Setco Automotive Limited has submitted 'Standalone'.Pursuant to Regulation 33 read with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform...
Press Release for Immediate Distribution
Setco Automotive 9M FY19 sales up 33.6% at INR 466 crore
EBITDA in 9M FY19 stood at 67.71cr, up by 82.3% despite the expiry of Uttarakhand benefits Profit After Tax in 9M FY19 stood at 24.20cr, up by 84.1% despite expiry of Uttarakhand Tax exemptions Sales in Q3 FY19 stood at 160.42cr, up by 10.1% YoY PAT of 7.21cr in Q3 FY19, down 35% YoY due to normal tax rate of 34% in FY19 vs ~8% in Q3FY18
Mumbai, February 11, 2019: Setco Automotive Ltd. (NSE: SETCO | BSE: 505075), the largest manufacturer of clutches for Medium and Heavy Commercial Vehicles (M&HCV) in India, announced its financial result for the third quarter (Q3 FY19) ended December 31, 2018 and nine months (9M FY19) ended December 31, 2018.
Setco Automotive reported a strong sales of INR 466cr in 9M FY19, up by 33.6% YoY despite a slowdown in the M&HCV segment in Q3. On the back of robust growth and improved operating efficiencies, EBITDA in 9MFY19 stood at INR 67.71cr, up by 82.3% YoY. The company posted Profit after Tax of INR 24.20cr in 9MFY19, up by 84.1% YoY.
The company reported sales of INR 160.42 crore in Q3 FY19, up by 10.1% YoY and EBITDA of INR 23.27 crore in the quarter, up by 6.9% YoY. The company posted Profit after Tax of INR 7.21cr in Q3FY19, down by 35% YoY due to the normal tax rate of 34% applicable in FY19 as compared to ~21% in FY18 (actual rate was ~8% in Q3FY18).
Despite unanticipated liquidity crisis affecting MHCV industry sales and production, Setco’s sales from Original Equipment Manufacturer (OEM) segment grew by 9.9% and sales from Aftermarkets segment grew by 32.2% in this quarter. LavaCast (a subsidiary of Setco) ramps-up its capacity utilization to ~70% utilization in Q3 FY19 vs ~60% in Q2 FY19 and is expected to move up to around 80% during Q4 FY19. Additionally, with the recent inroads into the farm-equipment segment and the introduction of new generation clutches (ASD clutch) in US Aftermarket, the company is poised to grow significantly going forward.
Harish Sheth, Chairman & Managing Director at Setco Automotive, said, “This quarter, the NBFC liquidity crisis has temporarily affected the growth rate of MHCV sector. This is more of a short term correction, however, the long term fundamentals remain robust. With the liquidity crisis abating and impending switchover to BS-VI norms, we expect the demand to pick up significantly from the first quarter of the new fiscal. The growth-friendly measures announced in the budget, coupled with the reduction in interest rates announced recently would give a further flip to the underlying growth drivers of infrastructure and GDP growth.”
Standalone - Key Financials of Q3 FY19 and 9M FY19
Particulars
Sales EBITDA EBITDA % Operating PBT PAT EPS
Q3 FY19 160.42 23.27 14.51% 9.21 7.22 0.54
Quarter Ended Q3 FY18 145.65 21.77 14.9% 9.37 11.27 0.84
Growth +10.1% +6.9% (40bps) (1.7)% (35.9)% -
9M FY19 466.25 67.72 14.5% 27.60 24.20 1.81
Nine Month Ended 9M FY18 348.96 37.15 10.6% 1.28 13.14 0.98
(Figures in INR Crore) Year Ended FY18 524.76 66.34 12.6% 17.32 28.81 2.15
Growth +33.6% +82.3% +390bps +2055.8% +84.1% -
Note - Expiry of Uttarakhand tax exemptions at the end of FY18. Normal tax rate of 34% is applicable in FY19 as compared to ~21% in FY18 (actual rate was ~8% in Q3FY18)
Page 1 of 2
Press Release for Immediate Distribution
About Setco Automotive: Setco is the largest manufacturer of Premium Quality “LIPE” brand clutches for commercial vehicles in India. Incorporated in May 1982, currently the company employs more than 2000 people globally. It is a Tier I supplier of clutches to all the prominent Indian commercial vehicle manufacturers such as Tata Motors, Bharat Benz, Ashok Leyland etc. Setco has all the required global quality certifications such as TS 16949, ISO 14001, OSHAS 18001 and VDA 6.3. Setco has a strategic global footprint with 4 manufacturing facilities, 2 in India, and 1 each in the UK and USA, with R&D centres in India and UK. Setco Automotive is the flagship company of The Setco Group which also includes Lava Cast Pvt Ltd, and its CSR wing, the Setco Foundation. Visit us at www.setcoauto.com
Safe harbour: Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause our actual results to differ materially from those in such forward-looking statements. We do not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf.
