ASK Automotive Limited (ASKAUTOLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ASK Automotive Q1 FY '27 Post Results Earnings Conference 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 PR. Thank you, and over to you, sir.

Thank you. A very good evening to everyone, and welcome to the Q1 FY '27 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, Joint Managing Director; Mr. Aman Rathee, Joint Managing Director; and 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 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. Please bear with us if there is a call drop 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.

Thank you, Rushabh. Good evening, ladies and gentlemen. It's my great pleasure to welcome you all to our Q1 FY '27 earnings conference call. I hope you have had the opportunity to review the detailed presentation submitted to the exchanges and available on our website. FY '27 has begun on a strong note for the Indian economy, which continues to be the world's fastest-growing major economy. Domestic demand remains robust. Private consumption is resilient and the Government of India's structural reforms, particularly GST 2.0, continue to energize the broader economy and importantly, for us, the automobile sector, given its deep forward and backward linkages. As you are aware, after 28th February 2026, the geopolitical conflict in West Asia had created undue volatility in energy, commodity and currency markets and had led to a sharp phenomenal increase in aluminum alloy prices, which affected our industry. Despite these challenges, we are optimistic that the growth momentum will remain in the coming quarters. Now, let me begin by sharing a quick overview of the broader industry as reported by SIAM. The Indian automobile sector has carried strong momentum into the first quarter of FY '27. Overall vehicle production across all segments registered a robust year-on-year growth of 22.1% in Q1 FY '27. The 2-wheeler segment, which is most relevant to us, recorded production growth of 22.8% on a year-on-year basis, with total 2-wheeler production of 72.5 lakh units in Q1 FY '27, up from [ 59 ] lakh units in the same quarter last year. I would remind you that in Q1 of last year, 2-wheeler production had grown by just 0.7%. The turnaround this year is, therefore, significant driven by the GST 2.0 rate reduction, the personal income tax rationalization announced in the union budget, successive rate cuts and liquidity measures by the Reserve Bank of India, a favorable base and the introduction of new models. Looking ahead, we believe the industry will continue to benefit from these far-reaching reforms, improving consumer purchasing power and easier access to vehicle financing. The monsoon deficit witnessed earlier in the season has eased on the back of rainfall in late June and early July, supporting the outlook for rural income and 2-wheeler demand in the run-up to the festive season. Before we move on to ASK's business performance, we would like to highlight that on the green energy front, as already shared with you earlier, I'm happy to update that our 9.9 megawatt solar power plant at Sirsa, Haryana has been fully operational and is delivering the sustainable operational economies on the expected lines. Our second captive solar plant of 11.55 megawatt at Bikaner, Rajasthan is ready and is expected to be commissioned in quarter 2 of 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 performance in the first quarter in both revenue and profitability. This is the 11th consecutive quarter of robust performance by us since listing of the company. We achieved highest ever quarterly revenue, EBITDA and PAT. We delivered strong performance in business and recorded consolidated revenue growth of 52.1%, excluding pass-through impact of significant increase in alloy prices on revenue that is 33.4% and wheel assembly business strategy reduction, which reduced by 6.6%. Overall, net revenue has grown by 25.3% on a year-on-year basis. We continue to outperform the 2-wheeler industry vehicle production growth. We achieved EBITDA of INR 164 crores with 32.7% year-on-year growth. EBITDA margin at 12%. However, EBITDA percentage was impacted due to abrupt and phenomenal pass-through alloy prices. Achieved PAT of INR 85 crores with 28.8% year-on-year growth. This reflects the result of our continued focus on expanding value-added businesses, improving utilization of production capacities and bringing cost efficiencies. We have outperformed the industry growth, and our aim is to continue on this growth path on a sustainable basis with clear focus on the bottom line to enhance the shareholders' value. Volatility in alloy prices may affect margin percentages due to the denominator effect. However, with the aluminum prices expected to remain benign in the coming quarters, we anticipate an improvement in our EBITDA margins. With strong performance, our earnings per share has increased to INR 4.32 per share against INR 3.35 per share in the last year same period. Our all 3 product segments performed well in terms of revenue growth. We have sustained our market leadership position in the advanced braking system. Our advanced braking system revenue grew by 48% in Q1 on a year-on-year basis. The aluminum light weighting precision solutions revenue grew by 75% in Q1 on year-on-year basis. The safety control cable revenue also recorded growth of 20% in Q1 year-on-year basis. Our revenue from exports were at INR 39 crores in Q1 FY '27 against INR 33 crores last year. Key updates. We are happy to share that the technical collaboration with Kyushu Yanagawa, Japan has been successfully implemented at our Karoli plant and first supply of high-pressure die casted alloy wheel has started to our esteemed Japanese customer. Strategic closure in low-margin wheel assembly business is complete and from 1st April 2026, wheel assembly revenues are met. We also remain optimistic on the medium-term industry outlook, supported by improving consumer sentiment, expected benefits from the 8th Pay Commission and continued policy support for manufacturing and formalization through labor reforms. These structural developments provide greater confidence in India's long-term consumption and manufacturing growth trajectory. We are confident that we'll continue to grow not only in mid-teens, but I would -- I'm confident that we'll be now growing for the full year in high teens. Thank you very much for your patient hearing. With this, we leave the floor open for Q&A.

