Jupiter Wagons Limited (JWL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Jupiter Wagons Limited Q1 FY '25 Conference Call hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sudeep Anand from Systematix Institutional Equities. Thank you, and over to you, sir.

Thank you, and good afternoon, everyone. Thanks for joining us today for the Q1 FY '25 earnings call of Jupiter Wagons. On behalf of Systematix, I would like to thank the management for giving us the opportunity to host this call. Today, we had with us Mr. Vivek Lohia, Managing Director; and Mr. Puneet Saboo, Vice President Finance. Now I would like to hand over the call to the management for the opening remarks, and then we can open for the Q&A. Thanks, and over to you, sir.

Thank you, Sudeep (sic) [Sandeep], and welcoming to all our investors and analysts us joining for the Q1 FY '25 Earnings Conference Call. I'm thrilled to share the progress and achievement of Jupiter Wagons Limited and our subsidiaries over the past quarter. Our unwavering dedication to revolutionizing mobility solutions has driven us to new heights, and I'm excited to present key milestones and strong financial performance in Q1 FY '25. In Q1 FY '25, the company reported a total income of INR 90,219 lakhs, marking a 19% year-over-year increase. EBITDA surged to INR 12,886, a 32% rise with EBITDA margins improving to 14.4%, up from 12.9% in Q1 FY '24. PAT reached INR 8,923 lakhs, a 40% increase, and PAT margin grew to 9.9%. Despite challenges from the general elections and peak summer impact of our multi-location plant, we achieved a robust consolidated EBITDA margin of 15.5%. Our order book stood at like INR 7,02,834 as of June 30, 2024. Jupiter is at the forefront of our mobility revolution, offering comprehensive solutions across rail, road and marine transportation. Our focus on sustainability, efficiency and innovation positions us as a key player in reshaping product mobility. We integrate various transportation modes to ensure smooth, efficient and eco-friendly journeys. During the quarter, we advanced into energy-efficient battery solutions for rail coaches through our collaboration with Log9 Materials Private Limited. Our commitment to an energy efficient logistics is evident in our role in developing critical infrastructure at every stage. Jupiter Electric Mobility, our esteemed subsidiary, has achieved a major milestone by completing 6-month trials of 11.2 kilowatt lithium-ion LFP battery pack for rail coaches. We are the first to receive certification from RDSO. Additionally, we secured a purchase order for LFP auxiliary batteries for Vande Bharat trainsets from Siemens and have technically qualified for rail tenders. Further, the company is in the process of developing the next-generation battery packs for Indian railways. This accomplishment underscores our leadership in advancing battery technology for Indian railways. Jupiter Electric Mobility has received approvals from the Automotive Research Association, ARAI, for commercial production of our 1-ton four-wheel electric light commercial vehicle, JEM TEZ. This vehicle features advanced fast charging technology, enabling full charge in approximately 20 minutes and offering a certified range of 127 kilometers. Production is set to begin in October Q3 FY '25 with the initial plan to manufacture 500 vehicles in the inaugural year. In March '24, we acquired a majority stake in Bonatrans India Private Limited to enhance backward integration and create operational synergies. For fiscal year 2024, Bonatrans reported a 5-fold increase in revenues to INR 7,436 lakhs. EBITDA rose to INR 930,000 lakhs with a 12.5% margin and PAT reached INR 702 lakhs. We aim for a turnover of approximately INR 400 crores from BIPL for FY '24-'25. In the short, medium-term, we plan to expand BIPL capacity to machine 28,000 wheelsets in FY '25 and up to 40,000 to 50,000 wheelsets by FY '26. These wheelsets will support JWL's freight car orders and be used to export to Tatravagonka and other international players. Further, we are also selling these sets to Indian railways for the LHP and Vande Bharat applications and to the various metro players -- leading metro players in India such as, Siemens, Alstom and BEML. We are also advance -- in advanced discussion to establish our fully integrated forging line for wheels axles in India with a target to manufacture around 1-lakh wheelsets annually and expect it to be commissioned and completed by 2027. This facility will not only cater to the demand of the -- the growing Indian demand for wheelsets, but also this will be a significant exporter of wheelsets to the European Union and all other major wheel, wagon, freight and rail manufacturers in the world. We are pleased to announce the successful completion of our qualified institutional placement, raising INR 800 crores. The QIP received an overwhelming response with total demand reaching approximately INR 2,800 crores, reflecting strong institutional confidence. The raised capital will be primarily used to establish a full wheel and axle manufacturing plants, enhancing our backward integration and supporting long-term growth. This initiative will create opportunities to expand into the export market, further strengthening our growth and market presence. With that, I conclude my remarks, and we can open the floor for Q&A. Thank you.

