ASK Automotive Limited (ASKAUTOLTD.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to ASK Automotive Q2 FY '26 Earnings Conference Call hosted by Adfactors PR. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Snighter Albuquerque from Adfactors PR. Thank you, and over to you.

Thank you. A very good evening to everyone, and welcome to the Q2 and H1 FY '26 Earnings Call of ASK Automotive Limited. From the senior management, we have with us Mr. Kuldip Singh Rathee, Chairman and Managing Director; Mr. Aman Rathee, Joint Managing Director; Mr. Naresh Kumar, Chief Financial Officer; and Mr. Manoj Sharma, Chief General Manager, and Investor Relations. Before we begin the earnings call, I would like to mention that some of the statements made during today's call may be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to the future financials and operating performance of the company. Also, please bear with us if there's a call drop during the course of the conference call, we will ensure the call is reconnected at the earliest. I would now like to hand over the call to Mr. Kuldip Singh Rathee, Chairman and Managing Director for his opening remarks. Thank you, and over to you, sir.

Thank you, Mr. Snighter. Good evening, ladies and gentlemen. It is my great pleasure to welcome you all to our Q2 and H1 FY '26 Earnings Conference Call. I hope you have had the opportunity to review the detailed presentation submitted to the exchanges and available on our website. The Government of India's GST 2.0 reforms marks a pivotal milestone that is set to elevate the Indian automobile industry and energize the broader economy, given the sector's deep forward and backward linkages. Despite the revised GST rates being applicable for very few days of September, all automotive segments like passenger vehicles, two-wheelers and three-wheelers have recorded their best ever September sales. Now, let me begin by sharing a quick overview of the broader industry as reported by SIAM. The Indian automobile sector witnessed healthy momentum in H1 FY '26 with overall vehicle production across all segments registering a robust year-on-year growth of 5.8%. The two-wheeler segment matched the overall vehicle production growth at 5.8% on a year-on-year basis. We are optimistic to achieve higher growth trajectory in FY '26, supported by strong festive season momentum, stable macroeconomic conditions and GST 2.0 reforms that have improved overall affordability and consumer sentiment. The two-wheeler industry closed H1 FY '26 with a strong production volume of 12.8 billion units, up from 12.1 billion units in H1 FY '25. In Q2 alone, production touched 6.9 million units as compared to 6.3 million units in the same quarter last year. Looking ahead, we believe the industry stands to gain further from supportive macroeconomic policies, particularly GST 2.0 reforms, personal income tax rationalization announced in the Union Budget 2025/'26, combined with two successive rate cuts by the Reserve Bank of India. These measures are likely to enhance consumer purchasing power and improve access to vehicle financing, creating a conducive environment for sustained demand. The good monsoon will further ensure rising income in the agriculture sector and will be beneficial for the two-wheeler sector. Since, all our products were under the category of 28% GST, hence, the reduction of GST rate from 28% to 18% especially good for ASK, because it will help us to outgrow in the Indian aftermarket and gain more market share from gray market operators and duplicators. With this positive backdrop, we remain optimistic about the growth trajectory of the sector in the coming quarters. Before we move on to ASK's business performance, we would like to highlight that our 9.9 megawatt solar plant at Sirsa, Haryana has started supplies from April '25. We are excited with the results in terms of sustainable operational economies. Happy to announce that the company is installing one more captive solar power plant of 11.55 megawatts at Rajasthan, which is expected to be operational by Q1 FY '27. This reflects ASK's special focus on green energy. Moving on to business updates. I'm delighted to share with you that we had a strong finish to the second quarter and half year in both revenue and profitability. This marks our eighth consecutive quarter of robust performance since the company's listing. During Q2 FY '26 we delivered revenue growth of 16.6%, excluding Wheel Assembly business. Wheel Assembly strategic reduction was 53.6% and thus, consolidated revenue has grown by 8.5% on a year-on-year basis. We achieved a growth of 19.5% in EBITDA and 18.6% in PAT on year-on-year basis. This is the highest ever absolute revenue, EBITDA and PAT earned by us in any quarter in the past. We continue to outperform the two-wheeler industry in terms of vehicle production growth during Q2 FY '26. Further, we have achieved an EBITDA margin of 13.4% in Q2 FY '26, representing an improvement of 124 basis points over Q2 FY '25. But for the significant increase in aluminum alloy prices during the quarter, our EBITDA margin would have been 13.7%. Our EBITDA margin is affected by aluminum alloy prices. Upward increase in prices of aluminum affects our EBITDA percentage, because of the denominator effect. However, our absolute EBITDA number remains the same. With this strong performance on profitability, our earnings per share in Q2 FY '26 has increased to INR 4.05 per share against INR 3.41 per share in the same period last year. Improvement in margins is mainly driven by better economies of scale due to higher volumes, benefit from increasing capacity utilization at Karoli and new Bangalore facility and strategic reduction in low value-added Wheel Assembly business. As a result, in first half of FY '26, we delivered revenue growth of 14%, excluding Wheel Assembly business. Because of Wheel Assembly strategic reduction by 53.5%, the consolidated revenue has grown by 6.1% on a year-on-year basis. Achieved growth of 19.4% in EBITDA and 17.5% in PAT on year-on-year basis. We have delivered EBITDA margin of 13.6%, an improvement of 151 basis points on a year-on-year basis. With strong performance on profitability, our earnings per share in H1 FY '26 has increased to INR 7.4 per share against INR 6.3 per share in the same period last year. Our all three product segments performed well in Q2 and H1 FY '25 in terms of revenue growth. We have sustained our market leadership position in the Advanced Braking System. Our Advanced Braking System revenue grew by 10% in Q2 and 7% in H1 FY '26 on year-on-year basis. The Aluminum Light Weighting Precision Solutions revenue grew by 22% in Q2 and 19% in H1 FY '26 on year-on-year basis. The Safety Control Cables revenue also recorded growth of 2% in Q2 and 4% in H1 FY '26 on a year-on-year basis. In the unstable global geopolitical environment due to tariffs and other issues of rare earths and magnets, our revenue from exports were at INR 63 crores against INR 74 crores last year in the same period. However, we do feel that we'll cross the last year's number. Thank you very much for your patient hearing. With this, we leave the floor open for question and answers.

