Aimtron Electronics Limited (AIMTRON) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I welcome you all to the H2 and FY '24 post-earnings conference call of Aimtron Electronics Limited. Today on the call from the management we have with us, Mr. Mukesh Vasani, Promoter and Chairman; Mr. Nirmal Vasani, Promoter and Senior Technology Director; Ms. Nikita Shah, Chief Financial Officer and the management team. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to quickly run us through the investor presentation of the company, briefing us about the business and performance highlights for the year that went by, the growth plans and the vision for the coming year, post which we will open the floor for Q&A. Over to you, sir.

Good evening, Vinay ji, and good evening, all the friends. This is Mukesh Vasani. I'm going to start the presentation now. I know we may have questions later, but I'm going to give you very quick overview about company. You see the disclaimer here. We will go through a little bit today company overview, business profile, industry outlook and way forward with financial metrics. In a company overview, if you maybe heard about this a little bit that we work on PC board assembly, including full design, engineering, and end-to-end solution in various sectors like automotive, industrial, gaming, IoT, robotic, AI, medical, and defense and other areas. Our goal is to diversify our portfolio in such a manner, so any sector goes up or down does not affect our overall revenue stream. So that is the reason we have very verities of customer base in our portfolios. Go to next [ page ] on this one. You can see myself here and Nirmal here. We both are promoting this company, and we have a full team in India managing this whole infrastructure. If you look at it here in our progression, we started this company on 19th April 2011. And then fast forward for the first 3 years, we worked as an ODM company and worked as a kind of a just their need in their premises. And then we moved out from there in 2014, and we did an opening ceremony with Karnataka Governor, Shri Vajubhai Vala. And then we started our journey. 2014 to 2018, we accomplished INR 20 crore turnover. And if you look at that, in 2020, we started winning the award and '21, we crossed INR 50 crores. Also in '21, we opened a facility in Whitefield. Dr. Ashwathnarayan came to do an opening ceremony, and we started with ISO standard focusing on high-tech medical clientele base over there. On the 2022, we also started automotive standards and other standards. And in '23, we opened 2 city offices, one in Vadodara City and one in Ahmedabad for more engineering support, that's why we started a city office. And you all know that in 2024, we accomplished a huge milestone and we got public listed. If you look at the business profile here, I'm moving to section 2. In the business profile, as I said, we are unique, kind of a comprehensive ESDM solution we are providing to our customers. So we do PC board design. We do assembly. We do full electronic system manufacturing, box build, and we also cater across the globe. And the customized solution, we work with the customer and we go latest and greatest technology like microelectronics assembly or IoT machine learning and end-to-end support. So we're going to have a couple more slides on this sector serves. So I'm not going to take too much of your time over here. And moving forward at next slide on this one. You can see in the bottom also what we're catering right now. On the manufacturing facility wise, we have 2 manufacturing facilities, both are state-of-the-art. In our Vadodara facility, we have a 3 SMT line, and there's one more SMT line is coming, is already installing on quarter 2. And then in Bangalore, we cater this kind of a clean room facility. It's not a clean room yet, but that is our goal for that facility to have a clean room facility for high-tech, life-threatening devices or for like a government secure project. So that kind of facility we create in Bangalore. So we have currently 2 facilities, and we have 2 city offices, one in Ahmedabad and one in Baroda. All the facilities, we have all kind of infrastructure certification. Let's see IATF we have for Vadodara facility, which provides all automotive and ISO standard is already there 9001. And we have a medical standard from both facilities 13485. So -- and we also very much focus in environmental and safety and also ISO 14000. So we have complete certification in all the facilities, whatever needed for current project. If you look at here is there is a more in-depth 4 plus 1, 5 SMT lines we have, 4 already installed and fifth one is coming, which is part of our RHP. 37 Through Hole setup lines and 3 full Box Build assembly lines, 2 we have here in Vadodara and 1 we have in Bangalore. So you can see more in that. On the manufacturing capability wise, I would like to have -- I think that's -- right now, I'm going to stop here and have other Aimtron team members start taking the lead. So manufacturing capability wise, maybe Nirmal Vasani, you can take the lead if possible.

