ASK Automotive Limited (ASKAUTOLTD.BO) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to ASK Automotive Q3 and 9 Months FY '26 Post Results Earnings Call hosted by Adfactors PR. [Operator instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Rushabh Shah from Adfactors. Thank you, and over to you, sir.

Good evening to everyone, and welcome to Q3 and 9 Months FY '26 earnings call of ASK Automotive Limited. From the management, we have with us Mr. Kuldip Singh Rathee, Chairman and Managing Director; Mr. Prashant Rathee, Joint Managing Director; Mr. Aman Rathee, Joint Managing Director; Mr. Naresh Kumar, Chief Financial Officer; and Mr. Manoj Sharma, Chief General Manager, Investor Relations. Before we begin the call, I would like to mention that some of the statements made during the 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. Please bear with us if there are any call drops during the course of the conference call, we would like to 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. Rushabh. Good evening, ladies and gentlemen. It's my great pleasure to welcome you all to our Q3 and 9 months 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 reform 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. 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 9 months FY '26 with overall vehicle production across all segments registering a robust year-on-year growth of 9.3%. The 2-wheeler segment matched the overall vehicle production growth at 8.8% on year-on-year basis. We are optimistic that the growth momentum will remain in the coming quarters as well, supported by stable macroeconomic conditions and GST 2.0 reforms that have improved overall affordability and consumer sentiment. The 2-wheeler industry closed 9-month FY '26 with a strong production volume of 19.6 million units, up from 18 million units in 9 months FY '25. In Q3 alone, production touched 6.8 million units as compared to 5.9 million in the same quarter last year. Looking ahead, we believe that the industry will continue to gain from the far-reaching macroeconomic policy reforms undertaken by the government, particularly GST 2.0 reforms, personal income tax rationalization announced in the Union Budget 2025-'26, successive rate cuts and liquidity enhancement measures by the Reserve Bank of India. These have positively impacted consumer purchasing power and improved access to the vehicle financing, created a conducive environment for the sustained demand. Rising rural income will also be beneficial for the 2-wheeler sector. Since all our products were under the category of 28% GST, hence, the reduction of GST rate from 28% to 18% is helping 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 company is installing one more captive solar power plant of 11.55 megawatt 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 am delighted to share with you that we had a strong finish to the third quarter and 9 months of the year in both revenue and profitability. This marks our ninth consecutive quarter of robust performance since the company's listing. During Q3 FY '26, we delivered revenue growth of 28%, excluding wheel assembly business. The wheel assembly strategic reduction was 51.5% and thus, our consolidated published revenue has grown by 18.5% on year-on-year basis. We achieved growth of 26.8% in EBITDA and 21.3% 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 2-wheeler industry in terms of vehicle production growth during Q3 FY '26. Further, we have achieved the EBITDA margin of 13.4% in Q3 FY '26, representing an improvement of 88 basis points over Q3 FY '25. Our EBITDA margin is affected by aluminum alloy prices. Upward increase in prices of aluminum affects our EBITDA percentage because of denominator effect. However, our absolute EBITDA number remains the same. With this strong performance on profitability, our earnings per share in Q3 FY '26 has increased to INR 4.05 per share against INR 3.34 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 9 months of FY '26, we delivered revenue growth of 18.6%, excluding wheel assembly business. Because of wheel assembly strategic reduction by 52.8%, the consolidated revenue which is published has grown by 10.2% on year-on-year basis, achieved growth of 21.9% in EBITDA and 18.8% in PAT on year-on-year basis. We have delivered EBITDA margin of 13.5%, an improvement of 130 basis points on year-on-year basis. With strong performance on profitability, our earnings per share in 9 months FY '26 has increased to INR 11.45 per share against INR 9.64 per share in the same period last year. Our all 3 product segments performed well in Q3 and 9 months FY '26 in terms of revenue growth. We have sustained our market leadership position in the advanced braking system. Our advanced braking system revenue grew by 22% in Q3 and 12% in 9 months FY '26 on a year-on-year basis. The Aluminum Lightweighting Precision Solutions revenue grew by 36% in Q3 and 24% in 9 months FY '23 on a year-on-year basis. The safety control cable revenue also recorded growth of 22% in Q3 and 10% in 9 months FY '26 on a year-on-year basis. In the unstable global geopolitical environment due to tariff and other issues, our revenue from exports were at INR 100 crores against INR 108 crores last year in the same period. However, based on Q3 FY '26 performance, we do feel that we'll touch the last year's number. Thank you very much for your patient hearing. With this, we leave the floor open for question and answer.

[Operator instructions]. First question comes from the line of Raghunandhan N.L. from Nuvama Research.

