ASK Automotive Limited (ASKAUTOLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ASK Automotive Q4 and FY '25 Post 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. Thank you, and over to you, sir.

Thank you. A very good evening to everyone, and warm welcome to the Q4 and 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. Aman Rathee, Whole-Time Director; and Mr. Naresh Kumar Sharma, 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, it may involve risks and uncertainties, including those related to 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 ensure that 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.

Good evening, ladies and gentlemen. It is my great pleasure to welcome you all to our quarter 4 and FY '25 earnings conference call. I hope you have had the opportunity to review the detailed presentation submitted to the exchanges and available on our website. As we all are aware, the global economy is facing headwinds, which have caused uncertainty across the world, especially in the emerging economies. However, the Indian economy remains resilient based on its sound economic growth and strong fundamentals. Adding to this positive outlook, the Indian Meteorological Department's forecast of above-average normal monsoon brings renewed optimism, especially for the rural economy. This is particularly encouraging for the 2-wheeler industry. 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 FY '25 with overall vehicle production across all segments registering a robust year-on-year growth of 9.1%. The 2-wheeler segment, in particular, stood out with a production growth of 11.3% on a year-on-year basis. This recovery is because of the rising rural demand and a notable resurgence in consumer confidence. As a result, 2-wheeler domestic sales grew by 9.1% year-on-year. This segment was supported by better connectivity in rural and semi-urban areas, along with the launch of new models offering enhanced features and greater value. The 2-wheeler industry closed financial year '25 with a strong production volume of 23.9 million units, up from 21.15 million units in FY '24. In Q4 alone, production touched 5.8 million units as compared to 5.5 million in the same quarter last year. On the exports front, the 2-wheeler segment delivered an impressive performance with a 21.4% increase year-on-year, reaching 4.2 million units. This was driven by the introduction of new models and successful penetration into new international markets. Turning to electric vehicles, a key focus area for our industry. Total EV registrations in the country reached 1.97 million units in FY '25, making a 16.9% growth year-on-year. However, it still has a share of business of less than 5% of the total 2-wheeler industry. Our share of business is growing as per the growth of the EV industry. Looking ahead, we believe that industry stands to gain further from supportive macroeconomic policies. The recent reforms in personal income tax announced in the Union Budget 2025, '26, combined with 2 successive rate cuts by the Reserve Bank of India are likely to enhance consumer purchasing power and improve access to vehicle financing, creating a conducive environment for sustained demand. The good monsoon forecast will ensure rise in income in the agriculture sector and will be beneficial for the 2-wheeler sector. 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, I would like to highlight an important development from this year. CRISIL Ratings upgraded our long-term credit rating from AA- to AA while reaffirming our short-term rating at CRISIL A1+. This upgrade reflects the company has improved capital structure, better financial flexibility and strong volume growth. Moving on to the business updates. I'm delighted to share with you that we had a strong finish to the fourth quarter and full year in both revenue and profitability. This marks our sixth consecutive quarter of robust performance since the company's listing last year. During Q4 FY '25, we delivered a growth of 8.5% in revenue, 24.7% in EBITDA and 20.6% in PAT on a year-on-year basis. We continue to outperform the 2-wheeler industry in terms of vehicle production growth during Q4 FY '25. Additionally, we delivered an EBITDA margin of 12.5% in Q4 FY '25, representing an improvement of 162 basis points over Q4 FY '24. As a result of strong performance in Q4 FY '25, we have surpassed our FY '25 EBITDA margin guidance by achieving a full year EBITDA margin of 12.3%. Our revenue has grown by 20.2%, EBITDA by 42% -- 42.7% and PAT by 42.5% in FY '25 on year-on-year basis. Our EBITDA margins for the year stood at 12.3% in FY '25 with an improvement of 193 basis points on year-on-year basis. Our aim is not only to sustain this level of EBITDA margins, but to improve gradually in the subsequent quarters, depending upon the growth of the 2-wheeler industry in FY '26. With strong performance on profitability, our earnings per share in FY '25 has increased to INR 12.6 per share against INR 8.8 per share in the same period last year. Our all 3 product segments performed well in 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 9% in Q4 and 16% in FY '25 on year-on-year basis. The aluminum lightweighting Precision Solutions revenue grew by 21% in Q4 and 28% in FY '25 on a year-on-year basis. The safety control cable revenue also recorded growth of 1% in Q4 and 14% in FY '25 on a year-on-year basis. As mentioned in DRHP, our wheel assembly business has very low margin, and we were requesting the customer for the last 2 years to shift this business to someone else. Now the customer has shifted 60% business from Q4 FY '25 and FY '26 still impact our revenues by approximately INR 300 crores. However, our EBITDA margins will improve by 80 basis points on account of this. In the dynamic and unstable global geopolitical environment, our revenue from exports remained the same at INR 147 crores against INR 174 crores last year also. As expressed in the previous interactions, I'm delighted to share that we have achieved double-digit EBITDA margins at 12.5% in Q4 and 12.3% in FY '25 compared to 10.3% in last year. Improvement in margins during FY '25 were mainly driven by better economies of scale, improved volumes, better product mix to the customers and continued focus on cost optimization. We have delivered strong returns in FY '25 with ROAC at 27.7% and ROE at 26.5%. We have also improved our debt profile with debt to equity reducing 0.38 against 0.42 last year. Our average debt-to-EBITDA is at 0.83 in FY '25. The Board has recommended a dividend of 75%, that is INR 1.5 per equity share on the face value of INR 2 each. I would now like to give you updates that our Bangalore facility started commercial production on 14th January 2025 and ramping up fast. This will be our eighth manufacturing facility and the third one in South India. Our largest manufacturing facility at Karoli, Rajasthan with an investment of INR 4.9 billion as on 31st March 2025 is ramping up fast to deliver future growth. Some more key new initiatives to be highlighted are that we signed technical collaboration agreement with LIOHO, Taiwan to manufacture 2-wheeler HPDC alloy wheels in February '24. The capacity already built up and the product is under testing. We entered into a strategic partnership with Kyushu Yanagawa Seiki Company Limited, Japan in March '25 for high-pressure die casted alloy wheels for 2-wheelers. We also signed a joint venture agreement with AISIN Group Japan, a top 10 global Tier 1 auto component supplier to market and sell passenger car products in independent aftermarket in April '24, product range unveiled at Bharat Mobility Global Expo 2025. The products have been launched in market in April 2025. Largest manufacturing plant at Karoli, Rajasthan with investment of INR 4.9 billion up to March 31, 2025, is ramping up fast to deliver future growth. Bangalore facility started commercial production on 14th January and ramping up fast. These initiatives underscore ASK Automotive's commitment to innovation, sustainability and market leadership. Thank you very much for your patient hearing, with this we leave the floor open for question and answers.