Absolutely. Hello, everybody. For manufacturing capabilities, Aimtron has always tried to become a full-service end-to-end one-stop solution for the market. And that includes everything from product design, having turnkey manufacturing capabilities, then converting that into electromechanical high-level assemblies. Within those capabilities, we do SMT, Through Hole, any sort of electronics testing and any sort of customization and custom fabs, including cables and harnesses as well. In terms of our process, everything starts with material. So we start with the raw material sourcing. From there, once everything is kitted, we go into printing, and then we go into a 3D Solder Paste Inspection, that's what SPI stands for. After that, the pick and place machines will place the SMT components, and the reflow will bake the components into the board. After that, we have wave and selective soldering for Through Hole components, then we'll do any sort of insertion tasks or manual soldering that's related to that. And -- sorry, from reflow, we go into 3D AOI followed by X-ray. And then we go into the back-end assembly including wave soldering and insertion. If manual soldering is required, that will be done at that time. After that, we do cleaning and washing and any sort of ultrasonic welding if necessary. And after that, it goes into our testing and quality assurance processes. From there, if Box Build is a part of the build, it will happen then. From prototyping all the way through to the end product, we can actually start from the concept stage, have the PCB design, do the assembly, take care of the cabling, take care of all of the mechanical components, including sheet metal, plastics, any sort of magnetics or machining. And then once the system is fully integrated, we can do functional testing. And then the Box Build is complete. And so then the task moves on to us doing the logistics, any sort of repair reverse logistics as needed. And then for the second stage, we'll go back and redesign and do an analytics for improvement further. Next slide.

Thank you, Nirmal. Maybe I have our Director of Sales, Mr. Sneh Shah, he is available also. Maybe Sneh Shah, can you take this couple of slides?

Sure. Thanks Mukesh and Nirmal for the brief. Hello, everyone. So product portfolio, I think to what Mukesh and Nirmal stated. So it's a complete system integration. We call that as an EMS or ESDM. That is like electronic systems design and manufacturing. So just an example, say, if anyone comes with a concept, we help them to design. If design is ready, we take it to the prototype. Prototyping to production till entry level support. And production also like for manufacturing complete system integration to what you see first one, that is Box Build Assembly. So no doubt, PCBA or PCB assembly remains our core competency where we are making hundred and thousands of boards a month. But over and above that, in case if you have like completely like injection molding, sheet metal, die casting, cable assembly or whatever it would be. So we can help you to provide a complete one-stop solution where like in case, if you're looking out for some testing for product reliability testing like EMI, EMC, UL, CE, where we are in global market. So this kind of certifications are also required. So we do have that design. We do have that capability team, design team who can help us to get that kind of service as well. So in short, anything and everything, like in terms of electronics to complete the system integration, we can help them to provide everything. So first one is -- yes. So if we go in-depth, if you talk about product engineering, so in case whether it's hardware design, specific to embedded, whether it's firmware, whether it's mechanical. Sometimes what happens is, some of the value-added engineering services like DFM. So once the design is ready and before we take it to the prototype, just to ensure that manufacturing defects or something doesn't happen. So we do have one software called Vayo where like we get things done. So specific to that, we have manufacturing engineering team as well to add the value-added manufacturing services. So we have software like Altium, SolidWorks, specific to hardware, specific to mechanical. And again, as we stated, like any pre-compliance certifications, like, for example, if anything we need to sell it in Europe, we need [ CESM ] certification. Anything for medical, we need the UL or we need the FDA or something kind of. So we do have that capabilities where QMS team is available to help us for regulatory compliances, anything for quality engineering, like end-to-end solutions. If any of the part is going to get obsolete, we can help them to provide alternative for that. We have a component library of [ 700,000 ] plus components. And to what machineries that we have, they are state-of-the-art Japanese machinery latest available in the market. So smallest component like 0201, which is considered to be smallest as of now in today's world. Where to what next coming up a small part also we will be able to place it. So what new machines are coming up. So that level of capabilities we have. In terms of AOI, SPI to what Nirmal stated, all of the machines are 3D where like you can see in all the 6 directions. And again, they are latest available in the market. If we talk about sectors to what Mukesh stated, like we don't put all our eggs in one basket. So we have myriad of sectors that we serve. So first we want to talk about automotive. There are different kind of like boards that we do, completes a couple of systems because as of now, a couple of technologies are trending like, EV as of now is trending available in the market. So we eye on such kind of niche market segment, not only India, but across the globe, where telematics or onboard charges, specifically anything for BMS, whether it's automotive or telecom, any of the BMS management, like battery management system, we help them to do. Industrial remains our core competency again, where like any IoT 4.0, to what industry 4.0 people are talking about. So first device you see monitoring system. So customer came with the concept. We completely designed it. And as of now, it's in a production phase. So it is even helping customers to reduce their maintenance time and couple of added advantage on top of it. Gaming sector, as of now in India, there are very less players, and we are the one who are already doing into that digital cube, that are being sold to U.S. market. Slot machines, again, a couple of machines that are being used for casino or something. Pinball, like complete pinball machines like a couple of mechanical stuff that we do, and controller for remote control and all that. Again, that is somewhat a niche market segment that we are already in. As of now, people are talking about AI, robotics, ML. And we already have chimed into that sector. You already might have seen the press release. As of now, we already cracked one deal for specific to IoT device, $2 million. Again, that has been used to track the fleets of logistics department. Drone, as we again stated in like press release. So drone, we signed a couple of like agreements with one of the international player where we are down the line. As of now, we are focusing on their plastic parts and all. But down the line, we'll be -- we might encounter for PCB as well. So PCB has a couple of other players, we are already in, like a couple of players in the India market along with a couple of other markets as well. And to what medical and health care equipment, we do have ISO 13485 specific to that. So air quality monitoring device, couple of ventilator, critical equipment makers. We are already there. And power sector, yes, it remains like the relays power, power board. What is regulator relays. So all these -- so these are just the glimpse of what sectors that are divided into. And it's just a glimpse of that we don't put all our eggs in one basket. So in case of anything in global market, we can chime into the latest available technologies, and that is what we are into.