[Operator Instructions] Our first question is from the line of [ Nidhi Shah ] from ICICI Securities.

Am I audible?

Yes, ma'am.

So firstly, with the budget announcement and with prior budget also that the locomotive -- the production for this year of locomotives and wagons will increase for this year and next year. So what do you think is your order pipeline looking like for this year?

So as already mentioned in the opening remarks, today our order book is very strong. It stands close to INR 7,000 crores. And as in the budget announcement itself, IR is in the process of undertaking a major expansion of its track network. As you have seen over the last year, the railway freight traffic has grown over 4% -- over 5%, and now it is close to 1,600 million tonnes. And by 2040, they want to take it to 500 million tonnes. So again, we expect a very, very strong wagon demand from IR, the expectations anything above 30,000 wagons is what we are expecting. Further, the private sector demand continues to be very robust. Again, every month, we continue to add significant order books. And from last -- this month, we have also started our supplies for the new wagons such as the fly ash wagon as well as the auto rig. So I think -- and we are in the process of developing further new designs. So I think with the addition of the specialized wagon, we expect the demand flow to be very strong and our margins to improve further.

All right. And as you mentioned, it was a specialized wagon, the order pipeline looking good. So what do you think about the competitive intensity in this market?

So obviously, there is competition. But we believe we have a significant edge because of forward integration -- in terms of the design capabilities, which we have and the kind of partnerships we have with people like GATX and the design feedback which we get from Tatravagonka, them being a significant partner. So -- and we -- and the kind of backward integration which we have undertaken. So we will continue to have the edge when it comes to these new designs, and we are significantly ahead of competition in terms of the design capabilities and the new designs which we have already introduced in the market.

All right. And my last question would be, if the EBITDA margin this time is nearly 2% higher than what it was for the full year last year. So could you give some color on that? And are these margins sustainable? And what would the full year margins look like?

So no -- so definitely, these margins are sustainable, and I had -- as such, also, I had mentioned in my previous calls also, this year, you will see the wheel business contributing significantly as well as the braking business. As contributions from these businesses go up, definitely, they will have an impact on the margins. Plus on the wagon side, also, as I mentioned that now we have started deliveries of our specialized wagons. So there also, we expect better margins going forward. So yes, so overall, I think we are very confident that our margins are going to be sustainable. And we are increasing our wheel capacities also significantly in Bonatrans. So quarter-on-quarter, you will see the revenue numbers going up. And further, we are doing a substantial backward integration. I think in a year or 2, the impact of that also will be significant.

[Operator Instructions] Our next question is from the line of CA Garvit Goyal from Nvest Analystics.

Am I audible?

Yes, sir.

Congrats for a good set of numbers. My first question is it seems like the order inflows got hampered in this quarter due to political event, in fact you mentioned in the PPT also. For the upcoming 9 months, what factors give you confidence that the order book will be executed and expanded as anticipated at the beginning of the year? Are there any slowdowns or delay being faced in our order book execution? And additionally, how do you foresee the order inflow for this quarter, sir?