For more information, contact: Anurag Jain Setco Automotive Ltd. Email ID: anurag.jain@setcoauto.com Tel: 022-4075 5555
Neha Patil Perfect Relations Email ID: npatil@perfectrelations.com Tel: +91 9619506683
Page 2 of 2
Results Q3 FY19 Setco Automotive Limited
Conference Call - Mumbai
February 11, 2019 at 4:00PM
Disclaimer
NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES
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Agenda
1 Key Highlight - Q3 FY19 and 9M FY19 2 Financial Results 3 Business Overview 4 Outlook
1 Highlights
Key Highlights - Robust 9M results
Standalone Q3 FY19 Q3 FY18 In INR Cr
Sales
160.42
145.65
EBITDA
23.27
21.77
14.9
11.27
7.7
14.5
7.22
4.5
9M FY19 9M FY18
EBITDA %
PAT
PAT %
Standalone In INR Cr
+10.1%
+6.9%
-40bps
-35.9%
-320bps
Sales
466.25
348.96
EBITDA
67.71
37.15
+33.6%
+82.3%
EBITDA %
14.5
10.6
+390bps
PAT
24.20
13.14
+84.1%
PAT %
5.2
3.8
+140bps
Key Aspects
1
2
3
4
Sales momentum remains positive - Sales has increased by 33.6% in 9M FY19 vs 9M FY18
9MFY19 EBITDA - Increased by 82.3% YoY, despite expiry of Uttarakhand tax benefits.
9MFY19 PAT – Grown by 84.1% YoY. PAT margin of 5.2% this year vs 3.8% last year, despite the following: • Normal Income tax rate of 34% in FY19 vs as compared to
lower tax rate applicable in FY18 due to Tax benefits.
Capacity expansion for 25% capacity growth to reach an annual long term turnover of over INR 1000 crs, with suitable financing. Expect investments from first half FY20
2 Financial Results Q3FY19
Key Figures Q3FY19 & 9MFY19 - Standalone
In INR crores
Q3FY19
Q3FY18
Q3FY19 vs. Q3FY18
9MFY19
9MFY18
9MFY19 vs. 9MFY18
Sales
EBITDA
EBITDA %
Operating PBT
PBT
PAT
EPS
Key Aspects
160.42
23.27
14.5%
9.21
11.51
7.22
0.54
145.65
21.77
14.9%
9.37
12.28
11.27
0.84
10.1%
6.9%
-40bps
-1.7%
-6.3%
-35.9% -
466.25
67.71
14.5%
27.59
38.64
24.20
1.81
348.96
37.15
10.6%
1.28
14.45
13.14
0.98
33.6%
82.3%
+390bps
2055.8%
167.3%
84.1% -
FY18
524.76
66.34
12.6%
17.32
36.02
28.81
2.15
Q3FY19 vs Q3FY18 • •
EBITDA Margin at 14.5% marginally lower despite ~200bps impact of expiry of Uttarakhand Tax benefit PAT – Effective tax rate of 34% vs a much lower rate in FY18 due to Uttarakhand Tax benefit which has since expired. However for 9MFY19 PAT is 24.20 crs which is 84.1% higher over same period last year
PAT & EBITDA margins are expected to be higher with full impact of price increase to compensate for higher raw material cost. This benefit will sustained going forward.