[Operator Instructions] The first question is from the line of Rishi Kapadia from CLSA India Private Limited.

First of all, congratulations to the management for reporting such a strong number. Sir, first of all, congratulations that you delivered a strong 19% growth in the EBITDA front. And you did call out that there was a 30 bps impact due to the aluminum price inflation. So, is it fair to assume that the revenue was inflated due to this by around 2.5% to 3%? That's one. And second, for this quarter as well for 3Q, we are seeing some aluminum cost inflation. So, anything to highlight what would be the effect on the revenue and the margin for the 3Q? That's my first question.

Yes. Thank you, Rishi. And you have very rightly pointed out that if the EBITDA margin percentage gets affected by 30 basis points, even the revenue also gets -- goes up by about 2.5% to 3%. So, that's a very correct observation of yours because of the aluminum price increase. And what was the second part of the question, sorry?

Sir, for this quarter as well, we are seeing some aluminum cost inflation. So, anything to highlight what would be the...

Aluminum prices are going up only. They have not stopped. So, we'll let you know quarter-on-quarter what's the trend remains, I think. But this is, because we are getting the aluminum prices, whatever is the raw material cost plus the value addition. So, this -- in percentages, it will keep on changing, but the absolute numbers will remain the same.

Okay. And my second question is towards Safety Cable segment, where it was one of our growth segment. But for this quarter, we have just grown by 2% and not on a lower base. So anything to highlight? Was there anything significant happened in the segment?

No. Nothing significant happened, except that, that is -- the approvals in the companies is on a few certain models. And if the model ratios change, then it gets affected and it is a result of that basically.

Sir, for going forward, what growth assumption do you think that this segment would kind of...