Thank you, Sneh. I think we have a lot of questions about this. So definitely, we're going to go revisit this. Maybe you want to take one more slide, and then I'm going to head over to Nirmal.

Sure. I think defense, we are trying to enter into that domain. So defense soon, guys, it's already on radar for us. So we'll be -- yes, if we talk about specific to AVR like robotics in terms of drone, we are there. But any other defense because as of now, the defense market is booming up in India to what Make in India, Made in India is there. So we are trying to add that. Health care, as we stated, we are eyeing on one more step ahead that as of now under Made in India, government has made CDSCO compulsory and mandatory. So we might undergo that as well in the near future because we are -- a couple of our players are exploring that direction. Consumer, as we stated, not specific to like consumer electronics. But again, something related to technology, where like AI or ML is affiliated. As of now, a lot of or most of the products people are eyeing at getting things in the automated way. So that is where AI and ML and IoTs in the future, and that is where Aimtron states into. Because to what we are in, we have the state-of-the-art machinery, state-of-the-art facilities and to what we focus is on quality or niche market segment. So that is what like the segments are all in.

Thank you, Sneh. Nirmal, if you can take this couple of slides here.

Yes. In terms of competitive strengths, our biggest one is that our product portfolio is continuously advancing. It's continuously expanding into not just each industry, but also that portfolio is expanding with applications across multiple different industries. So this diversifies our industry classification. And what that diversification does is it allows us to mitigate risks and mitigate vulnerabilities when certain verticals are experiencing challenges or economic downturns. Aside from this, we also have very complex product manufacturing expertise that a lot of our competitors at the entry level may not be able to meet with. At a comprehensive level, we also have strong in-house capabilities for both design and manufacturing, which gives us an understanding of how to develop in a way that makes a more successful manufacturing experience. We also have very strong long-term, well-established customer relationships, as well as a lot of product variety within those relationships, which means that as shipment volumes increase, it's an exponential increase. Our strong supply chain, our strong sourcing network spans multiple sources across Asia and the U.S.A. as well as Europe as well. And going through, we also have very strong quality assurance processes, a very strong testing processes, and a very experienced management, which is also highly motivated and young in thought process while wise in age.

