ASK Automotive Limited (ASKAUTOLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to ASK Automotive Q3 FY '25 post Conference Call hosted by Adfactors PR. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Snighter. Thank you, and over to you, sir.

Thanks, Sejal. A very good evening to everyone, and welcome to the Q3 and 9 months FY '25 Earnings Call of ASK Automotive Limited. From the senior management, we have with us Mr. Kuldip Singh Rathee, Chairman and Managing Director; Mr. Prashant Rathee, Whole-Time Director; Mr. Aman Rathee, Whole-Time Director; and Mr. Naresh Kumar, Chief Financial Officer. 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, may involve risks and uncertainties, including those related to the future financial and operating performance of the company. Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected at the earliest. I would now like to hand over the call to Mr. Kuldip Singh Rathee for his opening remarks. Thank you, and over to you, sir.

Thank you. Good evening ladies and gentlemen. It gives me an immense pleasure to welcome you all for our quarter 3 and 9-month financial year '25 earnings conference call. Before I proceed, I hope you all have had the chance to go through the detailed presentation submitted to the exchanges and uploaded on our website. I am elated to be with you today evening to update you on our business performance for the third quarter and 9 months ended December 31, 2024. I would like to begin by giving some insights on the industry updates, followed by details of our business performance. As per CM report, the automobile sector in terms of vehicle production across all segments grew at around 6.4% in Q3 FY '25 against the same period last year. Amongst all segments, 2-wheeler posted production growth of 8% in Q3 FY '25 and 13.1% in 9 months FY '25 on Y-o-Y basis. The 2-wheeler industry registered robust vehicle production volume of 5.9 million in Q3 FY '25 against 5.5 million in the same period last year. The 2-wheeler production in 9 months FY '25 was at 18 million against 15.9 million in the same period last year. India's stable policy ecosystem in 2024, building on the foundation of previous years has significantly supported the automotive industry's growth. As 2025 begins with the optimism generated by the Bharat Mobility Global Expo, this positive momentum is expected to further accelerate the sector's progress in the coming year. I'm now moving on to ASK business performance. I'm 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 is the fifth consecutive quarter of robust performance by us since listing of the company last year. During Q3 FY '25, we delivered strong performance in business and recorded significant growth of 21% in revenue, 41% in EBITDA, and 32% in PAT on year-on-year basis. We have also continued to outperform the 2-wheeler industry vehicle production growth in Q3 FY '25. Further, I'm glad that we have delivered highest ever EBITDA margin of 12.5% in Q3 FY '25, which is 180 basis points higher than Q3 FY '24. As a result of strong performance in Q3 FY '25, our revenue has grown by 24%, EBITDA by 50% and PAT by 51% in 9 months FY '25 on year-on-year basis. Our EBITDA margin stood at 12.2% in 9 months FY '25 with an improvement of 205 basis points on a year-on-year basis. These strong results reflect the result of our continued focus on expanding value-added businesses, improving utilization of production capacities and bringing cost efficiencies. Our aim is to sustain this level of EBITDA margins and improve gradually in the subsequent quarters, depending upon the growth of the 2-wheeler industry. With strong performance on profitability, our earnings per share in 9 months FY '25 has increased to INR 9.64 per share against INR 6.39 per share in the same period last year. Let me now go into further details of our performance on both revenue and margin side. We have delivered robust performance in Q3 FY '25 and recorded consolidated total income of INR 919 crores, which is 21% higher on year-on-year basis. As a result, the consolidated total income for 9 months financial year '25 stood at INR 2,760 crores, posting a 25% year-on-year growth. All the 3 product segments continue to perform well and delivered robust revenue growth in quarter 3 financial year '25. We have sustained market leadership position in the Advanced Braking Systems business with 14% year-on-year growth. The Aluminum Lightweighting Precision Solutions, our largest business segment with 43% share of revenue led the growth momentum and delivered 25% year-on-year growth. And Safety Control Cables also grew by 10% on a year-on-year basis. We have recorded strong growth in our margins and profitability. Our quarter 3 FY '25 EBITDA stood at INR 115 crores, recording 41% year-on-year growth and 9 months FY '25 at INR 337 crores, posting 50% year-on-year growth. We have delivered PAT of INR 66 crores with 32% Y-o-Y growth in quarter 3 of financial year '25 and INR 190 crores in 9 months financial year '25 with 51% growth on year-on-year basis. If we exclude onetime deferred tax gain of INR 7.15 crores in quarter 3 of financial year '24, adjusted year-on-year PAT growth is 54% and in Q3 FY '25 and 60% in 9 months FY '25. I'm glad to inform you that in 9 months of FY '25, we have achieved an EBITDA of INR 337 crores versus last full year EBITDA of INR 311 crores in FY '24. Similarly, in 9 months of FY '25, we have achieved PAT of INR 190 crores against the last full year PAT of INR 174 crores in FY '23. Now let me talk briefly about status of expansion plans of our production capacities. Firstly, our mega manufacturing facility at Karoli is expanding fast. The increased economies of scale and operational efficiencies are benefiting us in delivering better results. Secondly, our 18th manufacturing facility at Bengaluru. Incidentally, that's our third plant in Southern India in Bengaluru, has commercialized on 14th January 2025. Thirdly, solar power plant of 9.9 megawatts in Sirsa, Haryana for captive consumption started trial production on 27th January 2025 and will start supply of power soon. Further, out of the duty and budget allocation of INR 11,10,000 crores for FY '25 for infrastructure, a major portion is still unspent. Regarding the remaining portion of the budget allocation, we expect the government to spend in Q4 in a big way. Thus, the money shall percolate to the lowest level, including rural areas, which shall give a further boost to the sale of 2-wheelers in the country. As we go forward, we are hopeful of maintaining trend of outperforming industry growth in the subsequent quarter of FY '25. We anticipate the growth momentum in 2-wheeler sector to continue for the remaining part of the year with prevailing positive market sentiment. Lastly, we are confident that we would continue to deliver strong performance in coming quarters and generate value for our stakeholders. With this, I open the floor for question and answers. Thank you very much.