[Operator Instructions] The first question comes from the line of [ Mahesh Atal ] from [ Attal Investment Advisors ].

Can I ask my question in Hindi? [Foreign Language]

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

Congratulations on good set of numbers. I have 2 questions. First is, can you highlight some of the new order wins that will drive your continued outperformance for the next year because I believe alloy wheel business is still in the -- the products are still under testing. So apart from those -- apart from the alloy wheel business, what all are the new orders you can highlight? That will be the first question.

See we have the orders, I can only assure you that we will be growing in the mid-teens, and we'll outperform the market, outperform the industry again in this financial year because we have the confirmed orders to that extent. However, we also expect that the alloy wheel with high-pressure die casting that we made with the Taiwan technology is under an advanced stage of testing, and we hope to get the clearances by June or July end, and we are confident of starting the supplies in the H2 of this financial year.

Okay. So is it fair to believe that the second half will see alloy wheels of about INR 100 crores revenue from alloy wheels for this year, outlook for this year?

So let the things stabilize. I can't quantify the numbers like that. But yes, as I've told you, we will again outperform the industry as is our track record.

Okay. The second question is on the EV business. So as EVs become more prevalent, what role do you see -- do you foresee AK Automotive playing in the supply chain? Would you restrict yourself to just aluminum casting or -- which is an EV agnostic component? Or you're open to a bigger role in EV ecosystem with EV-specific components, slightly a longer-term question?

Overall, we are playing a bigger role. We are already supplying to 80% of the organized EV market, right, for the last 2 years. But as you know, the EV market still has -- is less than 5% of the total 2-wheeler market. So we are growing as the EV market is growing. However, our content per vehicle is higher because of the aluminum lightweighting components in the EV segment. So if it grows faster, we will also gain in out of it.

No, sir. So actually, my question was with respect to new products, specifically for EVs. Are you also looking at adding new products specifically for EVs apart from the aluminum casting related products? Or you restrict yourself to aluminum casting?

We have the 3 verticals at the moment. So we'll remain in the 3 verticals.

The next question comes from the line of Naveen Dubey from Narnolia Financial Services.

Congratulations on a very good set of numbers. My question is firstly related to the 2-wheeler industry. So recently, Hero is saying that the 2-wheeler industry is expected to grow around 6% to 8% in FY '26, so how do -- in the domestic market. And how do we see export markets to pan out? Any thoughts on export markets also?

Well, as far as the 2-wheeler industry is concerned, we are also very hopeful that it will grow about 6% to 8%, what Hero has said. And we are confident because of the various reasons just like I mentioned, good monsoon, interest rate cut, and the tax benefits the government gave with the budget. So that kind of growth we will see of the 2-wheeler, number one. And number two, exports, I think the geopolitical situation is quite dicey at the moment because of the tariffs and the various falls, but I'm an optimist, and I hope the clouds will clear very soon, and we expect a very good growth in this year. So last year, we could remain constant -- stagnant. But this year, we are still hopeful of a very good growth in the exports.

