MINDACORPNSEQ1 FY24August 09, 2023

Minda Corporation Limited

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137turns

14analyst exchanges

4executives

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Management on call

Aakash Minda

EXECUTIVE DIRECTOR FINANCE & STRATEGY

Vinod Raheja

GROUP CFO

Anshul Saxena

GROUP HEAD STRATEGY AND MERGER & ACQUISITIONS

Pushpa Mani

LEAD INVESTOR RELATIONS

Key numbers — 40 extracted

INR1,075 crore

rajectory with consistent better than industry performance. Our revenues from operations stood at INR1,075 crores with a growth of 6.4% year-on-year on the back of strong product portfolio, solid customer base

6.4%

than industry performance. Our revenues from operations stood at INR1,075 crores with a growth of 6.4% year-on-year on the back of strong product portfolio, solid customer base and presence across seg

10.7%

were subdued mainly due to the global economic headwinds. In this quarter EBITDA margins stood at 10.7%, growth of 12 basis points year on year, with profit before tax of INR 63 crores and PBT margin o

12 basis point

ly due to the global economic headwinds. In this quarter EBITDA margins stood at 10.7%, growth of 12 basis points year on year, with profit before tax of INR 63 crores and PBT margin of 5.9%, mainly due to high

INR 63 crore

EBITDA margins stood at 10.7%, growth of 12 basis points year on year, with profit before tax of INR 63 crores and PBT margin of 5.9%, mainly due to higher finance costs and depreciation on the back of inves

5.9%

growth of 12 basis points year on year, with profit before tax of INR 63 crores and PBT margin of 5.9%, mainly due to higher finance costs and depreciation on the back of investments in capacity addit

45 crore

which would accelerate our growth going forward. Profit after tax stood at 45 crores, the tax margin at 4.2%. Now, I would like to take you all through the key developments during t

4.2%

growth going forward. Profit after tax stood at 45 crores, the tax margin at 4.2%. Now, I would like to take you all through the key developments during the quarter. This quarte

15%

raction in our in-house developed products of two-wheeler smart keys, which constituted more than 15% of the total two-wheeler lockset revenues. With our consistent focus and commitment on R&D and te

3,000 crore

al patent count to 255. During the quarter, Minda Corporation won lifetime orders worth more than 3,000 crores across segments and products and technologies. Out of this, 50% of orders came from the electr

50%

orders worth more than 3,000 crores across segments and products and technologies. Out of this, 50% of orders came from the electric vehicle mobility segment, representing our product's growing acc

Rs. 750 crore

ng prominent new customers to our EV portfolio, we had significant battery charger order win of Rs. 750 crores lifetime from a leading OEM. The company won more than 30 awards at various forums like QCFI, AC

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Guidance — 20 items

Aakash Minda

opening

“We expect gradual improvement to continue in the coming quarters.”

Aakash Minda

opening

“In this quarter EBITDA margins stood at 10.7%, growth of 12 basis points year on year, with profit before tax of INR 63 crores and PBT margin of 5.9%, mainly due to higher finance costs and depreciation on the back of investments in capacity addition and technology, which would accelerate our growth going forward.”

Aakash Minda

opening

“In two-wheelers, exports are expected to recover gradually going forward.”

Aakash Minda

opening

“This is a representation of our two-wheeler where all the products of Minda Corporation are EV agnostic and will be offering products in the EV space, irrespective of the engine segment.”

Jyoti Singh

“And second is what point do you expect a recovery in the export and how is the momentum?”

Jyoti Singh

“And when we are seeing a full recovery going forward?”

Management

“We expect our exports to come back from quarter three onwards.”

Aakash Minda

“So, we have already applied in the CCI, as and when we hear anything, we will be making it public, the next moment itself.”

Aakash Minda

“These are some of the areas that, how we will be increasing our growth, as well as addition of new products to technology tie-ups and in-house development as well.”

Aakash Minda

“So, if I typically divide by INR1,500 crores order book, it will be somewhere about INR350- INR400 crores odd that should come in one year.”

