LANDMARKNSEQ2 FY24November 16, 2023

Landmark Cars Limited

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Management on call

Sanjay Thakker

PROMOTER AND EXECUTIVE CHAIRMAN, LANDMARK CARS LIMITED

Aryaman Thakker

EXECUTIVE DIRECTOR, LANDMARK CARS LIMITED

Surendra Agarwal

CFO, LANDMARK CARS LIMITED

Rahul Dani

MONARCH NETWORTH CAPITAL

Key numbers — 40 extracted

and I can tell you that India was the star of that show. The overall Indian auto industry grew at 5% year-on-year in the second quarter. This is in line with most estimates as we are coming from a v

15%

focus is showing excellent results. The average selling price of cars that we sell has increased 15% over last year to over 20 lakhs and the average service revenue has increased again by 15% to cro

20 lakh

results. The average selling price of cars that we sell has increased 15% over last year to over 20 lakhs and the average service revenue has increased again by 15% to cross Rs. 26,000. The EBITDA for a

Rs. 26,000

er last year to over 20 lakhs and the average service revenue has increased again by 15% to cross Rs. 26,000. The EBITDA for after sales has jumped 30% year-on-year due to this. You will also notice that th

30%

ice revenue has increased again by 15% to cross Rs. 26,000. The EBITDA for after sales has jumped 30% year-on-year due to this. You will also notice that the profitability has grown at 20% for after

20%

has jumped 30% year-on-year due to this. You will also notice that the profitability has grown at 20% for after sales for the half year period. We had spoken about building a unique pre-owned car b

Rs. 100 crore

appy to share that we have made very good progress in this. We are well on our way to surpass our Rs. 100 crores revenue guidance for the year. One should remember that we are buying and selling only our brand

19%

the used car trading. In the cars sold, we saw an ASP increase, average selling price increase of 19% rising from 16,56,000 in H1 FY23 to 19,65,000 in H1 FY24. Similarly, in the service, ASP also i

12%

om 16,56,000 in H1 FY23 to 19,65,000 in H1 FY24. Similarly, in the service, ASP also increased by 12% rising from 22,500 in H1 ‘23 to 25,218 in H1 24. In the last quarter, our new car proforma sale w

Rs. 866 crore

om 22,500 in H1 ‘23 to 25,218 in H1 24. In the last quarter, our new car proforma sale was around Rs. 866 crores across all our OEM partners and after sale revenue was Rs. 211 crore. As highlighted, this is ex

Rs. 211 crore

ar proforma sale was around Rs. 866 crores across all our OEM partners and after sale revenue was Rs. 211 crore. As highlighted, this is extremely predictable business with repeat customer and once we hit the

Rs. 17,50,000

to see tremendous growth. The average selling price of cars sold in the quarter has gone up from Rs. 17,50,000 in the quarter Q2 FY23 to Rs. 20,18,000 in Q2 FY24 showcasing a growth of 15% year-on-year. So, ou

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Guidance — 20 items

Sanjay Thakker

opening

“Our Mahindra operations in Howrah and the outskirts of Kolkata will start from the next quarter.”

Sanjay Thakker

opening

“100 crores revenue guidance for the year.”

Sanjay Thakker

opening

“We are aiming to double this business in the next year.”

Let's talk about the profitability now

opening

“We have already seen downwards in the inventory and hope to get to normalization inventory in the current quarter.”

Sanjay Thakker

“And again, I believe from January, there will be a kind of a uniform price increase.”

Sanjay Thakker

“So, I think come 1st January you will see a higher selling price of I think 100 out of 100 products that will be there in the market where this will play out.”

Sanjay Thakker

“In fact, maybe if we are having an Investors Day, which we are planning to have in the next quarter, we will showcase to you the technology that we have built, the apps that we have built to kind of do it.”

Sanjay Thakker

“So, there was an inventory buildup, new car launches like an Elevate, for example, the pre-owned cars that we saw started the business which wasn't there last year, but we are very mindful, and we don't want to have more inventory and there will be a big focus on reducing this inventory and you will see some good results by December.”

Sanjay Thakker

“What we are reporting is also including our demo cars, which we could kind of separately show from next quarter just to kind of show this kind of a bifurcation.”

Sanjay Thakker

“The BYD Seal which is a fantastic product will be as of now from the information we have will be coming to us by January and the bookings of that will also start around that time.”