Congratulations to you and the entire team for the strong numbers. My first question was on the CapEx side. The new CapEx of INR 35 crores and increasing the capacity to INR 32 crore brake shoes and pads. So how much would now the total CapEx be for FY '26 and also your thoughts on FY '27 CapEx? And even for FY '26, if you can also provide a breakup of CapEx, that will be very useful.

See, we'll close the FY '26 CapEx. We had planned INR 450 crores initially in the FY '26. However, we try to anonymize wherever it was possible. But then another CapEx of INR 40 crores we did for -- to set up the solar power plant, which was not scheduled initially. And with this extra CapEx, but still we'll close the CapEx at INR 500 crores.

Noted, sir. And how do you see it for FY '27?

FY '27 CapEx will be less. We intend to be within limits of INR 400 crores only.

Got it, sir. And on brake pads, approximately, what would be your market share?

See, the brake pads overall market is less than that. So our market share should be around -- between 10% to 12% or something.

Got it, sir. And congratulations on the performance on exports in this quarter. You had earlier spoken about the Ford order. Would that be commencing by end of FY '26? And how do you see that Ford order commencing and ramping up over FY '27 and '28? And also because of this order, would you expect FY '26 exports to be flat?

See, FY '26 exports, as I mentioned, will be flat. However, the exports to Ford have already started. The containers are going, but because of the great uncertainties created by the tariff issues, not only by U.S., but also by Mexico, where some parts were going and they have also imposed [ higher ] -- 50% duties. So -- but still, we are very hopeful that since our product is highly technical, we feel there will be some smooth supplies in the FY '27.

Got it, sir. Just the last question. Can you share how was the utilization at Bangalore and Karoli plant this quarter?

Yes, in this quarter, we have reached between 75% to 80% capacity utilization in the Bangalore plant. And now it's almost fully operational Bangalore plant. And the capacity utilization in Rajasthan plant remains at 65% only because in that we are waiting for some new items to be started, which are likely to start in the H2.

Our next question comes from the line of Naveen Kumar Dubey from Narnolia Financial Services Limited.

Congratulations for the strong set of numbers. I have 2 questions. First question is related to the margin. We -- our alloy wheel business is like 50% of the revenue currently. And aluminum prices have gone up, but we don't see much of impact on the margins. Have we taken any price increases in that?

No, Mr. Naveen, we have not taken any price increase so far. And the margins that you see is already down by at least 30 to 40 basis points because of the aluminum price increase. The revenue has gone up by that much and the EBITDA margin has come down by 30 basis points. So what you see the EBITDA margin in this quarter of 13.4% would have been 13.7% or 13.8% had the aluminum prices have not skyrocketed.

Okay. And the second question is on the same alloy wheel business. We have done that Japanese collaboration. And how is that progressing, sir?

That's progressing very well. We are going to take out the product in our premises, the first product in February -- by before February end. There'll be testing for a few months, and we hope to start the supplies in the start of H2.

[Operator instructions]. Our next question comes from the line of Vijay Pandey from Nuvama Wealth Management.

Sir, 2 questions. One was on the commodity prices sir. How are we able to -- like how are we tackling this increased commodity inflation, especially on the aluminum side? Do we have any hedge or like is it a pass-through? How should we look into that?

The aluminum prices are pass-through month-on-month. So we are not very much affected on that account. So that's what we said that the absolute EBITDA numbers remaining the same, only the percentage of the EBITDA has gone down by 30 basis points.

Okay. Secondly, sir, our new plant which we are setting up, this will be again solar, so -- will be powered by solar. So is there any extra incremental CapEx because of the solar situation because the solar panels -- the cost of solar panel has gone up? Like can you confirm the incremental unit economics there?

No, no, we are not incurring any extra -- there's no impact because the project is getting almost complete. All the supplies had already come before the price increase. So this new solar plant will be set up within the stipulated budget.

Okay. And sir, how is -- is it possible if you can give us an outlook for the remainder of fourth quarter and going into FY '27, a slight breakup for the 2-wheelers, especially [indiscernible] and [ other things ], that will be pretty helpful.

So as regards to the coming quarter is there, we have very strong projections from the OEMs. And even the independent aftermarket is looking very, very good because of the GST reduction from 28% to 18% in our line. So we are very bullish even on this Q4. And as regards the next year, we are very bullish on that because we feel that this 2-wheeler story will continue because it has started continuing after a gap of many years. So even the next year seems to be very good.

Our next question comes from the line of Deep Shah from YES Securities and Institutional Equities.

Sir, a few questions. Sir, first to begin with on the alloy wheels itself. While you have alluded some timelines to our Kyushu Japanese JV. If you can throw some light on the LIOHO, the Taiwan JV that we were working for? So any progress on that front? That would be my first question.