Okay. Okay. The second question is related to the agreement which we have done with Kyushu Yanagawa, Japan. Sir, is this product is related to ICE or specifically to EV products?

This is -- this can go in both vehicles, ICE as well as EV.

Okay. Okay. And we have done 2 technical agreements in last 2 years. So any other agreement in pipeline or any other -- for any other product adjacencies are we looking at?

We keep on looking for good technical opportunities. As you say, as you will see -- you have seen that we like to have the first-mover advantage. So we are talking to many different people, and once something materializes, the whole market will know through the stock exchange.

Great to hear on that front, sir. A couple of questions related to -- one is, we have seen a sharp improvement in gross margin. So I think that is related to that wheel assembly business or any other thing?

Wheel assembly business has gone only from March only. So there's not much to be seen in the last financial year '25. However, in the financial year '26, as I said, the revenue will drop by INR 300 crores. However, the margins will grow because of the wheel assembly by 80 basis points.

The next question comes from the line of Abinash S. from NAFA AMC.

Congrats on a good set of numbers. So when I went through your PPT, you had mentioned that you already had a partnership technical collaboration with LIOHO to manufacture HPDC. And in March '25, we have signed a new technical collaboration with another manufacturer. So what is the reason for signing up with a new person? Is it a different technology or a different grade of technology for the same HPDC? Or is there any delays in LIOHO technical arrangement? That's question number one. Question number two is, you said that the capacity utilization is improving in the Karoli plant. So what is the current utilization rate? And when can we achieve full utilization? And at full utilization, what would be our peak revenue because that being the largest plant. So could you provide some insight, that would be great.

Yes. Regarding the 2 collaborations, we have to be the -- we have the first-mover advantage with that technology, and we want to be the best in the class. That has been the philosophy of the company. So we'll imbibe both the technologies, and the Japanese player will be feeding the Japanese customer more and the Taiwanese player will be feeding the rest of the market. That has been the philosophy behind it, number one. And the second question, what was that?

Karoli.

Karoli. Karoli, we have already invested INR 490 crores, as I mentioned, till March end. The investments still carrying on because we have a huge potential in the growth in Karoli. So another approximately INR 200 crores we'll be spending this year also further, and the peak potential of the Karoli plant will be around INR 1,100 crores, INR 1,200 crores, which we will see in the times to come. At the moment, the Karoli plant, we have revenues of about INR 500 crores to INR 600 crores, and it's operating on 50% capacity utilization.

The next question comes from the line of [indiscernible] from [ Coastpark ] Advisors.

Sir, my first question would be on, we have seen a sharp slowdown in growth. Like earlier, we were growing around 20% to 30%. Now this quarter, we have grown 9%. So was there a one-off in the base or something or postponement of order or something like that?

No, no. There's neither postponement of order, nothing has happened. We have grown at 9%. However, actual growth has been 16%. If we count -- as I just mentioned that the wheel assembly, 60% of the wheel assembly went from 15th February onwards. So if we add on what would have been the revenue of that, then it would have been 16% growth. This phenomena will play in the next financial year also because, as I said, that if we were supposed to, let's say, grow 20%, then out of that, that INR 300 crores business of the financial year will be seeing less.

Understood, sir. And in an interview in the morning, you had called out a 14% guidance for FY '26. So 80 bps coming from wheel assembly.

In my interview in the morning, I said that we'll be improving by 150 basis points. So that becomes 13.8%. And I said out of this 150 basis points, 80 basis points will come because the wheel assembly has gone and 70 basis points will come for the internal more efficiencies and economies of scale. However, we are aiming to achieve 14% EBITDA margins in next year, this coming financial year.

Understood, sir. And lastly, on the die cast HPDC wheels, who are the major players in gravity die casting, who will be our competitors from whom we will take market share?

First, let the product be tested and approved because there are so many gravity die casting players, as you know very well. So we cannot say whose share will come once it is approved so that is the OEMs.

Sure, sir. Who are the top players in the segments that we are targeting?

So the top players -- we'll target all the OEMs for the scooter and motorcycle alloy wheels. So once they let the product be tested and approved, then it is for them to judge what are the advantages and whose share or whether they don't cut anybody's share, they just cut the import part or something, which...

Understood, sir, one last question. Any plans relating to disc brakes?

Disc brakes, we are already supplying to the system suppliers. We are not into the system, and we don't intend to be the system, that's a very small market of the 2-wheelers. But we already supply the disc brake pads, we are supplying to Brembo for Hero that it goes there and also to Endurance. Moreover, we are exporting also the 2-wheeler disc brake pad to the European market.