Risks & concerns — 12 flagged

Thankfully, the customer sentiment is holding strong when the situation globally turns cautious.

— Sanjay Thakker

So, once the volumes kick in, you will see a double impact of this going ahead.

— Sanjay Thakker

Is there any risk to these numbers coming down.

— Deepak Lalwani

It's a little difficult to explain on the call, but once you will see it, you will feel happy about what Landmark has built.

— Sanjay Thakker

It is a difficult thing to predict as to when the homologation happens, we have been told that it will happen like as soon as this quarter.

— Sanjay Thakker

So, BYD timing is a little difficult to say, it can happen anytime but hasn't happened so far.

— Sanjay Thakker

See, it's a difficult question to answer broadly.

— Sanjay Thakker

So, my question now is, from the rest of the business, there has been some volume uptake especially from Honda, while Jeep volumes continue to remain weak.

— Amar Kant Gaur

Do you see that as a risk to our numbers for Jeep specifically?

— Amar Kant Gaur

What kind of risk do you see in those terms and if you could shed some light on what kind of duty structure do we have currently on Mercedes and what could change in the near future?

— Amar Kant Gaur

Now, this is a risk as well as an opportunity because what will happen is that a lot of models of say a Volkswagen group, just to give you an example, can also start coming in.

— Sanjay Thakker

It's a little difficult to kind of predict 3-6 months or one year forward, but it will all even out.

— Sanjay Thakker

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Q&A — 10 exchanges

Sir, I just wanted to understand, the volumes in our after-sales business, it's flat on a half yearly basis and in fact it's down in this quarter. So, just wanted to understand what is happening here?

Sanjay Thakker

Yes, sure. So, there are two, three answers to this. And the answer in all is a combination of two, three factors that we will see. During the last year, we had our Renault operations, which we have shut in this current year. So, the number of cars, the small cars that we were servicing, some of them, has gone away. So, that is one thing. The second thing is that the aftersales business also has a kind of a seasonality factor around it and the reason for that is that the cars that you sell in say good months like say a March or a Diwali come for a one year service exactly after that or a 6-mon

Sir, just wanted to know in the aftersales business, we have this segmentation into four different parts, and I just wanted to know that what percentage of the aftersales business will be from only collision and repair services approximate?

Sanjay Thakker

Yes, so actually we are getting some learning as this is only our second, third earning call and every time we are wanting to improve on our disclosures, our presentation, the granularity of the business that we do and I'm hoping that by next quarter and the quarter after that you will see more meaningful dissection of the data. The dissection of the data will also include the high ROCE that the aftersales business does. So, what is the capital employed over there? What is the CAGR? We will disclose that. As far as the accident repair is concerned, currently it is at around 45% of our service,

First question for Surendraji. As last time we discussed that potential revenue from Indore, Bhopal MG outlets full year will be what, around Rs. 130 crores. Is that number correct, sir?

Surendra Agarwal

So, we are currently selling 100 plus car in a month. That's the pace we have. So, it will be Rs. 100 crore upwards for the year. But this year it will not be because this year we started from the month of August. Sure, I am saying from annualized basis, Indore, Bhopal. Rs. 100 crore plus turnover we will get it definitely. Including service or any process charges? Your number, Basu, what you had assumed is correct. And we will obviously add more MG outlets to top it up. Goa revenue will be proportionately similar, Rs. 50 crores – Rs. 60 crores annualized? Goa will be, I think, around 40% of I

Sir, my first question is regarding the cost structure, mainly two line items, employee cost and other expenses. So, I was noting personally on employee benefit expenses has increased by around 11% YOY and I was looking at your EPFO employee strength, which may not be your entire employee strength, but I think the EPFO headcount has gone down by 5% YOY. So, what could explain the difference in employees? Was there like a one-off bonus that led to this Rs. 53 crore number that was on employee? And secondly, your other expenses, it has actually remained in a very tight range of Rs. 40 crore to R

Sanjay Thakker

Yes, sure. Let me first talk about the manpower thing. The first answer is that no, there was no one-time bonus because of we becoming public or IPO. There was no such thing. We have a very clear kind of a policy. We were voted Pranay as the Best Manpower Guys by the Forbes Magazine, Best People Managers in 2019. And what I can say is that we are not somehow the best in revenue terms as far as the industry is concerned. Still people want to work with us and that is people has been our strength. And the top level we haven't seen any kind of people going away. The thing is that we have built new

I have two questions. The first on the new car sales margin that has dropped YOY 3.2% to 1.7%. What should we read into this? And does this also include the commission on financing? Because net of that, the new car margin then looks really low. So, if you could throw some light on that, that's the first question. Thanks.