[Operator Instructions] The first question is from the line of Raghunandhan from Nuvama Research.

Congratulations, sir, on extremely strong numbers once again. Firstly, alloy price inflation impact is 33% in total revenue. Approximately how much would be the same alloy wheel inflation impact for the braking systems division?

We have not calculated in that way, but we will let you know separately.

Sure, sir.

This will be approximately, if -- I will put it like that, that if it is increased by 48%, then the alloy impact will be around 28% or something. But we have not calculated as the CFO is saying.

Noted, sir. Second question on the new orders, can you indicate how much can be the revenue for alloy wheel in FY '27 and '28 and also for the Ford order for the current year and next year? And if you can throw some color if there has been any more order wins?

Well, alloy wheel, as I have explained earlier, we have confirmed orders of about INR 70 crores to INR 90 crores depending on how we gear up and how the customer gear up, and for this financial year. However, for next financial year, we have confirmed orders of about INR 250 crores. As regards to your second question of Ford Motors, we will be doing exports of about INR 40 crores to INR 45 crores this year. And next year, it is likely to go up to INR 60 crores.

Got it, sir. And any more new orders which you have received or are having in the pipeline? Anything you can talk about?

Yes, we have -- we are getting new orders in the existing -- with one of the customers, which I would not like to name and then happy to share that immediately, though it was not in our plans, but we'll have to set up a new plant immediately in South.

Noted, sir. Congratulations on that. So coming to the -- before I fall back to the queue, one question. Can you remind us on the utilization at Karoli and Bangalore facility and also the CapEx plan for FY '27, given that you are setting up this new plant in South?

Yes, Mr. Raghu, that our Bangalore plant, which was our 18th plant is running at optimum capacity utilization. We are optimum. And again, happy to share that against the installed capacity in Karoli plant from 60% to 65% that we were in the last quarter, we have now gone up to about 75% and we are confident that by -- in the last Q4, we'll be around 80% of the capacity utilization, because we see the visibility for the Q4. So that is the need that we have to urgently set up for the new orders that have come. We have to set up a new plant in South that will be in Bangalore at a war footing, and we hope to operationalize it before March in this financial year. The other question of yours was the -- how much CapEx to be done. We had given a guidance of about around INR 450 crores to INR 500 crores. But the way we are going and the way we are receiving the orders because as I today revised the guidance to high teens, I think our CapEx may go to something like INR 700 crores.

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

Congratulations, sir, for a very good set of numbers. My first question is on the AISIN JV. Can you throw some light on -- or can you give us an update on the JV, where are we in terms of revenue margin, et cetera, product portfolio expansion, number of dealers? Any color on the JV? And by when can we see the profitability of JVs improving because I believe it is still making losses. So, yes, that would be my first question.

Ronak, AISIN JV is ramping up, and we are introducing more products into the pipeline. And we are also expecting that by the end of this year quarter that we'll also see some profitability there. However, it will not be significant because it's mainly trading.