Thank you, Nirmal. I think a lot of investor friends had questions. What is your differentiator? So that will help us to understand. I'm going to get one more slide. Maybe you can take this.

Absolutely. So every company within our industry, every service provider of our nature faces the same weaknesses of having dependency on key suppliers for critical components and having vulnerabilities due to market fluctuations in any sector that they are concentrated in. And so to mitigate those weaknesses, we have the strength of having very, very strong manufacturing capabilities as well as very, very diverse customer bases, which give us some shielding from the market fluctuations and provide us a safety net in that regard. And then the focus on research and development allows us to mitigate our dependency on critical components as now we can develop secondary options, tertiary options for anything we previously may not have found a solution for. Alongside of that, we pride ourselves on a very strong commitment to high-quality standards and certifications. In terms of threats, the ones that we face at the most right now include having an intense amount of competition from global and local electronics manufacturers as well as having supply chain disruptions and compliance with regulatory standards that are dynamic. But the opportunities that this evolves is because these supply chains are being disrupted across the industry, we also have an opportunity to emerge into those markets and take opportunities where other companies cannot. We could also integrate IoT, AI, and we have very strong automation technologies that we are already capitalizing on and in the process of capitalizing on further as well as strong opportunities in terms of government incentives for electronics manufacturing.

Thank you, Nirmal. Thank you all. I think American quality on Indian soil, that's our slogan, and that is the main strength we have. I'm going to go a couple of more slides, and then we can open for the question-and-answer. I'm not spending too much time on this. You've been reading every day. Obviously, the whole ESDM sector is going on and what is plus and minus, market growth, demands, investments and infrastructure. So you see the government initiatives, PLIs and all kind of schemes they have including the technological advancement. With this government also, we are getting a lot of support. And I think this is something we are knowing, so I'm not going to spend too much time on this one. But definitely, we can take it more on question-and-answer if needed. But in sort, if you look at that in 2026, government wants to get electronics portfolio about $300 billion. That's a huge portfolio. And there is so much opportunity and so much expansion required for EMS. Current EMS is not even capable to handle the workload we have. I think that's what I heard from one of the friend that railway has too much work. Right now, they could not find even enough suppliers. They are mentoring suppliers also. So that is the scenario right now in our industry inside. So I'm not taking too much of your time on this. But if you look at the CAGR data and all other data is published by the government. There's so many initiatives. We are for Make in India initiatives. We are taking benefit from Gujarat government also, subsidies, benefits and all these things. And we will be now just gearing up in Indian system now. We never thought this about 10 years ago or 5 years ago that soon we're going to go on the public. But last year, we decided and we moved and jumped on. So you'll see a lot of ways of you can see something. That's a question came out a lot of time why this, why that? But that is the reason also. We just prepare everything very quickly. On the way forward, I think we did discuss a lot. So I'm not going to go too much, but diversified industry's focus. So we're going to get that, Nirmal already catch up on there. So we -- our goal is to focus on various industries. Also geographical expansions, operational excellence, backward integration and expansion. We have a lot of thought process. It's too early to say everything right now, but we do have a -- maybe Sneh, you want to add or Nirmal, you want to jump on to this because there might be a lot of questions on this one. But you guys can be -- so we have -- I know this company is also in teenage, correct? 11, how many years? 13 years, 14 years? So we are in teenage. So we have a lot of young people on this one. So maybe Nirmal and Sneh, you can take it on this. Sneh, you take first?

No, certainly. I think immense opportunity lies into India to what as of now everyone is eyeing at. So not only specific to electronics or not only specific to EMS, but complete electronics as a system. So I think, no doubt there are a couple of companies, but we also are going to play a vital role and we are just trying to see on how can we contribute more on each and every segment from diversification to geographical expansion to backward integration and expansion as well. So it can be both backward as well as forward integration down the line.