Sanjay Thakker

You are talking about an EBITDA margin on slide 16. That's what you are saying, the Rs. 15 crore that we are talking about. Yes, so basically the volumes is something that was a problem in the first 1 or 2 months of the quarter. That is kind of taken off right now and we believe that this will go up. But, Surendra, does this include the ROTF margin? Yes. So, the sales proforma revenue has dropped from say Rs. 960 crores to Rs. 908 Crores, but the EBITDA has dropped from Rs. 30 crores to Rs. 15 crores. So, yes I just want to? Yes, so the cost of everything otherwise remains the same. It's a vol

I have a couple of questions, firstly on the Mercedes side. So, as we can see the Mercedes business from the standalone business it has performed exceedingly well and now it is contributing about more than 50% to overall EBITDA. So, my question now is, from the rest of the business, there has been some volume uptake especially from Honda, while Jeep volumes continue to remain weak. Could you provide some outlook on those sides and maybe some of the other brands, how they are doing?

Sanjay Thakker

Yes, that's a good idea, Amar. So, last time I had kind of started my speech by kind of giving a run through about all the OEs. Now Honda, the Elevate continues to now clock in the numbers as was predicted. So, this is something which is a heartening fact. Honda has loyal set of customers and the numbers just keep on happening. So, my sense is that Honda which in the first quarter degrew at 37%. That was the kind of the steepest drop that we had seen will make up for every kind of lost number in the first quarter. And I think for the year will close higher than last year. That will be quite a

So, I've read your results and I saw that basically Q2 versus Q2 last year, they're obviously 10% down in terms of total revenue but from what I understand most of that is from the new car sales that you spoke about, the model is slowing down there. So, what I want to understand is for the next three fiscal year or so, what do you think your aftersales business can go at? Also you just spoke about how you're focusing on less services but services that are making more money, right? So, I just want to understand how you are thinking about it and what you are guiding for the next 3 or 4 years?

Sanjay Thakker

You are asking about aftersales, Manan? Yes, aftersales, specifically aftersales. So, aftersales, Manan, we have grown for the last 9 years at 20% CAGR. And this year, though we could not grow at 20% CAGR in topline terms, we have grown at the bottomline terms. So, we want to kind of maintain that pace and I don't see any reason to kind of change that trajectory of ours. Correct sir. Also sir, I want to understand how that business is basically structured fundamentally in terms of, so when you say aftersales business, are these vehicles that come to you, you repair them and you give a single b

I just wanted to understand this quarter, the EBITDA from the new car sales business is appreciably lower than last year. I just wanted to understand what is the sustainable sort of margin in this business? If you could just throw some light, especially with the new vehicles that you're launching from different brands as well?

Surendra Agarwal

So, our EBITDA margin for the sales business in the tune of 2.5%-3.5%. Only particular of the quarter two is some volume impact and the cost which we have maintained for the future growth. That's the reason. But in the steady state, it will be in the tune of 3% plus kind of thing. But Y-on-Y, it is half, right, the EBITDA? Y-on-Y is because of the volume impact. But the revenue fall is not as significant as the EBITDA fall. I'll tell you, our gross margin percentage term if you look at it is higher than the Y-on-Y. But being there, the volume is not there, though the volume is not sustained th

So, my question was on aftersales services revenue. If I look at last 10 years, the CAGR has been around 20%. And obviously the scale was low. You're also growing well from the low base. So, if I look at 1H numbers for FY24, the revenue growth has been 12%. So, from the medium term perspective, can this business will be more like say low to mid teens kind of growth CAGR or how should we look at this?

Sanjay Thakker

So, Suraj, my point here is that the moment we start new businesses like MG we started, we had some amount of car park which was there and that started clocking in. The moment we start say Mahindra in Howrah, Calcutta, there is a huge amount of car park over there which will start giving us the revenue. So, it's just that we have been a little slow in getting into these things. It has taken a little bit more time. The moment we do either acquisitions or we kind of set up our own, which is as I said a lot of it is in the pipeline, my sense is that over a period of time it will all go to this le

Yes, thank you all for joining this call. I'm reminded of the Afghanistan-Australia match, where Australia came from behind to win the match. I think we are taking some kind of inspiration from that and we want to kind of go ahead and win the match and this year based on that. Thank you.