[Operator Instructions] The first question is from the line of Sanjeev Agarwal from [ Aviva Investments ].

I would also congratulate the team for achieving such a high EBITDA margin. This is definitely a one triggering factor for us as investors. Sir, I would like to know if you can help us with the EBITDA margins on the three to four product lines that we are having in our organization is advanced braking systems vis-a-vis aluminum lightweight, which are the two main and the other three as well.

Well, Sanjeev, our EBITDA margins in all the three verticals are very close to each other. They are similar. So good part is, as you said that we could achieve the highest EBITDA margins by better capacity utilization. Because we -- in last 2 years, we invested very heavily. We invested INR 475 crores in the Karoli plant till date, and we are continuously investing up to INR 200 crores in the third plant, 18th manufacturing facility in Bangalore.

Sir. Sir, the second question would be, can you please explain us percentage between the EV versus non-EV that we are selling right now?

See, our percentage is similar because we are supplying to 80% of the OEMs in the EV sector. So the EV is total -- EV percentage at the moment is only 5% of the total vehicle production in 2-wheelers. And we -- our share of business...

The next question is from the line of Joseph George from IIFL Securities.

Congratulations on good numbers. Just 2 questions. One is on the JV with AISIN Group, you mentioned that you're going to launch it in -- I mean, in terms of the product launches that's going to happen in April 2025. I want to understand how should we think about the scale of operations in year 1 in terms of maybe revenues or profitability?

Well, Mr. Joseph, there was a very good response. We launched -- we had an exhibition in the Bharat Mobility Expo and there was an extremely positive response from the dealers all over the country. We are in the process of appointing dealers all over the country, and we hope to launch the operations in Q1 as we had always told before.

Okay. Any sense on how big the scale of operations would be in year 1?

No, I think year 1 is always the start. As we progress in the quarters, maybe we'll give you some feedback after the H1.

Sure, sir. No problem. The second point I want to touch upon was the subsidy that is expected for the Rajasthan plant. I think earlier, you had mentioned that it will start flowing in from the end of FY '25. Is that the status even now and nothing has flowed in 3Q?

No, no, no, it has flowed in, and we could achieve all the conditions, and we got -- we have applied for the subsidy as the has started from the Q3.

So, I mean, some of that subsidy has already started accruing in Q3 itself?