That will depend on what more demand comes for which vehicle now after this GST reduction. So, I think it will depend more on that. But all efforts are in the -- there should be a reasonable growth. However, our overall growth in the revenues will be totally as per our guidelines. We have, right from beginning, we have given the guideline of mid-teens, mid-teens and plus this aluminum price impact that we still hold.

Sir, my third question is on exports. We have seen a very strong growth in the export front, despite adverse macroeconomical conditions. So, any highlight on how the exports volume would look like? What's your outlook for FY '26 and '27 on export front?

No, no. Export front, we were very bullish. We were trying hard on that. But suddenly this geopolitical situations changed. And that has really affected this particular year. Otherwise, we were very bullish even on this financial year. I hope that things settle down. And as per the yesterday's news, if this rare earth and magnet issue gets resolved, I think in the export, quarter 4 should be again normal. And that's why we have said that we still believe that we'll cross the last -- in spite of all the odds against us, we'll still cross the last year's number.

The next question is from the line of Yash Agarwal from Nirmal Bang.

Good evening. First of all, congratulation for the great set of results. My first question is, can you please give breakup of INR 600 crores of CapEx done in last 2 years and INR 250 crores of CapEx done in first half and also the outlook for remaining FY '26 and next year?

Good afternoon, it's Naresh Sharma. Yes. So, our CapEx is mainly -- in the last 2 years is mainly towards the plant and machinery and some part is in the building. And this year, we have a plan of around INR 450 crores of CapEx in the complete total year. Out of that INR 370-odd crore already is leased and the rest will be in the second half.

And sir, for the next year?

Next year will depend. Because now after doing this CapEx, we are completely sorted for the growth of the rest financial year. But as per the optimism, whatever the way the situation develops, we'll be investing. But normally, we do invest about around INR 400 crores every year, because -- on an optimistic note.

Okay, sir. And when do you expect the additional capacities to ramp up fully like, based on my assumption, it's close to 65% right now.

Yes, yes. It is 60% right now. In next financial year, we expect this to go to something like 75%, 80%.

Okay. And like what will be your prediction for next 2 years, when they can reach close to 80%, 85% like in next year?

Actually, our capacities also keep adding. So, percentages...

We keep on adding. So that we can't mention in the terms of percentages. But as we have the ambition to grow at mid-teens. So accordingly, we have to invest, if we have to grow. Because we have been outgrowing the industry always, so far. And that is the intention that we should outgrow the industry. So for that, we need to do the CapEx.

Okay. And my third question is, given the fact that two-wheeler aluminum casting is highly competitive, what growth do you expect here beyond FY '27? And what are your internal target for aluminum casting in other segments that is private vehicle and exports?

So we -- this is our sunrise industry, not only ours, for everyone in the segment. And we see a great potential going ahead in this particular segment.

Okay. So, like do you have any tentative targets, anything like how much...

Our tentative target I have told you. Overall, we have to grow at mid-teens, so that's our internal target.

Okay. And last question, what is the update on the alloy wheel business? How much CapEx do we plan here? And what are the timelines?

Alloy wheel business, already we have done the CapEx, most of it. Because in the -- we have done the CapEx and the machines will get delivered by February this financial year in the Q4, and we'll take out the product with the Japanese collaboration in the month -- by around April or May. And after testing, I think the supply should start to the Japanese OEM. Whereas the other one with the Taiwan collaboration that is under testing with one of the OEMs. This being a safety item, I think they are taking a little more time. So, but we also don't mind -- all our parts are safety parts and they do -- the customers do take time to test it. So, as and when it comes, even that should start.

The next question is from the line of Raghunandhan from Nuvama Research.

Congratulations on strong profitability and festive greetings. Sir, my first question is on Bangalore and Karoli plants. For Bangalore plant, utilization was expected to reach 60% in Q2. Has this been achieved? And is it on track to be 75% by Q4? Also, how much was the utilization at Karoli? I think last quarter, it was 65%.

