MINDACORPNSEQ4 FY23May 24, 2023

Minda Corporation Limited

8,639words

91turns

9analyst exchanges

5executives

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Management on call

Aakash Minda

EXECUTIVE DIRECTOR FINANCE & STRATEGY

Neeraj Mahajan

GROUP PRESIDENT, MARKETING

Vinod Raheja

GROUP CHIEF FINANCIAL OFFICER

Anshul Saxena

GROUP HEAD STRATEGY AND MERGER & ACQUISITIONS

Pushpa Mani

LEAD INVESTOR RELATIONS

Key numbers — 40 extracted

INR 4,300 crore

ed another year of resilient and better-than-industry performance with revenue from operations of INR 4,300 crores, a growth of 45% year-on-year basis. EBITDA margin for the year improved by 83 basis points to 1

45%

better-than-industry performance with revenue from operations of INR 4,300 crores, a growth of 45% year-on-year basis. EBITDA margin for the year improved by 83 basis points to 10.7%. We delivered

83 basis point

of INR 4,300 crores, a growth of 45% year-on-year basis. EBITDA margin for the year improved by 83 basis points to 10.7%. We delivered double-digit EBITDA margin for 11th straight quarters. Normalized PAT for

10.7%

es, a growth of 45% year-on-year basis. EBITDA margin for the year improved by 83 basis points to 10.7%. We delivered double-digit EBITDA margin for 11th straight quarters. Normalized PAT for the year

INR 219 crore

vered double-digit EBITDA margin for 11th straight quarters. Normalized PAT for the year stood at INR 219 crores with a PAT margin of 5.1%. The growth was driven by addition of new customers and products, pr

5.1%

11th straight quarters. Normalized PAT for the year stood at INR 219 crores with a PAT margin of 5.1%. The growth was driven by addition of new customers and products, premiumization across product

rs,

ss with existing and new customers. In line with the company's philosophy to reward its shareholders, the Board of Directors have declared a final dividend of 40% on the face value, that is INR 0.80 p

40%

philosophy to reward its shareholders, the Board of Directors have declared a final dividend of 40% on the face value, that is INR 0.80 per equity share, taking the total dividend for the year to 6

INR 0.80

eholders, the Board of Directors have declared a final dividend of 40% on the face value, that is INR 0.80 per equity share, taking the total dividend for the year to 60%, that is INR 1.20 per equity share

60%

% on the face value, that is INR 0.80 per equity share, taking the total dividend for the year to 60%, that is INR 1.20 per equity share. Now I would like to take you all through the key developments

INR 1.20

value, that is INR 0.80 per equity share, taking the total dividend for the year to 60%, that is INR 1.20 per equity share. Now I would like to take you all through the key developments during the year.

10%

for the two-wheeler smart key business, which continued to gain traction and clocked more than 10% of the total two-wheeler lockset revenue with key customers, including all the leading names in I

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Guidance — 19 items

Aakash Minda

opening

“Out of this, 20% came from the EV industry and EV OEMs and platforms representing our various products growing acceptability and readiness for EV mobility going forward.”

Aakash Minda

opening

“Exports are in line with the top line going forward.”

Aakash Minda

opening

“More than 2% continues to be the R&D spend and the following year will be continuing to increase further.”

Abhishek Jain

“And what kind of the margin guidance you have in this business?”

Aakash Minda

“On the margin front, we do not give future guidance.”

Aakash Minda

“For the two-wheelers, I mean, the next mid-term to long term, this definitely will be increasing from two perspectives.”

Aakash Minda

“Ma'am, it depends again, but technically, we can say in the next mid-term to long term, about 30% to 40% should be the target that we have in mind.”

Aakash Minda

“All the product lines and the domain, what we are doing is we would like to develop our different technologies and complete system solution offering with respect to the three or four product lines and the product domains, which we are into, currently running many products, and how we will be consolidating and integrating them to offer a system solution.”

Aakash Minda

“While, of course, we want to grow this and we will see in upcoming quarters and there will be increase in the content electronics, etcetera, first and most important is to stabilize this.”

Saral Seth

“Sir, my question pertains to how do we plan to increase our content per vehicle from here going ahead over the next 2 to 3 years across segments?”