So in terms of execution, we are very, very confident. Already, I think, post-election execution numbers have gone up. And as we had guided that this year, we are targeting to achieve a sale of 10,000 wagons, and we are completely on track. And we are very, very confident to achieve those numbers. As I've told you again from the private sector, we are continuously adding incremental order books. And we accept -- we expect Indian Railways also to come out with significant tenders in the coming months. So order inflow also, I think, will continue to remain strong. We are more focused on definitely increasing our capacity, especially our foundry capacity and on the backward integration side in terms of the braking business as well as the wheelset business. I think going forward, they will play a very critical role.

Sir, when you mentioned we are increasing foundry capacity. So what is our existing capacity? Like we were targeting 1,000 wagons per month, right? So what is our new target? Are we be looking to further expand it or how it is going to be?

See, as I mentioned by the beginning of fourth quarter, we will be adding another 1,000 tonnes of foundry capacity, and we are on track towards that. And I think that will help us. Definitely, once we add back capacity, we will be able to achieve our target of 1,000 wagons.

So by when, you means Q4 '25?

By -- before end of Q3. Before end of Q3, as I had mentioned.

Why it is getting delayed, like that? Earlier, we were looking at by the end of FY '24 only and now 3 quarter delay is there.

No, no, no. So it's end of I said Q3. So it is before -- always it was in '24 only. It will be completed in '24. We are not going to go to '25. We are not -- there are no delays. Whatever guidance which I have given, we stand by it. So we had earlier also mentioned, by October, we will be completing our expansion, and we are on track for that.

And sir, secondly, could you also elaborate on the company's plans regarding Lithium-Ion batteries. Are there any significant CapEx plans in place to support this initiative? And what is the expected time line for the implementation? Additionally, like does the company have any plan to set up a dedicated plant for it? Or how it is going to be, sir?

Dedicated plant for what? I could not follow you.

Lithium-ion battery technology that we are talking about in the PPT?

Okay. Yes, definitely, we have a plan to backward integrate, and we are in the process of finalizing the same. So right now, we are focusing on developing the right technology and getting ourselves certified. So as and when we firm up the plans, we will let you know.

Understood, sir. And sir, one last question on your brake segment...

Our next question is from the line of Shrinidhi Karlekar from HSBC.

Congratulations on good set of numbers. So just a little bit more colors on your incremental investment that are going into wheelset business. So can you give us like a broad landscape, like how much is the Indian market demand of the wheelset? How is it split between cast and forged wheel where does the Bonatrans comes into the [ picture ] for cast and forged wheel. And how much likely to be incremental demand that you see in the domestic market itself? So some color on this whole opportunity that you have on the wheelset side.

Yes. Thank you. So as you are aware that today already the Indian -- if you look at the entire rolling stock population and the country is close to 500,000. And we expect by 2030 that entire rolling stock population will be close to about 800,000. So -- and wheelsets have to be replaced in approximately around 7 years. So every year, you're looking at a replacement demand of at least 5 lakh wheelsets plus the OEM demand which is there. So we expect annual demand to be nothing less about 6 lakh wheelsets. And today, if you look at the manufacturing capacity in the country, it is close to about 1, 1.5 wheelsets in the maximum. And wheel factory is the major manufacturer, and they produce, I think, close to about 1 lakh wheelsets. So there's a significant gap and India is a major importer of wheelsets. And if you look at our own wagon capacity, we are looking to produce at least anything between 12,000 to 15,000 wagons annually. So our internal demand is itself close to about 60,000 wheelsets. And plus for us, Europe is a big opportunity. Our partner, Tatravagonka, they themselves require about close to 50,000 wheelsets annually. And plus, we are already in discussions with other European players who themselves are looking at alternative sources for wheelset procurement. We are setting up facilities initially to produce about close to 1 lakh wheelsets, but we are very confident that given the kind of demand, which is there, we will have to further enhance the capacities in the future.

Right. Sir, there is both cast and forged wheel that Bonatrans can do or it's only the forged wheel?

No, we are only -- so we can assemble and machine both cast and forged wheels. But the backward integration, which we are doing, we are focusing on forged wheels because that is the future technology and all high-speed applications will require forged wheel only. So cast wheels cannot be used for any high-speed application. And if you look at Europe, it is all forged wheel only.