As we mentioned that it is -- in Q2, it reached 60% in the Bangalore new facility, which we opened on 14th January. And in Q4, we are very confident that it will reach 70% to 75% capacity utilization. As far as the Karoli plant is concerned, since there is more and more investment going on there. So, I think we cannot go by the percentages that -- but yes, we'll probably remain between 60% to 70% -- anywhere between 60% to 70% capacity utilization. Because more and more investment is being done. I think, and we may be at 60%, counting that investment.

Got it, sir. And would you be tracking the margins at these plants, sir? How would they compare with the blended level? And you can indicate by when would you think that they will match the blended level of margin?

They have already matched the blended level.

Good to hear that, sir. My second question was on alloy wheels business. You indicated that April onwards, the product -- production could start off and supplies to Japanese OEMs will pan out. So, how do you see the business shaping up in terms of -- what could be the possible revenue in FY '27 or '28? Or based on the CapEx, what can be the peak revenue potential here?

No, Raghu, actually, what I had said that, there are two collaborations we are having. Again, I'll specify which I explained in the last few minutes back. And in the first collaboration with [ Evan, ] the product, we have already taken out last September. It's under testing for more than a year -- around 1 year. But as I said, all our parts are safety items. So, we know it takes a lot of time. And we are never in a hurry. The customer takes -- has to be fully sure to grant clearance for that. So, once the clearance comes, we will start supplies from that collaboration. The second collaboration is from Japan, which is for a particular Japanese customer. This, as I said, the machines will come in Q4 completely. They'll be installed in Q4. And in the quarter 1, we'll be taking out the samples and giving to their Japanese customer. And again, whatever time they take on the testing and approvals after that the supplies will start. So, let the approvals come. The moment the approvals come, I think we'll be able to give you the guidelines. Otherwise, before that, to give the financial guidelines will be a little premature.

Understood, sir. Just a clarification here, sir. Based on the CapEx you have incurred for alloy wheel, what would be the capacity in terms of revenue potential here? Could it be like INR 200 crores, INR 300 crores?

Yes, yes. Already, that CapEx that we have done will ensure the revenues of INR 250 crores. Suppose the approvals come -- whenever the approvals come, now I'll not put a timeline to it, but whenever the approval comes, we'll let you know. And I think we are prepared -- geared up to supply up to INR 250 crores.

On the...

Sorry to interrupt. Sorry to interrupt, Raghunandhan. This is operator. Due to time constraint, we need to move to next question as there are many people in the queue. The next question is from the line of Nitin from JM Financial.

In light of increasing aluminum alloy prices, do we maintain a margin target of around 14% in FY '26?

No. Nitin, I think, we are doing pretty well. And we do hope to maintain the present margins.

Okay. Okay. So, there will be slight miss on the margin front in terms of -- in light of this rise in the aluminum prices. Is that correct?

Why do you say guidance -- was what? What was the guidance?

14%, if I remember.

It was 13.7% guidance. And we have already explained that 30 basis points in percentages only will get affected. Nothing else. Absolute EBITDA numbers remain the same. We are not off the mark in that guidance.

Okay. Got it. Got it. And second is related to the mandatory ABS antilock braking system. So, is there any further updates from the government or from your customer that you see that it is going to be mandated from 1st of January 2026?

Not to our knowledge. And I think this question was asked to the one of the reputed OEMs also, even they could not answer to that. There's a lot of uncertainty. Let the notification come, then only we can clarify.

The next question is from the line of Ronak Mehta from ICICI Securities.

Congratulations on good set of numbers. My first question is just a clarification. I think, one statement was -- I think you mentioned that you have already done CapEx for the first tie-up -- one of the tie-ups of the Alloy Wheel business. And I believe that CapEx would be about INR 125 crores, right? Because typically, asset turns are about 2x and which is how you came to that number of INR 250 crores revenue potential. Is that understanding correct? Or?

See, Ronak, the good part in the process that we are taking of producing alloy wheels with high-pressure die casting is that all the machinery and the investment is very, very fungible. It can be used on any other product. And since that plant where we had invested INR 125 crores, that's already will be reaching 70%, 75% capacity utilization. So that, that is already fully used.