Yes, Taiwan thing is going on well. It's under testing. There were a few amendments to be done. We have already done those amendments. But I have explained it in every call that this being a safety item, we cannot do -- any hurried call we cannot take. So let the customer take the call. But we are very confident all the results will definitely come in the Taiwan collaboration also, positive results will come.

Okay. And sir, the second question is about the Sunroof Cable JV that we did and then some sort of supply was expected from 1H FY '27. So where are we on that journey? Is it on track? Or I mean, is there any initial, let's say [ soft ] commitments by the OEMs, if you can throw some light there?

We are very much on track on that. Already the machines have come, the setup [ and ] is there. And I think all our samples, et cetera, production will come out in the Q2 of FY '27 and the supply should start in the H2.

And sir by roughly, what would be the addressable revenue side for us, because [indiscernible]...

Revenue side is not too big. Addressable revenue side is about INR 100 crores. That's all. But see, I told in our last call that we don't do many things just for the sake of money. We take pride in saying that this is Atmanirbhar Bharat project, and we'll be the first one to digitalize it in the country.

Surely. And sir, last question is about the AISIN JV. So there also, we had committed about some [ abandonment ] of some 40, 50-odd dealers for aftermarket penetration. So where are we on that aspect?

That is ramping up now slowly and gradually. And maybe in the first quarter of next year we'll breakeven in that.

[Operator Instructions]. Next question comes from the line of Yash Agarwal from Nirmal Bang.

Congratulations for the great set of results. I just wanted to know your view on update -- any update on the draft ABS regulation, which was meant to be implemented by the 1st Jan? So, you have any update on that?

No, there is no update from the government. I think it is only -- it was a draft, which is now hanging because the request of the OEMs.

And also in the quarter 3, like we have seen that the 2-wheeler ICE segment growth outpaced the 2-wheeler EV segment. So mainly maybe because of the GST benefit, the ICE segment is doing better in the 2-wheeler side. So, do we expect this trend to continue going forward?

You are right because now the gap is very less because of the GST reduction. And that way, I think [ our ] ICE sector is rather in a stronger position.

And sir, what are your expectations for the Q4 2-wheeler production growth estimates? Like have we revised it higher as compared to the last [ time ]?

We know our projections. We always say we'll grow in mid-teens, and we'll be growing in mid-teens.

Our next question comes from the line of [ Harshit ] from [ Vi Squared ].

I just wanted to understand your guidance about your debt levels and what are your plans with that?

Debt levels, our debt-equity never increases 0.5. And we are much -- will remain below that in spite of the extra expenditures on CapEx that will be increasing this financial year. And it's always 1 year of EBITDA. Normally, it's close to that.

I just also wanted to understand what would be your ideal capacity utilization across your various plants on a blended level?

See, we are -- see the economies of scale come and we are overall 80% capacity utilization. We love to do that. But however, we put up the next plant much before because we are suppliers to all our prestigious customers and direct online and just-in-time suppliers. So, we keep always some extra capacity.

Our next question comes from the line of Sahil Sanghvi from Monarch Networth Capital.

Congratulations for very good numbers. Sir, just wanted to understand the growth in the ABS segment and the ALP segment that we've reported? So ideally, in the braking segment, we usually have something -- some growth around the 2-wheeler industry, but this time, it's much, much higher. So, if you could help us with the reason? And also, the Aluminum segment has grown a little higher than our run rate for the last 2, 3 quarters. So just the reasons for that? And do you expect that these growth rates will sustain?

See, there has been an impact on the Indian aftermarket. As I have mentioned many times that the reduction of GST, we were unfortunate to be on the 28% bracket. Now that it has come down to 18%. So, a lot of gray market -- we are giving a tough fight to the gray market operators which are prevalent in the country. So, I think we are grabbing more and more share from them, so that there is a very huge growth in the Indian aftermarket. That's the main reason. Plus our ICE OEM players, their duty was also reduced from 28% to 18%. So, their numbers have also increased tremendously. And in the Q3, even they grew by 15%.

So similar reasons apply for the Aluminum segment?

Aluminum segment, yes, similar reasons or even otherwise, there, so the work can come from anywhere. That's a very flexible and great opportunity. That is why we call it the Sunrise industry.

Our next question comes from the line of Sagar Shetty from BP Equity.

So, congrats on the good set of numbers. So, I just wanted to get a picture on how -- like after the GST rate cuts, so how is the sentiment going on with the OEMs? Are we seeing any particular better demand from 2-wheelers or EVs or anything like that? If you could just give some color on it?