Yes, it is about INR 6.65 crores subsidy from the Karoli plant in the Q3. Now onwards, a similar figure of around INR 7 crores will continue in the forthcoming quarters also.

The next question is from the line of Hitesh from HDFC Securities Institutional Equities.

My question is, how do you see the 2-wheeler demand shaping up over the coming months? And is there any concern of higher inventory-led production cuts by 2-wheeler players because the export market pickup for 2-wheelers is also gradual. So how do you see the production schedules of our 2-wheeler customers shaping up?

I feel that the coming quarter, this Q4 is very much sorted. And I'm an optimist on the 2-wheelers very much. And I feel, as I mentioned in my presentation that once this infrastructure spending is done, a lot of money is going to flow down the line and which is they are the real customers of 2-wheelers. And I feel positive even on the next...

Sure, sir. And one more question on what is the -- how do you compare the difference in the content per vehicle of the ICE 2-wheeler and electric 2-wheeler for our components?

The EV component because we are into very critical lightweighting and thermal management products. In EV, the component is higher. It's 30% to 50% higher in the EV. So if we -- since we are agnostic, ICE agnostic and EV agnostic, so once the EV actually picks up, then I think our revenues will further grow.

The next question is from the line of Ronak Mehta from JM Financial.

Congratulations on good set of numbers. So I have a couple of questions. First is on the Karoli plant. Can you help us with the utilization level of the plant? And how do you plan to ramp it up further over the coming quarters?

See, the good part is, Ronak, that we have invested -- we are -- we keep on investing. And we -- as you know, the present status is INR 470 crores. So the utilization percentage is similar, about 45% to between 45% and 50%. But now the capacities are further ahead, and we expect that the coming year's growth shall be very much taken care of from there as well as the plant -- new plant in the south in Bengaluru, which is our 18th plant.

Okay. So is it fair to assume that the asset turn for the plant on the -- even on the new investment will be about 2 to 2.5x?

It's not 2.5, we operate in 2x. Always we operate in 2x and we definitely intend to achieve that with our lead manufacturing, we always aim for that.

All right. The second question is on the new Bengaluru plant. So have you started supplying alloy wheels? Can you just indicate who all are the customers? How do you plan to ramp it up? Any new order wins with respect to alloy wheels...

The commercial production has started. Some items of the existing product lines, which we were already supplying, they have started filling. But the new product lines are getting the QAV done. You remember in Karoli also, it has taken some time, 1 quarter at least, we had taken. So that QAV is going on. We expect that all QAV to finish by March in this quarter, next 2 months. And from the next financial year, it should come on a good level.

Okay. And any new order wins on the alloy wheels business because you indicated last time that you were in negotiation with customers and customers were doing trial run. So any update on that?

I definitely said because it's a safety item, the testings go on quite long. We are into the business of safety, and we have enough patients and that takes a little time. But we hope that some news should come by end of Q1 or sometime in Q2.

The next question is from the line of Basudeb Banerjee from CLSA.

[indiscernible] A couple of things...

Sorry to interrupt Mr. Basudeb. I would request you to please use your handset.

Yes, a couple of questions. One, Honda announced their new EVs. So what kind of were getting from Honda for coming months coming quarters...

Mr. Basu, their plans are not very aggressive. The whole year plan for next year, they have taken only around 18,000. That's yearly plan.

One more model is also coming.

One more model is also coming. They'll launch it in, I think, around Q2.

So you mean 1,500 per month from these two models, that's what they're aiming at?

Yes, the first model, first model. Second model will give the different projections. When they give it, we'll let you know.

Sure, sure. And second, sir, now as overall European situation is not that great and your export outlook also corrected. So any new major orders or some progress you are making from scratch scope for expanding your exports outlook. If we recall, we are aiming at INR 300 crores exports revenue for FY '27. So these challenging times definitely are acting as a hurdle. So how one should look at it?

You are right, Mr. Basu, the things are not very rosy in the European sector. And on this particular in spite of such good results, we would like to tell the investors that our exports may not grow this particular year because the customers, very prominent customers, they are first consuming the vast inventories in the pipeline. However, not to be getting totally disappointed, our Q4 is trying to be getting better than the Q3 and Q2 in exports. So maybe once they correct the inventories and better orders start. Second thing is we had also mentioned for the next year that we have got an export order of INR 100 crores for Ford Motor, but through Aptiv then -- but that is under testing. We have already given the samples. And once the approvals come, then that will start hopefully in the beginning of the next financial...