Understood, sir. Sir, I just wanted to check for the Karoli plant, how much investments have we done so far? And yes, so that is the first question.

See this year, we'll be doing about around INR 450 crores of investment, total. And so in that, the Karoli plant will be doing about INR 250 crores or so. INR 250 crores. And rest will be some maintenance expenses and INR 100 crores will be further doing in the Bangalore plant.

Okay. So INR 250 crores this year for Karoli and till last year, we have already invested about INR 450 crores. So, about INR 700 crores for that?

Last year, March, we had invested INR 490 crores.

INR 490 crores. Okay. Fair enough. My second question is on the new products side. So, any new products under development that you want to highlight, when are you likely to come up with some new products? Because new product addition can obviously drive much faster growth for you, given how the growth has been for you in the last few years. You have substantially outperformed the underlying industry backed by the new products and new customer additions. So any update, anything that you're working on, you want to highlight on the new product side?

No. We are continuously working on some new products. And I think, as soon as the breakthrough comes, we'll keep on briefing everyone on that account. But that effort continuously goes on.

Okay. Like sir, should we expect the new product to come this year, next year, any timeline?

It will come next financial year. Because this year, the business plan we are through what we have projected and given, I think we will be achieving it confidently on that.

[Operator Instructions] The next question is from the line of Naveen Kumar Dubey from Narnolia Financial Services.

Yes. Congratulations on a strong set of performance. My question is related to the two-wheeler industry itself. So, one more thing which is coming from 1st January, I think that is the pay commission is getting implemented. So, what kind of additional benefit for two-wheeler industry we can expect?

Well, this quarter 4, we are very, very optimistic because as you rightly said, all the good developments are taking place already. And the whole industry is quite bullish this year. So, we expect that the growth, which has been 5.8% so far that we are expecting around -- overall in the years, maybe it touches 7%, maybe.

Yes, because TVS was guiding, I think, around 8% in the second half.

As you see that quarter 1 was 0.7% only. So, quarter 2 has improved substantially, and I think there is a big boost to the two-wheeler industry.

Okay. So, will this growth be continue for maybe next 2, 3 years, considering the kind of tailwind that industry has, going to have for at least next 2, 3 years?

Well, I can't explain that much. But yes, next year -- this year and next year, it's likely to continue.

Okay. Another question is on the export front. That is more of a generalized question. Sir, how is the export market situation right now? Is it improving? Or is it the similar as it was a few months back?

No, it is almost similar to what it was because it's not in good shape. But yes, yesterday's news that China is releasing all the rare earths and the magnet situation, that has given a boost in our minds that next few months or next 1 year, I think there is a truth for 1 year between U.S. and China. So next 1 year, the supply should be normal. And if the supplies are normal, again, hopefully, it should pick up.

Another question, sir, is on -- we have seen some reduction in cash flow generation from operations in the first half compared to the last year. So, was there anything different from last year? Or?

You are talking about the stand-alone or consolidated basis?

Yes. Consolidated basis.

Yes. This is mainly due to two, three things. One is the inventory increase, because this time, festival season, we were expecting very good festival season. And GST 2.0 impact, we invented some inventory. So, working capital impacted as well.

Actually, the implementation of the new reduction in GST came from 23rd of September. So, there were very few days in Q2. And all the festivals right from Diwali -- Dusshera to Diwali, which is the pain sale period that was in October. So, there was a transition. So, we built up the inventory.

Okay. And last question is, sir, how is our content value is increasing? Do we have any kind of data, this last 2, 3 years, how has that moved?

So we -- our content value remains very strong. Whatever it was, it's carrying on. And as we said earlier, though EV is not performing much, but otherwise, in EV, it is much more than that. About 40%, 50% more.

[Operator Instructions] The next question is from the line of Vijay Pandey from Nuvama Wealth Management.

Congratulations for an excellent quarter. Sir, a couple of questions. Just wanted to check in terms of aftermarket, this includes the ABS sales or like the aftermarket sales, it includes all three segments, our ABS, ALPS and safety control? Or is it only one of those segments?