Risks & concerns — 9 flagged

Commodity prices have reversed the rising trend and have started to soften from elevated levels.

— Aakash Minda

In the two-wheeler segment, the slowdown in scooter sales was countered by the pick-up in demand for motorcycles primarily through the changing customer preference in the premium two-wheeler space.

— Aakash Minda

Exports continue to be under pressure due to macroeconomic challenges.

— Aakash Minda

Here Middle East exports have been a concern on quarter-on-quarter basis, as they have come down.

— Aakash Minda

Exports continue to remain under pressure.

— Aakash Minda

And so, the full year impact of that depreciation and, of course, in the coming quarter, the capacity utilization of those should also happen and take in action.

— Vinod Raheja

Sir, I just want to know that the PAT margin that is coming in these particular quarterly numbers around 4.2%, there is a significant -- we have seen a decline.

— Devang Shah

Do you not consider this a risk and if you consider it, how are you trying to mitigate this?

— Rajesh Kumar

So, there is no challenge as such in terms of plant ramp-up.

— Navin Matta

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Q&A — 14 exchanges

Thank you for the opportunity. So, my question is on the like on the first only die casting if you could give the Q1 number for die casting and for the full year. Last year, how much it was? And second is what point do you expect a recovery in the export and how is the momentum? And when we are seeing a full recovery going forward?

Management

Yes, so I'll take your first question in terms of how we are focusing on the exports growth. So, exports are looking subdued currently. Now in the first quarter, we have had at least 10% to 15% lower sales from exports based on the geopolitical concerns and other financial microeconomic issues. We expect our exports to come back from quarter three onwards. And that is when the year-end closing happens and more and more sales start picking up for the export market as well. So, expectation is to come back from the quarter three onwards. So, on the first question, which is on the die-casting fron

Thank you, a very good evening. So, my first question is on the order wins in Q1, which you have stated is INR 3,000 crores. If you could give us a segment wise breakup, like in which division, how much order we have received, if that's possible?

Management

Yes, so thank you for your question. If I again have a look, out of the INR 3,000 crores, about INR 400 crores are replacement businesses and about INR 2,600 crores are for the new businesses. Exports are about INR 138 crores. If I look at the mechatronics division, about INR 1,100 crores worth of order have been booked, out of which 14% have been for replacement, and 86% have been for new businesses. In the information and connection system, it's about INR 1,050 crores, out of which 70% is for the new businesses, and about 23% are for replacement businesses. And other orders, which are about

Good evening, sir and congratulations for great set of number in tough time. Sir, my first question is related with this Smart Key, which contributed around 15% of the overall locking system. So, have you own any new business in two-wheeler locking system?

Aakash Minda

Yes. I will not be able to disclose the name of the customers, but we are winning orders across engines, which is EV as well as IC engines. So yes, in quarter one this year, we have won a business of about INR 360 crores for Smart Key from one of the leading OEMs in India as well. One of the businesses, which is significant. Now you don't have any presence in the four-wheeler segment in the locking system, so are you looking to enter in that business? No, that is not correct. We have a presence in the four-wheeler locking system market in India and exports. So, we are under development and sup

Yes, hi Aakash. Can you give some colour on how much the domestic growth versus the 6% volume growth, which you are referring in the presentation?

Aakash Minda

So, our domestic growth has been to the tune of about 7% to 8%, which is quarter-on-quarter growth. And for the Y-o-Y? Y-o-Y has been again much higher. It is getting about the tune of 12% to 15%. And how much did exports decline? The exports have declined by to the tune of about 20%. And I was just wondering, we had these lifetime order announcements done in FY '22, lifetime order announcements done in FY '23. And now we have another INR3,000 crores in quarter 1 FY '24. So, I was wondering, for those two years, your lifetime orders, they haven't come in commercial states? So typically, in aut

Well, thanks for the opportunity. I just need a couple of updates from your side. First is with regards to the Smart Key business. As mentioned that it constitutes nearly 15% of two-wheeler lock set revenue. We would be interested to know the names of the clients that who we are associated with. That is my first question. And the second question is, if you can also provide an update on the component internalization plan, which we are having for the wire harnessing division?