See, after the reduction in GST, 2-wheeler demand is really picking up, both at the OEM level and the independent aftermarket level. And it has been a real big boost to the 2-wheeler sector.

Okay. And sir, so do we expect some like -- if not in Q4, but FY '27 onwards, do we expect some revision in our growth guidance like from mid-teen digits to somewhere around high-teen digits or anything like that? Or do we expect some...?

We always expect mid-teens, and we are happy to achieve that. Because see, we are outgrowing the market. You will appreciate that even this year in spite of such good times, the 2-wheeler sector in 9 months has grown only by 8.8% and whereas we have grown substantially higher.

And sir, if I could just ask one more thing, like with the ABS thing going on, so if the draft has not been announced by the government. So, what is going on with the OEMs right now? What is the sentiment with the 2-wheeler manufacturers? Have we had any conversation with them? And is there any kind of thing you have discussed on how...?

No, I have repeatedly said that we'll talk on this hypothetical question, and we'll discuss when the final notification comes because our OEMs are already in discussion with the government that it's not practical. So let the results come out of that. We are not aware what they are discussing with the government.

Our next question comes from the line of Nitin Agarwal from JM Financial.

Congratulations on a great set of numbers. I would like -- I wanted to know about your EBITDA margin guidance since we have ramped up the Bangalore facility and the facility is expected to ramp up? So, do -- are we trying to -- are we thinking of revising our estimates upwards going in FY '27? Or are we maintaining around 13.7% thereabouts?

So, we had given a guidance of 13.7%, but that gets affected at least by 30 basis points because of the denominator factor of the aluminum price increase. So that 13.7% becomes 13.4% and we are very hopeful that we'll try to maintain around that only in the next financial year.

Okay. So -- but you highlighted that the aluminum prices are a pass-through on a month-on-month basis. So eventually, the margin will come back to what we were guiding for initially. Is that understanding correct?

No, that understanding is not correct. The contribution that we get for doing the job remains the same. So, when the aluminum prices go up, the EBITDA margin percentage goes down. But the absolute EBITDA remains the same.

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

Just want to confirm about the launch pipeline for the new products in the next year. So, we have Sunroof, we have 2 programs of alloy wheels. If you can just confirm when can we expect commercial production of...?

Both the programs we will be launching in start of H2.

Okay. So, both agreements, the agreement with Taiwan, the one agreement with the Japanese company, both will come in the second half only?

Yes. Second half they can come. They will come in second half after due testing. And even this Sunroof Cable will also come. That will also come.

Generally, how much time does it take for the full ramp-up? So when can we expect...?

We are prepared from day 1. We are prepared today also because we have already invested everything. So once the testing is complete, then we'll immediately clear up.

Our next question comes from the line of Rishi Kapadia from CLSA.

Congratulations on a good set of numbers. Sir, my first question is on wheel assembly business. By when can we expect that this would kind of completely phase out?

Sir, the customer has assured that by March end the balance will also go, which is about 48%. So, let's see, once the customer takes it back, we'll be announcing in the next call. If the customer takes it back in March, then next year also, you will see the same representation from our side that actual -- excluding wheel assembly, this is the growth and without -- and we published this much.

Got it. And sir, my second question is on your ROCE. You are currently delivering 27%, 28% of ROCE and despite capacity utilization of the 2 plants at lower level. So, what do you expect? Can ROCE go ahead from current levels or 27%, 28% is something which would kind of build in?

I hope, Rishi, you are satisfied with 27% ROCE. That's a tough job to achieve, which we are achieving. And the second thing I would correct that one plant has already gone to 80% capacity utilization. So only one is left now at 65%. ROCE will remain. This will be difficult to maintain 27%, but we take all out efforts to maintain 27%.

Okay. And sir, lastly, just a clarification. Would aluminum inflation would lead to roughly 2% revenue inflation as well or it would be lesser than EBITDA?

Certainly. One side, it leads to revenue inflation. The other side, it leads to reduction in the percentage of EBITDA margin, not the absolute, but percentage of EBITDA margin.

Okay. So, quantum would be just 2% roughly, right?

Yes, 3% -- you can say 3% -- 2% to 3%, yes.

[Operator instructions]. As there are no further questions from the participant, I would like to hand the conference over to Mr. Kuldip Singh Rathee from ASK Automotive Limited for closing comments. Thank you, and over to you, sir.

Thank you, everyone, for such a patient hearing. And I would like to once again reassure you that the future looks very bright. And as you know that I'm always an optimist, our Q4 is going to be very bright and even the next year seems to be very good. On that positive note, I would like to end and thank you. Thank you very much once again.

Thank you so much, sir. On behalf of ASK Automotive, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.