Aftermarket, it's only two segments. So, that's the brakes and cables, not the aluminum.

Okay. Okay. And the passenger vessel will be entirely ALPS.

Yes. Specifically, ALPS. Yes.

Okay. Secondly, sir, I wanted to check about the JV, the German JV, which we discussed in the last quarter conference call. Any idea when can we start seeing the revenue potential? Like what will be the revenue potential? And what can be the profit potential from that?

Well, the JV potential, we'll start working on that shortly next month. And we hope to come into production early in H2 of next financial year.

Okay. H2 of FY '27?

Yes, please. Yes, please. It will take like 9 months or so.

Okay. Sir, what can be the top line in that case like for the JV business? Top line or bottom line?

Sir, let it come first. I think, we'll let you know. There'll be many more calls before that.

The next question is from the line of Ronak Mehta from ICICI Securities.

Sir, just one last question from my side. Looking at your growth in the Aluminum segment, is it fair to assume that you are gaining market share in the ICE aluminum casting segment as well?

Well, we are doing well on all fronts, ICE as well as EVs, yes, and all. Because of some new items, some PV. Yes. And some aluminum segment, the growth has come from the PV also. Some.

Okay. Sir, so can you highlight some of the new programs that can drive this kind of a growth rate even for next year?

So, we are very confident that this will continue next year also. I think the visibility is there.

The next question is from the line of Sagar Shetty from BP Wealth.

And congrats on the good set of numbers. So actually, I would just like to follow up on the new plant. So, should we go with the previous assumption that the asset turnover expectation will continue to be around 1.75? Or is there any update on the ratio?

No. It will continue like that. It will certainly continue like that.

Okay. And so, the revenue potential will also continue to be the same for both the plants?

Whatever we are very cautious and you can see the financial prudence of the company, and we are very, very cautious on investments. And we especially focus on the bottom line. So, this will be definitely remain like that. And not only that, we would like to maintain our ROCEs also, which is one of the best in the industry. We are very focused on that also.

Okay. And sir, just on the sunroof cable JV. So, is the setup for the project on schedule like the INR 10 crore investment which you planned earlier? So is it in line with your timeline or is there any changes on that? Like we were expecting the revenues to be -- expected by '27.

I just told you that the plant should be commissioned by H1, finish end of H1 next financial year. H2, '27.

I didn't get you. I'm so sorry.

I think the voice from your side is not clear. But what I said is that, just now I told you that the sunroof joint venture will be putting into production in 9 months and in H2 of next financial year, some breakthroughs should come in revenue.

[Operator Instructions] The next question is from the line of Maulik Gandhi from Val-Q Investment Advisory Private Limited.

Yes. So, currently -- my first question is that, currently on the Aluminum Light Weighting Precision Solutions for the four-wheeler, you are currently doing for only the ECU body. So, are we planning to add more products in the four-wheeler space, so that we could explore into some other areas in four-wheeler for aluminum light weighting?

Yes. You will see the numbers have improved and the supplies to the passenger cars. And we have added some more products.

Also, what would be your content per vehicle in the four-wheeler?

It is not significant at the moment.

Okay. And then, let's say, by 2 years, 3 years time, do we expect this business to be, let's say, around 10% to 12% of our total turnover?

We are trying hard to improve on all fronts. And as I said, that, our main aim is to focus on our mid-teens growth. That is more important.

As there are no further questions from the participants, I now hand the conference over to Mr. Kuldip Singh Rathee from ASK Automotive Limited for closing comments. Thank you, and over to you.

Yes. Thank you very much, everyone, and thank you for your patient listening. And well, I hope that I could clarify your queries quite transparently. In fact, I would also like to say that, I speak -- or I'm an optimist, and I always remain optimist. And while the numbers that we give you are our aspirational numbers. And -- but let me tell you, we work very hard to achieve those numbers. And that's what we have been doing so far. Thank you very much, and the company will hopefully keep on performing in similar manner in the coming future value and create value for our stakeholders. That is the intention. Thank you very much.

Thank you. On behalf of Adfactors PR, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.