And sir, currently, Bonatrans are the on-trade or it's more of machining at this moment?

So right now, we don't have any foundry facilities. We have -- we are doing the machining and assembly of wheelsets.

And sir, last one, if I may. Sir, currently, what Jupiter Wagons produces for the Indian Railways and the private customer on the wagon side? Where do you guys procure wheels for that? Is it railway factory or -- and can that be backward integrated and sourced it from Bonatrans?

So right now, we are sourcing mainly from Bonatrans and other suppliers. But the idea is that over the next 2 years, we are setting up a whole -- ourselves, we are doing a complete backward integration.

Our next question is from the line of Devesh from Antique Stock Broking.

Just if I might have missed, I just wanted to know what is the average selling price for wheelsets currently for Vande Bharat and for freight?

So freight it's roughly around anything between INR 2.7 lakh to INR 3 lakhs. It depends on the raw material prices. And for Vande Bharat, I think it's approximately -- I don't know again the exact numbers. But I would assume that it is anything between INR 6 lakh to INR 8 lakhs. But again, I'm not -- it's somewhere in that ballpark.

And margins are same for both of them?

Yes, margins -- no, as you go into more high-speed applications, definitely because the intricacies and machining and everything and the demands are much higher. So definitely, in high-speed applications, the margins are more than freight.

Okay. And one another update I wanted on the commercial vehicle volumes. If you see the volume numbers like Y-o-Y, they're stable, but then Q-o-Q, they've fallen down. So are we expecting some slowdown in that side? Or are we not focused on that business yet? There was one time and you had mentioned that you want to be focused on containers.

So I think there is no significant -- this was a legacy business for us, and the idea is to -- again, it's not that we are not focused and we want to continuously grow this business. But as you see, there is no significant drop in numbers. The numbers are very, very similar. And we expect before end of this -- compared to last year, we expect the numbers to go up only by end of this year. Again, you have to understand that being an election year, election quarter, even in the Commercial Vehicle segment also, there was an impact because of that. And I think post the monsoon season, you will see definitely increase in terms of demand.

Our next question is from the line of Parvez Qazi from Nuvama Group.

So a couple of questions from my side. First, it would be great to get an update about the EV business and also the brake business regarding Stone India. What are the developments, let's say, which have happened over the last call it a couple of months in terms of future tenders and scaling up our product portfolio there?

So on the EV business, as I have mentioned that we have already got approvals from ARAI. We are in the process of now starting our commercial production. And by end of October, we are confident that we will start rolling out our vehicles. We are, I think, in the last mile of that journey. Again, we are starting with more than 80% localization, and our vehicles will be eligible for getting subsidy too. Further on Stone India, again we are -- we expect railways to grant us licenses very shortly. We have already upgraded our infrastructure, and we expect commercial production to start in the next couple of months.

Great. And actually, what was -- what's our net debt figure currently?

I'll just hand over to Puneet, he will mention this.

Our net debt would be around -- our gross net debt consol basis is around 450 and the net debt will be around 300.

Our next question is from the line of [ Gagandeep ] from Nvest Analystics Advisor LLP.

Am I audible?

Yes, sir.

Yes. Please go ahead.

Yes, sir. Sir, my question is on the brake segment side. Like the company had set a target of achieving INR 300 crores to INR 400 crores in revenue for brake and disc segment in FY '25. So -- however if we look at the KOVIS and DAKO order book numbers that shows only INR 35 crores execution in this quarter. So with no incremental order book observed in this quarter. So are you in line with achieving the target for FY '25?? And why there are no incremental orders for this segment, sir?

No, I think we are adding incremental for, I think, the DAKO business already we have orders of close to INR 150 crores -- close to about INR 100 crores, and Indian Railways is now coming out with new tenders. So already, they have come out with the tenders. They're going to award further orders, I think, in the next couple of months. And even on the KOVIS business, we are adding incremental orders every month. So I don't know exactly from where you've got the numbers. And when we talked about INR 200 crores, INR 250 crores, we also included Stone India. And as I've just mentioned, that in the next couple of months, we'll be starting commercial production there. So we are definitely in line to achieving the numbers which we have disclosed.

