G. N. Gauba
The tough questions, there are so many important new models, old models, very difficult to quantify, but Gauba, can you give the answer to this.
— Vivek Chaand Sehgal
Sehgal already said in the preamble that it is very difficult to describe on that with it.
— G. N. Gauba
Q&A — 10 exchanges
Q
My first question is on the onetime cost that you have talked about in the presentation, would it be possible to explain in slightly more detail on both of these bullets that we have, the initial startup costs, ideally if you can quantify both of these initial startup costs and additional costs to meet increase volume because at least on a Q-on-Q basis, what we have seen is about 10% increase in revenues, so was there some element like excess capacity requirement which led to higher freight cost or manpower cost and also how will these onetime costs shape up in the coming quarter, will they be
Vivek Chaand Sehgal
Gauba, can you answer this question along with Anurag? Kapil, as Mr. Sehgal said in preamble and we have also explained that we have begun two plants which are at a final stage, one in Chennai and another one in Bangalore, while we have employed the manpower who are being trained and in certain reasons as you might be aware there is a significant increase in the minimum wage cost from this quarter, so while it may be possible to quantify some part of it, but not all because these costs will get offset in two ways, number one, when the volumes come, the matching revenues will come more likely f
Q
Just a clarification first, this Rs. 30 crores impact which you mentioned that is for both the items, right, startup cost as well as higher cost to meet demand?
G. N. Gauba
No, these cost would be more in the nature of the manpower costs which are not being fully utilized, expedited cost as well as in terms of certain costs which go into a new unit in the initial setup including some of the assembly boards or tools which we have to develop for the new plants. And secondly, with respect to commodity side, so would it be fair to say we saw some increase in commodity cost in this quarter because of reasons like sale purchase effect which is there and which may normalize the cost stabilizers going forward? I mean it is a factor of many aspects, I mean you are right,
Q
Sir, with reference to the new projects company has been focusing on high voltage wiring harness for EVs and earlier you had indicated that supplies have commenced to customers in EVs, two-wheelers and buses, if possible can you provide some color in terms of how the customer additions are proceeding and what portion of revenues or future order books will be EV related projects?
Vivek Chaand Sehgal
These are early days definitely we can give some more color, but still differentiation of EV as the percentage there is more, but Pankaj, Gauba, Anurag if you can add some color to this. Ragunandanji, this is Pankaj, so on the high voltage side, of course as Mr. Sehgal said the penetration is not so big at the moment, but then as we had mentioned earlier, we are continuously engaged with the customers and adding on more customers in the three areas of be it pass cars, two-wheelers or the buses as well and even on the smaller segments like the small trucks and other things, whatever and even th
Q
Sir, my first question was regarding the raw material, so was there any inventory loss during the quarter when I say inventory loss and the copper price have fallen by 15% on quarter-on-quarter basis, so where you are holding any copper inventory which led to inventory write-offs during the quarter?
G. N. Gauba
Sir, we are not holding any stocks of the copper, what we buy wire and then based on the MOQs or the economic order quantity, there could be some stocks, but normally even the wires that we buy from our parent company, SAMIL as you are aware of MSEW, we buy just for next 2 days or 3 days, so the inventories of wires would also be limited, I mean it is such a bulky item, you can't stock of it either and we do not do any hedging or those things, because it is a passthrough with the customer. The second question was on the employee cost, as you said that there were two new facilities which have s
Q
I just had two quick followups, I am not very clear on this copper contractual passthrough, I understand it is the passthrough and I shouldn’t focus too much on the percentage, but would you give some sense on what is the typical time lag, is it 6 months, is it 3 months for the copper correction to start reflecting in the contracts? And the second question, I think you mentioned is that there could be various moving parts in terms of mix in terms of currency, if you can give some color on mix, by mix you mean the vehicle categories or how should I be thinking about the mix, is it OEM mix, is i
G. N. Gauba
One, as far as the copper contractual is concerned, as you might be aware the wiring harness part numbers are too many, too large, no two harnesses go into one model, so you have given the number of path numbers where the copper is being used and one needs to carry out the adjustment, there is normally a quarter lag, so something like may be in a simple word this quarter will, average copper price will apply to the next quarter. In some cases, the calendar quarter may not be followed by the customer, it could be a different basis which may be adopted by the customer, so when we talk about a la
Q
It can be a repeat question, in the initial part when you said the Rs. 30 crores cost incrementally for ramping up the new facilities which got distributed between staff cost and other expenses, so does the percentage of sales that will come down with revenue ramping up or this absolute cost will go out in subsequent quarter, so if you can help out to understand that?