1
2
2 Financial Results Q3FY19
Growth momentum continues
MHCV Industry Production In ‘000
307
273
9MFY18
9MFY19
Setco Sales In INR Crs
Q3FY19 vs Q3FY18
9MFY19 vs 9MFY18
Growth
Growth
MHCV Industry Production
12.3%
42.9%
Setco OEM Sales
9.9%
Setco Aftermarkets Sales
32.2%
41.1%
64.7%
OEM Sales
Aftermarkets Sales
Exports
Key Aspects
146
[VAL UE]
182
247
16
14
9MFY18
9MFY19
9MFY18
9MFY19
9MFY18
9MFY19
% of Total Sales
42%
44%
52%
53%
5%
3%
1
2
3
As a strategy, Aftermarket has been developed over the years and today it constitutes ~60% of our revenue.
Apart from being more profitable, Aftermarket ensures sustainable growth and company is less vulnerable to cyclical OEM demand. With the recent introduction of new generation clutches (ASD clutch) in US Aftermarket, we anticipate robust performance going forward
2 Financial Results Q3FY19
EBITDA% sustained despite higher RM cost
EBITDA In INR Crs
+82.3% vs 9MFY18
28.86
21.78
18.77
23.77
23.37
20.67
37.15
67.81
Q1 (3.41)
Q2
Q3
Q4
Q1
Q2
Q3
EBITDA Margin
FY18
FY19
-5%
13.9%
14.9% 16.4%
15.1% 14.1% 14.5%
Key aspects
•
EBITDA Margin at 14.5% marginally lower despite ~200bps impact of expiry of Uttarakhand Tax benefit
1. Sustained EBITDA margin mainly due to -
•
•
Impact of price revision implemented in Q3FY19 to compensate for RM cost increase Tight control on manufacturing and selling over heads
2. Company expects to increase EBITDA margin in
line with the guidance
2 Financial Results Q3FY19
Operating PBT – more than 20 times in 9M FY19
Operating PBT In INR Crs
+2055.8% vs 9MFY18
16.72
Key aspects
• Operating PBT in 9MFY19 at 27.60cr compared to 1.28cr in 9MFY18, an increase in more than 20 times
9.37
7.11
11.12
8.94
7.27
Q1
Q2
Q3
Q4
Q1
Q2
Q3
1.28
(15.21)
FY18
27.60
FY19
2 Financial Results Q3FY19
Profit After Tax : 9MFY19 is 84.1% above prior year
PAT In INR Crs
+84.1% vs 9MFY18
13.76
11.27
15.66
8.18
8.80
7.22
13.14
24.20
Q1
Q2
Q3
Q4
Q1
Q2
Q3
(11.89)
FY18
FY19
EPS
-0.89
1.03
0.84
1.17
0.61
0.66
0.54
Key aspects
9MFY19 PAT at INR 24.20 crs against INR 13.14 crs in 9M FY18, despite providing for normal income tax rate @34% this year compared to lower tax rate in FY18 due to Tax benefits.
Q3FY19 PAT of INR 7.22 crs against INR 11.27 crs of
Q3FY18
• PAT FY18 includes other income INR 4.13 cr (Uttarakhand benefit) which has since expired
3 Business Overview
Management Message
After 5 quarters of continuous growth, the M&HCV segment has shown a reversal of trend in Oct- Dec 2018. This temporarily blip is more of a short term correction & the long term fundamentals remain robust. With the impending switchover to BS-VI norms , we expect the demand to pick up significantly in the next year. The growth friendly measures announced in the budget, coupled with the easing of liquidity and reduction in interest rates announced recently will give a further fillip to growth.
Harish Sheth, Chairman & MD
Despite a slowdown in the M&HCV segment in Q3, Setco has delivered another quarter of YoY growth. Our planned initiatives on cost management, new products and gearing up for BS-VI introduction are proceeding as per the plan and early results are visible. We are confident to deliver superior top-line and bottom-line performance over the next few years. Commodity and FX headwinds have now stabilized and the company has implemented measures to address them through Pricing and Segment Mix.
Udit Sheth, Vice-Chairman
3 Business Overview
The Setco Advantage
Market Advantage
Manufacturing Advantage
Technology Advantage
Strong relations built over last 15 years with various OEM players.