Thank you. I think we would like to go more on question-and-answer. So I really appreciate everybody. I'm going to go more, I don't know. Your excitement is right here because you want to see the financial numbers. And Nikita, maybe Nikita [Foreign Language]

Hello, everyone. Very good evening. Today, we are here to give a glance for the financial updates of the company for financial year '24. The revenue for the financial year '24 stood at INR 929.80 million, increased by 29.09% (sic) [ 30% ] year-on-year. The EBITDA for the financial year '24 stood at INR 236.30 million, increased by 42.60% (sic) [ 42.50% ] year-on-year. The EBITDA margin for the financial year '24 stood at 25.40%, increased by 226 bps year-on-year. The PAT for the financial year '24 stood at INR 136 million, increased by 57.50% year-on-year. PAT margin for the financial year '24 stood at 14.60%, increased by 257 bps year-on-year. The return ratios on equity was 26.30%. The return ratio on capital employed was 31.40%. Now looking at the segment-wise revenue industry, geography and service wise for the financial year '24. The total revenue for the financial year '24 stood at INR 929.80 million. Top 3 industry-wise sector, we have played major role in the industrial by 36%; in gaming by 20.90%; in automotive by 13.40%. Top 3 geographical, our higher sale geography wise in U.S.A. was by 44.80%, the second highest is India by 26.20%, and the third highest in U.K. by 11.80%. The top 3 service sector major services provided were in PCBA by 70.60% of total revenue, in Box Build, by 24%, and in end-to-end solutions by 5.4%. Now looking at the income statement. EBITDA margin in financial year '23 was 23.15%, an increase in financial year '24 by 25.4%. PAT margin in financial year '23 was 12.1% and increased in financial year '24 to 14.60%. EPS in financial year '23 was INR 10.67 and in financial year '24 is INR 9.06. Now looking at the balance sheet. Shareholders' fund, in financial year '23, was INR 312.3 million, an increase to INR 570 million in financial year '24. There is no major change in the current liabilities. Current liabilities for financial year '23 was INR 433.40 million, decreased to INR 280.90 million in financial year '24. There is no major change in non-current assets. Current assets in financial year '23 was INR 640.80 million, increased in financial year '24 to INR 694.20 million. Now we can have for the moderator to show the next slides.

I think we are at the end of the presentation, Vinay ji.

Yes. We'll take up with Q&A, sir. You can end the presentation.

Correct. Correct. I will end the presentation, and we're going to go to Q&A. Yes, I'm going to stop share. Thank you.

We'll take the first question from the line of [ Agastya Dave ].

Sir, I have two broad questions. One is on the marketing side. So you have clearly shown your capabilities. But how do you -- I mean, first of all, what is the marketing setup of the company? And how do you approach your clients? How do you onboard them? What is the process? How do you win new accounts? And once a commitment is made from the customer side, how -- what is the gestation period before which you start production? And do you need to put in some kind of a capital expenditure before you start servicing a new account?

So good question, actually. Nirmal, you want to start?

Sure. So I'm going to start with the -- I'm going to start in reverse order for your questions. So the last question that you asked was what our period is or we call it a lead time between when an order is placed and when we can actually fulfill that order. And standard lead time depends on our material availability. And for most projects, that is within 8 to 10 weeks from order placement to order being delivered and fulfilled. For those types of orders are standard orders, we actually have no need for any additional capital expenditures. We already have a very strong equipment, very strong lines that are able to fulfill those orders. And there is no need to have additional lines being utilized in excess. And even as of now, even with our current growth, our management has been very careful to still have built-in capacity to be able to manage larger orders coming in. The question you asked previous to that is the marketing setup of the company. And so I have a small request. Could you please elaborate on what exactly do you mean by the marketing setup of the company in this sense?