G. N. Gauba
Yes, I think I had also answered in the previous question, the cost in relation to the manpower cost or those will come down as the revenues will come from these facilities. There could be some front ending of the resources also, so that efficiency levels it gets more evened out. Certain costs which are onetime cost like if we are spending on the assembly boards or some tools or fixtures, these get eliminated altogether, so it is a combination of the two. So, out of the Rs. 30 crores, how much is for those oneoff which will get eliminated? Sir, I think that would be too micro details. We can g
Q
So, can you talk about these new facilities, Bangalore and Chennai by when can we expect a reasonable level of ramp-up at this time, this is going to happen in the current financial year itself or it could take a year or so?
Pankaj Mital
This is Pankaj here. We expect ramp-ups happening and we can’t give a specific date because these are all car maker related volumes, but maybe we would see Q4, Q1 of next year, so not like another one year or something, but may be next 2-3 quarters. And if you could also elaborate a little bit, you mentioned that we are in discussions with the customers for alignment to new cost structure, if you could just elaborate a bit what do we exactly mean by new cost structure? Kapilji, it means that whenever there are some unprecedented costs which have been increasing, then that is what we mean by th
Q
Just continuing with Kapil's questions, like I am just trying to understand he asked, like we have passthrough for the raw material and related costs and I would imagine that like may be some cost like you are pointing out that may be there is a sudden beyond minimum wage increase etc., which is impacting you, but is there a new cost element here or is it because RM etc., of course FX you have been passthrough, right?
G. N. Gauba
Sonalji, we have a passthrough only for the copper that was the past because historically, we have never seen component makers asking for price revisions and all that. So, there is a passthrough for copper as well as for Japanese Yen, so when it comes to certain other inflationary trends as you have seen, globally component manufactures, supply chain issues or those were the costs which were historically at the same level, similar level, they have changed quiet substantially. So, that is something which is a change in the cost structure or cost scenario, just to answer your question at a broad
Q
Just one thing, what is the imported content in your raw material?
Vivek Chaand Sehgal
The tough questions, there are so many important new models, old models, very difficult to quantify, but Gauba, can you give the answer to this. Normally, we do this exercise at the year-end as part of the requirement, but let us see if we can take that data separately, but as of now, I don’t have this number available with me. Has it changed dramatically with more of a hybrid etc., models going on stream? I mean as a percentage, hybrid and EV will not be a larger percentage, but from model to model, it can vary as Mr. Sehgal already said in the preamble that it is very difficult to describe o
Q
Thank you very much. It is a work in progress kind of quarter because we had huge expansion on the same side, the plants are almost ready for production, so I think you would see the efforts of team to mitigate whatever pressures for last quarter and it happened very soon and I think you would see that the company comes up very strong in the coming quarter and the quarters. So, thank you all very much and thank you very much for attending this. Good bye.
Management
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Speaking time
G. N. Gauba
20
Moderator
12
Vivek Chaand Sehgal
10
Kapil Singh
7
Pankaj Mital
6
Jinesh Gandhi
4
Basudeb Banerjee
4
Vinod Malviya
3
Sonal Gupta
3
Raghunandan NL
2
Opening remarks
Vivek Chaand Sehgal
Thank you very much. Good evening ladies and gentlemen. We are here to answer your questions on our results. A brief about this year it is a work in progress kind of a quarter, good indication will be available at the moment you see the half yearly results with the first quarter. The turnover is up almost about 31% with cost net figure of Rs. 1,800 crores which is very heartening. We have 2 new branches that have been started in this quarter, so the results on the quarter might look damp but we are very sure that the things would be mitigated very soon with the customer because most of the costs have been done in consultation along with the customer. With this, I hand this back and would be ready for your questions. Thank you.
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