Risks & concerns — 6 flagged

In fiscal year 2023, the overall industry experienced double-digit growth across vehicle segments except two-wheeler, where the growth has been sluggish due to rural demand and under pressure on the back of negative rural sentiments due to inflationary pressures, rising vehicle cost and increasing fuel prices.

— Aakash Minda

So, coming to Minda Corporation, definitely exports for this particular quarter are under pressure.

— Aakash Minda

So, even when there is a pressure from the export market, we try to outperform them.

— Aakash Minda

And again, while there are pressures from the raw material, wage increase to various states like we have seen all across, the margin definitely continues to be under pressure.

— Aakash Minda

So, the challenge in the automotive industry is definitely continuously increasing the working capital.

— Aakash Minda

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Q&A — 9 exchanges

First of all, congrats on a strong set of numbers in this tough time. My first question is related to the information and connected systems business. So how do you see the growth going ahead in the wiring harness business? And what kind of the margin guidance you have in this business?

Aakash Minda

Yes, Abhishek, wiring harness continues to be the nervous system of the vehicle. And if you see the latest trends from BS-IV to BS-VI and in various segment such as electric vehicle mobility, more-and-more premiumization happening in the car. The content of the wiring harness is set to grow forward and even more. It depends on the segments as well as on the ICE or EV type of a vehicle. But technically, again I would not be able to give you a number on the particular growth. But it is going to be in line or even better than the industry growth, having more-and-more content per vehicle, such as

Sir, my question was on the mechatronics division. So, with respect to the locksets, I wanted to understand what is your share of business with top customers like Bajaj, HMSI, TVS, Hero, Suzuki?

Aakash Minda

So, ma'am, I will not be able to share the exact numbers. That is the confidential information. But largely wherever and whichever product Minda Corporation works in, either with the customer or in the segment, we are one of the leaders, having more than 30% or 35% share of business across segments. In the two- wheeler lockset, which is higher, we have more than about 40%, if I may say. All customer segment level, it may vary from different customer-to-customer. Understood, sir. But could you tell us where the share of business is higher, from which customers and from which it would be lower?

So, as I mentioned, this is the potential maximum kit value that we can offer. Currently, if I say that we are offering somewhere between INR 10,000 to INR 12,000 is what we have currently reached and which is under mass production. Dhananjay Mishra: Can you repeat? I didn't get the numbers.

Aakash Minda

INR 10,000 to INR 12,000. Dhananjay Mishra: And that is a potential we can -- but are we -- have we got order from any customer to get this much kit value for a particular model? Yes, we have. I cannot name the customer or model, but… Dhananjay Mishra: No, I was just asking, I mean, whether we -- because you have increased this mechatronic, we have increased our -- this thing by INR 2,000 to INR 3,000. And then in information and connected systems, we have increased to INR 2,000. So, we can provide INR 8,000 to INR 10,000 kind of products for EV. So that's what I ask. And in terms of just for

Sir, I had two questions on the macro front. So, I just wanted to check with you, how has the global market landscape impacted your company's performance?

Aakash Minda

So, besides India, if you look at various reports, like the next 10 years are India Inc., and due to the various concerns of geopolitical issues, COVID etc., of course, the other markets are under pressure, whether it's America or Europe or other such countries. So, coming to Minda Corporation, definitely exports for this particular quarter are under pressure. But our interest and focus is always to be winning new orders. So, even when there is a pressure from the export market, we try to outperform them. Sure, sir. Sir, also, I just wanted to check what are the steps that we are taking to add

So, this is basically with regards to how do you see operational efficiency kicking in? Are we taking any digital transformation initiative? And the second question is with respect to expanding our international footprint, if you can provide any steps that we have taken for that?

Aakash Minda

Yes. So again, we are into the manufacturing business and automotive. So definitely, operational excellence is the most important forty for us. And especially with the ongoing setups and technology changes and the customer demand, we have to fall much faster in line. For those initiatives, we are, firstly, setting up and providing our state-of-art plants and improving end-to-end traceability, low-cost automation, robotics, business excellence, IoT and all such digital control in the process. And we are partnering up, and already we have partnered up with various external companies to strengthe

Sir, my question pertains to how do we plan to increase our content per vehicle from here going ahead over the next 2 to 3 years across segments? Because we are seeing decent premiumization, which is happening across the board. So, do we still feel that there is room for further penetration in our products to increase content per vehicle?