So hypothetically speaking. Let's say, you think that you can service, you can make some speakers for [ Bosch ] or Philips or Sony or whatever. So you have to crack that account, right? So somebody has to go and make a pitch. Somebody has to do the entire pitch and then do the negotiation, present the plans, get their feedback, then probably they would like to visit your plant. There may be some additional certifications needed. There will be a fairly long process, right? So in your organization, who is heading this -- all these functions? Who is heading these functions plus what kind of team you have in place? How many people are there? And how do you -- I mean, what kind of investments do you need to make in your marketing setup?

So Nirmal, can Sneh take this because he is the one taking earlier.

I was just about to suggest that.

So, Agastya, I was late by 5 minutes, so was the reason I was at client's place. So to answer your question, as of now, I am looking after for sales and marketing. And for specific to lead generation and all to what we are exactly looking out for. We use like different, different social media navigator tools. Just an example I'm giving you as of now. Say LinkedIn sales navigator tool. So this kind of like media, social media platforms, there are some database expos, exhibitions. And there's several ways out once lead is generated. Leads are like initially, it's prospect. From prospect, it gets converted to lead. Once we receive the RFP and all. From lead, it gets converted to the opportunity to win it. And then if in case required face-to-face discussion, virtual meetings, whatever is required, we do have a team size of it for different, different regions in case if it's required. So -- but because as of now, what we do is we are into B2B market. So it's more of a virtual world post-COVID that it has started. So as of now, that is how it goes.

Thank you, Sneh. To add a little bit because this is something Agastya is not looking for. He is looking for more our in-depth plan. So we have about 10 people right now in India. Our goal is to have about 30 people to get engaged in marketing and sales. We're also planning to have a couple of other areas. After this money, we have some general purpose money. So we are planning to have a couple of offices somewhere in middle, maybe European countries or somewhere. And we'll have some -- we are participating in one of the Germany Expo, Munich coming out. And we are participating in our international expo exhibition. So we will be attracting those big name. Also, recently, we got registration and HAL, BHEL, ISRO and all those people. So we are now a public company because we are -- previously was NRI Director and promoters. But now we are a public company, so we can go on more government, defense, railway and all these areas, too. I hope I answered your question.

Right. That was useful. Sir, my second question was can we go back to the presentation. There was a particular slide, which gave the breakup of your revenues by geography, by industry and by product segments. So I had a question related to that Slide. If you guys can go back to that Slide.

Can we take on one-on-one because we have almost 45 minutes and we will not be able to answer other questions.

All right. So then I'll quickly ask the question. Sir, you have so many products and you have so many industries that you're catering to. Your scale is still about INR 100 crores, sir, INR 93 crores, right? So are all the offerings that you are today making all the products, are all of them breaking even? Or some of them have not reached this -- so on a variable cost basis, they must be making money. But is everything making money on a fixed cost level? And second, when you scale up, what do you need to add? Is it more capital intensive? Or is it more manpower intensive?

So I'm going to answer the second first. We do not have to worry about capital because our infrastructure is ready up to next 3 years. So with coming new lines. So capital, we are latest and greatest lines, latest and greatest facilities, and most welcome to walk through the facility. And the first question going back to here. See, Aimtron Electronics is just only says INR 91 crore or INR 94 crores number is correct. But it is born from Aimtron Corporation. And there's nothing to shy that, Aimtron Corporation is a mother company in the U.S. and that is originally started for Aimtron Electronics. So we are catering all those industries, and we are trying to encourage all the customers to go direct to Aimtron Electronics. And that is the reason you don't see. And also when you have a smaller unit, it's very hard to justify all the percentage and everything. But within a couple of years, you will see the way you are looking for the result.

Got it, sir. One follow-up. And then I'm done, sir. You said that you have enough capacity for 3 years. So what's the maximum revenue you can generate from this particular capacity?

Oh my God, that's a hard question. You look at that all my peers, like if you look at Vinyas, you look at Kaynes, Centum, everybody, they are going far, far, far. But our goal is to have -- we cannot commit to 100% growth. But right now, we committed to 30% to 40%, maximum 50% growth, that's what we are committing. Because, again, also, we are -- our culture is more as American culture. [Foreign Language]

We take the next question from [ VN ].