Sir, in press release regarding aftermarket plans with the tie-up with AISIN where it was mentioned. So any specific strategy time line, revenue potential you were aiming at?

So as I just told Mr. Basu that there was a very huge response in our exhibition in the expo in January, and we'll be -- we are in the process of making further dealers all over the country, and we'll be launching in the Q1 as was initially decided. And I hope the only thing we are trying to do is we are trying to break even in the first year. And if we do that, I think that should be a good achievement.

And last thing, sir, if I missed out, basically for a South Indian 2-wheeler OEM trials were running for your new alloy wheel. So is it completely done and commercial production has started or still the results are yet to be there?

Mr. Basu, since it is a safety item, the trials go on in various terrains and they take -- they are time consuming. So I think we hope to receive the results by Q1 end or maybe early Q2 and then only the supplies will start.

And as you said in one question in the call earlier that you have already commenced production. So...

That plant is the complete ALPS plant. So it is not confined to alloy wheel. It is -- we can make anything for any customer there. So the machines are like that, and there is a fungible line, and we can -- we are making various other products as a start. And then we are -- because we have gone to the South, now we are getting some new orders also from various customers in the South because we have reached -- initially, we had exhausted our complete capacities in South, but now the customers have reposed confidence that we have come near to them.

Ladies and gentlemen, we have lost the connection of the current participant. [Operator Instructions] The next question is from the line of Kuber Chauhan from Anand Rathi.

Congratulations on good set of numbers. Most of my questions has been answered, but I wanted to know about your mix. How much the contribution was from EV and how much was it from ICE for this particular quarter?

ICE, we have not yet launched, as I just -- ICE, okay. So the ICE contribution is 76% in our business and the EV contribution is about 5%.

And have we seen the trend moving on this? Or we saw dip in this particular quarter?

It's moving as per the plan as per the production of the [indiscernible]. Yes, one of the largest manufacturers, his production levels went a little down. Otherwise, we were expecting even better performance in the EV.

The next question is from the line of Naveen Kumar Dubey from Narnolia Financial Services Limited.

Congratulations on a very strong set of numbers, sir. I have a couple of questions. First one is related to your aluminum lighting products segment. So I want to understand what kind of potential market size this segment could have...

See, we have always said, Mr. Naveen, that the continuous focus in the motor vehicles industry, whether it is passenger car, whether it is 2-wheelers, that's on lightweighting. So I think the best material for lightweighting is aluminum. So we call it our sunrise sector. And we see huge potential in the sunrise sector domestically as well as in exports. And second thing is the more and more electronics coming in all the vehicles, so in electronics, aluminum being the very good conductor, there is a very -- it's the best material for thermal dissipation and there also it fits very well. So the -- because of these two qualities, we see very huge growth in this. And as you must be noticing that in 9 months, we have grown 25% in this sector.

Yes, sir. Sir, related to same, I think earlier, it was more of an import substitute product. So any figure or any data related to that as what would be that import percentage that aluminum product is imported in India? Any ballpark figure?

No, no, aluminum is not getting imported. In fact, there are so many manufacturers for the last 30 years who are manufacturing here in nearby to our plants, and they are approved by the OEMs like Maruti, Suzuki, Hero and Honda, and we have to buy from them. So this is never -- yes, they do import the scrap. So that data we don't -- neither we have nor we feel the need to have.

Okay. Okay, sir. A couple of questions related to -- sir, any customer addition in the recent past in the last 1, 2 months, is there any new customer getting added in your portfolio?

One customer added for export, but that's -- we got the orders, but the supplies as per schedule have to start in the Q3 of next financial year.

Okay. Q3 of next financial year. Okay, okay. Because we had kind of INR 75 crores of order book for exports, I think earlier we had some we are still maintaining that we have that. That is already there. So that we are not.

Yes, yes. We still -- we're still maintaining that we have that. That is already there, so that we are not calculating.