Aakash Minda

Yes, absolutely, it is not even the beginning, if I may say, Saral. As you see the bike, cars, etc., are all going through premiumization. And if I speak about our products for vehicle access, so from a traditional lock and key, as I mentioned earlier, we're now moving to keyless solutions. And this is only the 5% to 7% penetration as of now. Going forward, of course, it is only going to increase. When it comes to the wiring harness content and increasing kit value, as I had mentioned earlier as well, the increasing number of connection systems, high- voltage cables, more complex wiring harnes

Sir, my question is on the aluminium die casting side. So, just wanted to understand, I believe that as we move on from aluminium to zinc and to magnesium, so I mean, the value content or the product improves. So, is there a margin difference if we are providing aluminium die-casted products versus zinc and magnesium die-casted products? And what would that be?

Aakash Minda

Very challenging question. But again, we are primarily into aluminium casting. We are not into magnesium casting. Of course, there are more pros than cons when it comes to the technology per se. But more importantly, the application of each of the zinc or aluminium or magnesium casting plays an important effect. Honestly, I cannot comment on the profit margin across all three. Okay, sir. And sir, I mean, if we see the magnesium die-casted product, I mean, is the industry -- or do you believe the industry can slowly start moving to the magnesium die-casted products at least in the premium vehic

My first question is on the working capital. How do you see in future your working capital days to evolve? What are the company's strategy on that?

Aakash Minda

So, the challenge in the automotive industry is definitely continuously increasing the working capital. Like one of the key matrix’s that we also monitor and working towards that. And hence, as I mentioned, one of the important factors in that is our suppliers or our creditor partners. This is where we are working with them on how we can strategize to decrease our inventory days as well as their payment term results. And there are, of course, MSME norms which the government has set of 45 days and all. So, this is one aspect that we're working on across various segments. Number two is, of cours

So, thank you very much. Going forward in FY '24, we are very confident of growing better than the industry or performing the industry with our own capabilities and technologies and customer engagement. We continue to focus on delivering numbers and performance on consistent and sustainable basis. And we are developing our ability to navigate the market challenges by relentlessly focusing on new products, R&D, innovation and strategic tie-ups to cater to the evolving demand of the automotive space. Our strategic approach will remain on fortifying our core products and expanding our products an

Management

Speaking time

Aakash Minda

Radha

Moderator

Saral Seth

Abhishek Jain

Mihir Desai

Rajesh Kumar

Harish Shah

Dhananjay Mishra

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Opening remarks

Abhishek Jain

Thank you, Jacob. Good evening, everyone. On behalf of Dolat Capital, we are pleased to welcome you to Minda Corporation's 4Q FY '23 Earning Call. We thank the management for providing us the opportunity. From the management side, we have with us: Mr. Aakash Minda, Executive Director, Finance & Strategy, Mr. Neeraj Mahajan, Group President, Marketing; Mr. Vinod Raheja, Group CFO; Mr. Anshul Saxena, Group Head, Strategy & Mergers & Acquisitions; and Ms. Pushpa Mani, Lead Investor Relations. Before we begin this, let me mention a short cautionary statement. Some of the statements made in today's earnings call will be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties that may cause actual result to differ from the anticipated outcome. Now we hand over the call to Mr. Aakash Minda for opening remarks, post which we'll have the Q&A session. Over to you, sir.

Aakash Minda

So good afternoon, everybody. Thank you, Abhishek and Dolat Capital, for holding the conference call for Minda Corporation. I would like to begin. Good evening, everyone, and welcome to the Q4 & FY23 Earnings Conference Call of Minda Corporation. On behalf of the company, I thank you all for joining us on this conference call and hope all your families are keeping safe and healthy. In fiscal year 2023, the overall industry experienced double-digit growth across vehicle segments except two-wheeler, where the growth has been sluggish due to rural demand and under pressure on the back of negative rural sentiments due to inflationary pressures, rising vehicle cost and increasing fuel prices. Despite the same, Minda Corporation recorded another year of resilient and better-than-industry performance with revenue from operations of INR 4,300 crores, a growth of 45% year-on-year basis. EBITDA margin for the year improved by 83 basis points to 10.7%. We delivered double-digit EBITDA margin for

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