More than 85% of market share in MHCV
clutch space
in Two Modern manufacturing facilities India backed by support manufacturing facilities abroad
High tonnage press shop Diaphragm spring production –
Import
Substitution In-house machining and critical heat treatment facilities Supplier base
Lava Cast - Integrated Play Advantage
Service Advantage
State-of-the-art foundry with machine shop Addresses supply chain constraints, assures supply of good quality castings and inherent cost advantages Strengthen relations with OEM by supply of like Fly casting / components to them wheel, Clutch housing, Brake drum etc in addition to clutches
Nation-wide distribution reach - 42 touchpoints
& 23 distributors Training programs and field visits on servicing, troubleshooting & maintenance The clutch is the fuse of the drive train which is designed to fail optimally saving the engine and the gear-box and requires a strong service network to ensure that the vehicle performance is most efficient
R&D centre at India supported by efforts in UK are poised to play a key role in national and global plans. In last 3 years, developed over 50 variants of clutches farm equipment and commercial vehicles Engineered customized solutions to suit different power trains of OEM’s for meeting BSIV/BSVI/EUROVI norms.
for
People Advantage
The most valuable part of our company is the people – the human capital – and any plans to move our business forward starts here.
3 Business Overview
Customer focus and growth
OEM Business
1
Aftermarket – Dominant segment ensuring stability and growth
2
3
International Business Turnaround
Lava Cast
4
Growth Strategy
Cost Optimization
Enhance productivity and asset utilization
Build culture of innovation & performance
Continuous improvement in Working Capital and Debt Management
Win together with all our stakeholders
5
6
7
8
3 Business Overview
Fortifying OEM Business
Key Aspects OEM
Foray into new OEM business – Farm Equipment
Development on BSVI migration from April 2020 on track and in line with different customers. Expect low double digit price hike.
investment
rural Heavy in infrastructure, utilization and higher demand
in resulting
sector increased
and fleet
All key drivers to deliver targeted growth are on track and expected to exceed the initial target.
Recent inroads to farm equipment segment would further diversify the OEM base
1
2
3
4
1
2
3
India is largest manufacturers of Tractor. Increase level of Mechanization will further drive the industry
Due to low volume play, no separate assembly line is required
Industry is moving towards higher horse power tractors leading to growth in dual clutch technology , which currently has only one supplier in the market. There is a demand for second supplier
Key developments
in progress and Approvals from major OEMs are expected shortly, and full benefits of it will be available in FY 20
4 Outlook
Subsidiary performance & outlook – Lava Cast
Key Aspects
1
2
3
Continuous ramp-up in capacity utilization with ~70% utilization in Q3FY19 vs ~60% utilization in Q2FY19
Supply to external customers such as TATA Motors, Ashok Leyland and others has commenced. Also received approval from Daimler for supply of castings.
Expected to hit increase capacity utilization of around 80% during Q4FY19 and optimum utilization in FY20
4 Outlook
Guidance – On track to achieve FY20 targets
Key Aspects
FY19 Guidance FY20 Guidance
Sales Growth
~30% over FY18
Around 30% over FY19
EBIDTA Margin
Mid teens
16-18%
FY20 outlook promising due to following reasons
1
2
3
4
5
6
7
OEM - We anticipate robust OEM growth momentum given strong pre-buying of BS-IV MHCV is expected before BS-VI migration from April 2020 Aftermarkets –Peaked OEM cycle in the past is expected to boost the first/second aftermarket replacements in FY20. First/second time replacement assumed for 1-6 years old trucks
Farm Equipment – Approvals from major OEMs are in progress and expected shortly, and full benefits of it will be available in FY 20
International Subsidiary - introduction of new generation clutches (ASD clutch) in US Aftermarket Benefit of pricing adjustments to compensate for Increase RM cost will be available for the balance of this year and full year FY20. Expects stable headwinds in the coming year. Capacity expansion for 25% capacity growth to reach an annual turnover of over INR 1000 crs, with suitable long term financing. Expect investments from first half FY20 Optimum capacity utilization in Lava Cast in FY20 and sales to major external customers, including exports, would lead to positive bottom line
IR Contact
We Invite You To Visit Setco
Setco Automotive Limited
Perfect Relations
Vinay Shahane Mail : vshahane@setcoauto.com Tel : 022-4075 5555
Anurag Jain Mail : anurag.jain@setcoauto.com Tel : 022-4075 5555
Ashish Samal Mail : ashish.samal@perfectrelations.com Tel : +91 9920778076