Management

Yes, so I will not be able to give you the exact names against the orders as we are bound by confidentiality with our customers. But I can tell you some of the general names where we have won the orders as well as only in mass production and you can see from the market as well. There are customers like Bajaj Chetak, Honda and other export customers as well. And as and when the new customers start coming in, you will see those products in the market.We have 100% win ratio of the RFQs that come across our door when it comes to the two-wheeler Smart Key solutions. So, our focus is how we can stil

Thank you for the opportunity. Sir, my first question would be on the premiumization. As your company is known for product premiumization, can you throw some light on what is happening in our cluster business?

Management

Yes, so typically if you see an instrument cluster, it depends on segment-to-segment. If I speak about a two-wheeler segment, or analogue cluster, or a needle-based cluster, or stepper motor cluster, what we call, it's typically about INR 600 to INR 700 rupees. But when you move on to the next generation of clusters, which are smart clusters in the form of personalized, individualized, connected clusters, and more of TFT. They are, of course, to the range of about INR 3,000 to INR 5,000 per cluster. Of course, they are first higher penetration into the EV segments, as well as in the higher end

Sir, I just want to know that the PAT margin that is coming in these particular quarterly numbers around 4.2%, there is a significant -- we have seen a decline. So, any specific reason and moving forward what's your outlook on that?

Management

Yes, so as we just now explained, the primary reason is due to the increase in the finance cost and the depreciation. So, the finance cost on year-on-year has gone from INR 8 crores to INR 14 crores and depreciation has gone from INR 32 crores to INR 39 crores and our forecast – and our interest rate has also increased. So, these are the reasons why the tax margins have gone down. But overall, again, for the year, this should come back to the same levels as we have always target. And last year, there was one time tech side back actually, as you might be would know. That also had sort of positi

Thank you, sir. So, my question is on the EV kit value that you have suggested that the potential kit value can go up to INR 16,000. The question is, I mean, do we see these gains visible in the increased realizations and at the top line level, or does it also kick in at the margin level? Because let's say from FY ‘18 to now, the margin is kind of stable at 11%. So, let's say, two years to three years from now, as these lifetime win orders start contributing, do you expect an improvement in the margin? And if yes, to what extent?

Aakash Minda

Yes, so firstly, again, this 16,000 to 20,000 is the potential. It is based on the products that we are currently supplying and are in mass production. Of course, in a particular bike, then 100% of the stated value may not go. But this is our complete kit value offering in the two-wheeler segment that we offer in the mass production range. When it comes to the future of the products of the electric vehicle mobility, with the improvement in terms of minimization, electronification, electrification of our products, definitely the margin is expected to improve with more-and-more software content

Yes, sir, I just had one question regarding the effective tax rate. What will be our effective tax rate going forward? And do we have any bad credit?

Aakash Minda

Sorry, is your question on effective tax rate? Yes, and the remaining bad credit. So, can I get some information on that? Yes, for the fiscal ‘23-‘24, we are expecting effective tax rate of about 20% to 21% range. Okay, got it. Thank you. Thank you.

Thank you, sir, for taking my question. My first question is, can you help us by throwing some light on how the EV sales is panning out and which are the major products in that segment and how do you see the traction going forward?

Aakash Minda

Yes, so again, if you particularly look at the two-wheeler EV penetration in the Indian market, which is close to about 3% to 4%, Minda Corporation’s revenue from the EV perspective or the EV segments is typically higher to the tune of about 6%. So, it shows that clearly we are going ahead of the industry growth when it comes to EV sales and our penetration is much higher, which shows our customer confidence in our products, technologies, and capabilities. So, if I put into numbers, in our quarter 1 last year, about 2% of our sales were EV. And in this quarter, about 5.5% to 6% is our revenue

Yes. Hi, team. Thanks for the opportunity. My question was with regards to the product mix. So, we see that the two-wheeler mix has gone up while the commercial vehicles and passenger vehicles have gone down. In fact, even aftermarket has gone down. So, this also has impacted our margins. Would that fair to -- would it be fair to say?