[Operator Instructions] The next question is from the line of Pradyumna Choudhary from JM Financial Family Office.

Congratulations on a good set of numbers. My first question was on the aluminum lightweighting solutions vertical. So I just wanted to get a better sense of what the growth triggers are. One would be related to the lightweighting happening on the EV side. But are we witnessing more and more aluminum being used even on the ICE vehicles? Like if you can just explain the growth triggers here?

Yes, even in the new vehicles, they are trying to make it lighter. So the more and more aluminum is [indiscernible] And also the use of electronics is also increasing. So a lot of ECUs are all using aluminum as the preferred metal.

And sir, like from -- just for a better understanding, would it be possible for you to quantify how much aluminum content has increased in new ICE vehicles versus older vehicles? And how much would be the increase in case of EVs?

This will be...

Is at the moment and plus what we do is we keep on adding new products with our existing customers. So we are increasing our content, and that's our continuous endeavor to increase our business even with our existing customers.

Okay. Okay. And who are we taking away the market share from when we're adding new products?

No, we don't inquire from the customer. When customer is in some requirement then we do supply. That's what we do.

Okay. Okay. And so on the aluminum lightweighting side, we can -- your sense is over the next 2, 3 years, we can continue growing at 25%, 30% kind of number.

We have a good growth. That's how -- as I said, that last 30 years, we have outgrown the industry, and we have grown in mid-teens. That's a record of not 1 day, but 30 years. And this year now this year also, luckily, we are doing that. So I always say that we will keep on growing in mid-teens.

All right. All right. And lastly, if you can just quantify the revenue from non-2-wheeler segments like passenger vehicle and like what's the percentage of revenue? I know it would be very small. I just wanted to get some sense from passenger vehicles and commercial vehicles.

So it's actually very small. We -- just 4% of that export, which is in that 2-wheeler is out there, and may be 3% miscellaneous, so 7%, 8%, that's all.

[Operator Instructions] The next follow-up question is from the line of Pradyumna Choudhary from JM Financial Family Office.

So just another question, sir. So apart from aluminum lightweight for the other two verticals, advanced braking system and safety control cables, we expect to grow in line largely with the industry or even there, there are additional growth triggers...

So brakes, we have always said that we are #1 in the country with a majority share of business for the last 20 years. So we have to grow almost in the line of the industry, except sometimes aftermarket grows in double digits. So that's in our hands. But otherwise, we grow with the growth of the industry. And regarding the other verticals, the other two verticals, there is definitely a very good scope.

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

Yes. Sir, what could be the CapEx for future, maybe next 2, 3, 4 years, if you can help with that?

No, Mr. Naveen, now the CapEx that we have made, as I said, we have invested INR 600 crores, and this will see us through for the next 18 months. However, whenever a new opportunity comes, we don't feel stringy on not putting the excess CapEx. Whenever we see the opportunity, we grab and we don't mind doing more CapEx. Because whatever cash -- strong cash we are generating, we always put it back in the -- our new expansion, and that's how we keep on growing.

Okay. So maybe some INR 150 crores to INR 200 crores of CapEx.

I can't say the new opportunities keep on coming. So we don't shy away from investing. But only thing is we are very, very judicious in investing. And I'm happy to share that last year, we closed at a debt equity of 0.42. And in spite of such heavy investment, we'll be most likely closing at a debt equity of 0.38. And next year -- further next year, our target is 0.3. We are very cautious in spending. But when the need and the opportunity arises, we just don't hesitate. We immediately spend it.

Okay. Okay. Sir, one more question related to the Bangalore plant, which has just started. I think what kind of cost increases can we see over the next 2, 3 quarters because it will be in the initial phase?

Well, we have plans to break even in the Q4 of next year. I think that will be pretty fast if we are able to manage that. And we are confident that we should do that.

Ladies and gentlemen, we will take this as the last question. I would now like to hand the conference over to Mr. Kuldip Singh Rathee from ASK Automotive Limited for closing comments.

Thank you very much, everyone. It has been a pleasure talking to you. And let me assure you that we remain optimistic. We remain confident that we'll be performing and adding value to our stakeholders. Thank you very much for your patience, and see you and talk to you after -- in the next quarter. Thank you.

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