Management

Speaking time

Sanjay Thakker

Moderator

Surendra Agarwal

Abhisar Jain

Basudeb Banerjee

Deepak Lalwani

Pranay Roop

Mithun

Kunal Sabnis

Amar Kant Gaur

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Opening remarks

Rahul Dani

Thank you, Neerav. Good morning to everyone. On behalf of Monarch Networth Capital, we are delighted to host the Senior Management of Landmark Cars with us. We have with us Mr. Sanjay Thakker - Promoter and Executive Chairman, Mr. Aryaman Thakker – Executive Director and Mr. Surendra Agarwal – CFO. I would like to hand the call to Mr. Sanjay sir for his opening remarks and then we move to Q&A. Thank you and over to you, sir.

Sanjay Thakker

Thanks, Rahul. Thanks, the Monarch team for hosting this call. We are in midst of transformation in India. Such transformation comes maybe once in one's lifetime. There is a consensus among the world that it is India's time now. The same sentiment is shared by the Indian customers who are finally loosening their purse strings and spending. We operate in a segment where sentiments play a very big role. Thankfully, the customer sentiment is holding strong when the situation globally turns cautious. I was in Munich recently for a global Mercedes conference and I can tell you that India was the star of that show. The overall Indian auto industry grew at 5% year-on-year in the second quarter. This is in line with most estimates as we are coming from a very high base now. As I had guided in the last call, our partner OEs have started participating in this growth and we are covering up for the shortfall of the first quarter. The sales numbers for Honda, BYD,Jeep as well as Mercedes-Benz are i

Surendra Agarwal

Thank you, Sanjay bhai. A very good morning to everyone and warm welcome to one and all attending the earning call. I would like to start by some operational metrics before getting into the financial number: We continue to be the highest contributor in terms of volume for multiple OEMs and this translates into the meaningful number for all of our OEM partners. In the half year gone by, we have serviced 1,58,000 plus cars and sold 307 used cars under our new model of the used car trading. In the cars sold, we saw an ASP increase, average selling price increase of 19% rising from 16,56,000 in H1 FY23 to 19,65,000 in H1 FY24. Similarly, in the service, ASP also increased by 12% rising from 22,500 in H1 ‘23 to 25,218 in H1 24. In the last quarter, our new car proforma sale was around Rs. 866 crores across all our OEM partners and after sale revenue was Rs. 211 crore. As highlighted, this is extremely predictable business with repeat customer and once we hit the tipping point in certain OEM

Coming to the financial numbers

Our total pro forma revenue for the quarter stands at Rs. 1,120 crores as compared to Rs. 1,148 crores in the same quarter of the previous year. This symbolizes a marginal degrowth of 2.4% year-on-year. Sequentially the previous quarter proforma revenue was Rs. 934 crores. This accounts for a growth of 20% quarter-on-quarter. We have made up a lot of lost ground in the quarter. We look into the half-yearly number. Total proforma revenue for H1 is at Rs. 2,054 crore as compared to Rs. 2,179 crore H1 of the previous year.

Let's talk about the profitability now

The gross profit for the quarter is Rs. 162 crore with a 14.5% margin on proforma revenue as against the gross profit of Rs. 152 crore in Q2 FY23, a 6.5% higher than last year. This year EBITDA stood at Rs. 57.1 crore for the quarter versus Rs. 63.6 crore in the same quarter of last year. EBITDA margin clocked in Q2 FY24 being 5.1% while the same in quarter 2 FY23 was 5.5%. Similarly, PAT stood at Rs. 20.5 crore with a 1.8% margin. There is a 21.6% year-on- year growth in PAT, over Rs. 16.9 crore in the same quarter last year. Now for the corresponding figure for the half year period: Our gross profit for H1 FY24 was Rs. 305 crore as against Rs. 292 crore in H1 FY23. EBITDA for H1 FY24 stood at Rs. 104 crore and the corresponding figure of H1 FY23 was Rs. 116 crore. Profit after tax of half year stood at Rs. 27.8 crore versus Rs. 35 crore last year for the same period. Cash PAT for the semi-annual period is Rs. 52.6 crore as against Rs. 54.95 crore in the same period last year. This is

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