Understood. But any color on the revenue that you expect from the JV maybe say, by the end of next year -- this year, end of next year?

I think this year, there is not much significant revenue we are expecting. But maybe in the last quarter call, we will be able to give you some good guidance for the next financial.

FY '28.

Sure, sir. And my second question is on the commodity prices. So like you indicated during your opening remarks that commodity prices have started to cool off and you may see improvement in the margins going ahead. But I just wanted to clarify one thing. Is there any pass-through of last quarter, which is still pending? Or we are -- but everything is fully passed so far.

Actually, Mr. Ronak, there is a complete confusion on the margins. In our -- this casting line, we have to see the absolute EBITDA, which, as I have always explained, because there is 100% pass-through with the customer, back to back, we are hedged, fully hedged. So the absolute margins remain the same.

Yes, sir. No, sir, my question was something else...

No, no. When we talk of the margin, it is only the percentage that looks like low, which is looking [ 12% ] when the prices are coming down, the same percentage is 13% or 13.4% like that.

No, sir, I completely understand that. So my question was more from a pass-through, which happens with a lag, with a 3-month or 6-month lag. So is there any part which is pending.

No, not pending. We have received everything from there. Our customers are very, very esteemed customers, and they have passed it on.

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

Just one question that I have. So you mentioned that in the first quarter, revenues are inflated or rather growth is inflated by about 33% because of aluminum or the pass-throughs. Now, if I look at this quarter's revenue, which is about INR 1,358 crores and if I divide that by [ 1.33 ] to remove the element of price hikes for aluminum, I get to about INR 1,020 crores. And if I -- there is no impact on EBITDA because of the pass-through. And if I use the EBITDA number and divide it by this modified revenue, I get a margin of some 15.7%. So what I want to check is, one, is the math correct? And second, is this kind of a margin sustainable adjusted for the effect of price hikes in revenue?

Naresh, this side. Actually, your calculation is right, but some part of opening inventory may be there in the revenue. So this margin of 15% is not sustainable in our industry. Our margins remain in the same line.

The overall margins will be -- you'll be finding around 13.5% to 14% in between that.

Understood, sir. And the back working that I get, that is logical, right, where I got more than 15%.

That's nearly logical, yes.

The next question is from the line of [ Vineet Agarwal from Bajaj Alternates ].

Congratulations, sir, on great set of numbers. Just one question from my side. Like how do you plan to fund the new CapEx which you are targeting?

Yes. Actually -- we are actually keeping in mind our high mid-teen growth. Our internal accruals will be sufficient. But yes, for cash flow management, we will have to take some external financing.

So external will be borrowing, sir?

We'll be taking term loan for machines.

The next question is from the line of Mrunmayee Jogalekar from Asit C. Mehta Investment.

Sir, congratulations on a great set of numbers. I had a couple of questions. You mentioned that you have received some new orders based on which there's a new capacity that you're putting up. So can you give some more color on these orders? Are these more on the EV side because we are seeing improving penetration? Or is it broad-based across ICE and EV?

This is broad-based ICE and EV, but yes, EV also is substantial because as you know, the EV share is now increasing. And it's daily in the ALPS segment.

Okay. Okay, sir. Got it. And sir, any updates on the alloy wheels with the Taiwanese partner?

That is under testing. As I told you last time also in the last many calls, I said that it's in the final stages of testing whenever the approval comes because being a safety item, we don't pursue it that the customer must should take their own sweet time. So but we are very confident that even that will pass.

Got it, sir. Anything on the...

For both these collaborations, I had given the guidance of H2, but we have been lucky that this one -- at least one of them has fructified 1 quarter before.

Right, sir. Yes. And sir, anything on the sunroof cables business?

That is also going as per plan. And in fact, we have received very good orders in that. And next year, it will be shaping up very well.

But the supplies will start in H2...

Yes, yes. Initial supplies will start from H2, but next year, you will see a substantial growth there.

Okay. So we'll start in H2 of this year and then ramp up next year.

Yes, yes.

The next question is from the line of Vaibhav Mehta from Axis Mutual Fund.