[Operator Instructions] The next question comes from the line of line of [ Mahesh Atal ] from [ Attal Investment Advisors ].

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The next question comes from the line of Naveen Dubey from Narnolia Financial Services.

Just 2 questions. One is our working capital has improved over the last 2 years. Sir, what are the drivers for improving this?

The one driver is certainly the very good inventory management. And the second is, I think our customers are also so good that they are paying us on before time.

The second question is on how big we can scale our Bangalore plant. I mean we are investing and how further we can go from here on?

[Foreign Language] We will be investing INR 100 crores more this year. So that will be an investment of about INR 250 crores. And so it will give us a revenue of approximately INR 400 crores -- INR 400 crores to INR 500 crores.

[Foreign Language] considering the land area, et cetera or we have to go for greenfield?

[Foreign Language] whether we should go to Gujarat or we should go to Bangalore because we anticipate with one customer, Gujarat also the expansion is coming.

The next question comes from the line of Kairav Sundar from Spark Capital.

Congratulations on a good set of numbers. I just wanted to check with you on capacity utilization across our plants and especially the new plants, Bangalore and Karoli. Also, if you can give it segment-wise, if possible.

No, the capacity of all our plants, except Karoli and Bangalore has just started. It will be starting this quarter only, actually. And so capacity utilization of Karoli plant, I have repeatedly said is around 50%, 55%. And even this new plant in Bangalore, we expect this end of the last quarter of this FY '26, we should have a capacity utilization of 60%, 70%. Rest all plants are in full capacity.

The next question comes from the line of Joseph from IIFL Capital.

Just one question. You mentioned that you're going to spend some INR 460 crores this year, is that entire or CapEx spend. So is that entire amount going to be spent in FY '26?

Yes, this is entire, entire. That's what we propose to do, as I said, that we'll be making additional capacities. And out of that, the main -- the bigger amount of about INR 150 crores to INR 200 crores will be for this alloy wheel plant for the Japanese collaboration, of which we see -- we will see the results in the next financial year.

Sure, sir. And when we think about CapEx beyond FY '26, is that -- I mean, is the intensity going to be as high? Or do you expect the intensity to come up?

We are optimistic. So we always think that the intensity should remain the same because now the world is looking at India. Hopefully, once the peace prevails throughout the world, I think they will look towards India.

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

So my first question is on the content per vehicle. How different is it in a motorcycle versus a scooter? And do we view the scooterization trend continuing?

We -- our content is almost similar. There's hardly any difference. And yes, at the moment, there is a trend towards scooters, which is good.

Sure, sir. And my second question is, how much more expensive on average is the HPDC alloy wheel than a regular alloy wheel? And what are the benefits of the HPDC technology?

Pricing, we don't know at the moment. Once we start the supplies and then probably in the next 2 calls, we'll be able to tell you that about the difference in pricing or something. But well, the supply should be smooth with less rejection. That's what our assumption is in the HPDC alloy wheel.

Sure, sir. And the benefits of the HPDC technology?

That's what we said that it's a much smoother supply with less rejections and much more mechanical controls.

[Operator Instructions] The next question comes from the line of [ Ashok Shah ] from Eklavya Invesco.

Sir, can you just explain the future of the EV scooters in a scooter market or a bike market, we are planning for the -- we are doing for the EV also.

Can you repeat it, there was a blur in your voice.

Yes, it's okay. Sir, we are doing supply to also to EV scooters. So due to the cost effectiveness, the market of the EV scooter will increase and overtake over the next 5 years to the normal scooters and bikes.

So that we can't say that you need to ask to the EV manufacturers, but we wish that it increases. We had expected it to increase further, but I think there is a price cap, so -- and they are losing money on that same price. So I don't know. It's -- we can tell the statistics that it is less than 5% of the total market.

So what's our supply to the EV market currently in our total bike?

We have also the same ratio. We are supplying to the EV players, all EV players. So we are fully hedged, whether the ICE grows or the EV grows, we are supplying to everyone. So it doesn't make a difference to us.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Kuldip Singh Rathee, Chairman and Managing Director, ASK Automotive Limited, to give his closing remarks.

Thank you, ladies and gentlemen. Thank you for such patient hearing. I will only say that we'll keep on working the way we have been worked in the past. And hopefully, we'll justify our performance in the times to come to the market. And one thing we forgot to mention that this year, we improved our ROCE with the capacity utilization from 23.64% to 27.5%. I may assure you that next year also, we'll be doing very well, and we'll be achieving an ROCE close to this with the equity -- debt to equity also further improving and the performance going on a very sound footing. That's what we will make all-out efforts to justify our performance, and we'll be in touch every quarter, and thank you very much for your patience.

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