Aakash Minda

So, as I mentioned again, exports have been subdued in this quarter and the domestic sales also has grown by 6%. And most of this has come from the growth of two-wheelers, which is at the rate of 12% shown in slide number six. So of course, which replicates our 45% of our revenues coming from two-wheelers to three-wheelers as well. So, in the same line, our growth from two- wheelers have also grown in this quarter to the tune of 48% revenue as compared to 44% last year. Right sir, that was very helpful. Sir, just a follow-up on the previous participant's question on the two-wheeler EV outlook.

Thank you for giving me opportunity, again. Just one last question from my side. Sir, you have recently filed for a fundraising exercise. So, if you can throw some light on the status of the same?

Aakash Minda

Sorry, can you repeat the question? Your line was unclear, please. Yes. So, you have recently filed for fundraising. So, if you can help me with the status of the same? So, we have taken a board approval last quarter as a resolution on QIP to scout on the fundraising. So, we continue to explore and as and when there is a need we will definitely come back to the market for that. Okay. And sir, on the business question, what is your plan to grow the passenger vehicle offering by Minda Corporation which is currently at around 14% to 15% of your total revenue? How do you see it going forward in th

Yes, hi sir. Thanks for the opportunity. Just a question with regards to your cumulative order book, new order wins which may -- which still have to go into production. Would you have a number that you can share?

Aakash Minda

Hi Naveen. No, I'm sorry. I don't have that number which has to go into production hands off. But yes, we can get back to you with that number on how much order book is yet to go into production, which is under development right now. Okay, sure. And just I missed your comments on what kind of growth are we targeting for FY ‘24? I think we were planning for double digits. So just what are your thoughts on that? It continues to be in the line that we have shared earlier and also committed to deliver those numbers, which are much higher than the industry, north of 20%. Of course, as I mentioned,

Yes, so thank you very much. Going ahead, Minda Corporation remains focused on strengthening its competitive edge by investing sustainably in R&D with an aim to produce high- quality products that cater to the diverse needs of customers worldwide. Our strategic approach will remain on fortifying our core products and expanding our product and customer base, both by attracting new clients and deepening our relationship with existing ones. Further, stabilizing commodity prices and semiconductor supplies are expected to aid improvement in underlying margins. We are fully poised and confident of m

Management

Speaking time

Aakash Minda

Moderator

Management

Pritesh Chheda

Rajesh Kumar

Saral Seth

Abhishek Jain

Navin Matta

Mihir Desai

Shridhar Kallan

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Opening remarks

Abhishek Jain

Thanks Seema. Good evening everyone. On behalf of Dolat Capital, we are pleased to welcome you to Minda Corporation Q1 FY24 Earnings Conference call. We thank the management for providing us the opportunity. From the management side, we have with us Mr. Aakash Minda, Executive Director, Finance and Strategy. Mr. Vinod Raheja, Group CFO, Mr. Anshul Saxena, Group Head Strategy and Merger and Acquisition, and Ms. Pushpa Mani, Lead Investor Relations. We'll start the call with a brief opening remarks from the management and followed by Q&A sessions. Now I hand over the call to Mr. Aakash Minda for opening remarks. Over to you, sir.

Aakash Minda

Good evening and thank you very much, Abhishek, for organizing this call for us. So good evening, everybody, and welcome to the quarter one financial year 24 Earnings Call of Minda Corporation Limited. On behalf of the company, I thank all of you for joining us on this conference call, and I hope you are keeping safe and healthy. The auto industry saw moderate growth during the quarter across most of the segments and two-wheeler and passenger vehicle demand mainly driven by pickup in demand driven by new product launches and rise in demand for SUV style vehicles. While commercial vehicles and tractors demand remains subdued on the back of strong pre- binding quarter for FY23 due to implementation of OBD Phase 2 norms and festive season. Exports largely seem to be bottomed out with possibility of recovery in coming quarters. Commodity prices have reversed the rising trend and have started to soften from elevated levels. Semiconductor supplies have also eased out, especially on the back

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