So it will be INR 300 crores, INR 400 crore or INR 200 crores, INR 250 crores?

No. I never mentioned INR 300 crores. I mentioned INR 200 crores to INR 250 crores in FY '24-'25.

Our next question is from the line of Akash from Dalal & Broacha Stock Broking.

Yes. First of all, congrats on the great set of numbers. So my question was -- first question on Bonatrans, wherein I wanted to understand all the leases that we have priced in this quarter, have you used for captive focus or how is it?

Thank you, Akash. No, it is not being used for captive or not all. Definitely Bonatrans has supplied for captive. But we have supplied to Indian Railways for the applications. We have supplied to the metro players also. And we have supplied to other wagon manufacturers also. So it has been Bonatrans supplying wheelsets across the various segments, and not only to Jupiter, but to all the major players.

Okay. So this is like you said, sir, our own wagon production, we're planning somewhere between 12,000 to 15,000. So that works out on a 50,000 60,000 wheelset requirements for our own purpose. So how do you plan to scale the wheelset that are going to be produced at Bonatrans going further? How much we'll be using for captive and how much we'll be catering to other players?

So as I mentioned that we are -- by this year, we will be scaling the production to about 30,000 wheelsets. And by next year, we will be close to about 50,000 wheelsets. And then I think then onwards with our complete integration happening, we will be close to about 1 lakh wheelsets by '27 end. So as we keep on scaling up, it will be -- basically, the production will be used for our captive production as well as for supplies to others. So initially, I think for our captive production, Bonatrans will be supplying close to about 22%, 25% of our demand. And as it keeps on scaling up, definitely we will be using more of that capacity. But again, we are looking at the market opportunity in a big way. So -- and to serve the requirements for LHP as well as the Metro and the Vande Bharat. So it'll be a mix of everything for us.

Got it, sir. And I would also like to understand how do you, I mean, foresee the margins going ahead? So we'll get a gross volume of around 25% and EBITDA of 15.5%, at the consol level. So for this year, is it a sustainable -- are those gross margins, EBITDA margin of 15% plus are sustainable? And how do you take it forward in the next 1, 2 years?

I think definitely, we are confident that these margins are sustainable. It will be around the 15% kind of margins because, as I mentioned, that as the other businesses start contributing significantly, so they will start having a positive impact on the margins. And going forward, again, as we achieve better backward integration, we -- as I have mentioned that as the steel business becomes bigger, as the baking business becomes bigger, they start contributing. We expect the margin profile to improve.

One last question from my side just one last question. Yes. So basically, last year in FY '24 as a whole, the industry, I think the railway industry, including a private and the public in railway demand, I think there was around 35,000 wagons, so -- if I'm not wrong. So then how do you project this number going ahead, like where it can reach in the next couple of years considering '25, '26 and '27?

So I'm not sure about that number, I have to cross check. But as you are aware that today, industry has significant order books. So we -- in terms of the demand, I don't think we see that to be any kind of challenge. If you see the national rail plan from Indian Railways, in the next 5 years, they are looking to buy at least close to, I think, 400,000 rolling stock. and in terms of the wagon demand is 400,000, of which they have procured, I think, around 150,000. So there is still a huge gap in terms of their projections, which they have done and the procurement which they have done. So we don't see a challenge and the kind of investment which is happening in the infrastructure, especially on the track infrastructure and the signaling and in terms of the last mile connectivity which is there. And the government is very, very committed very towards infrastructure. As you have seen in this budget itself, the finance minister reiterated that the infrastructure spending is now above 3% and they continued -- and the government will continue in that path. So I don't see any challenge in terms of the demand going forward.

Our next question is from the line of [ Suman Kumar ], an individual investor.

Sir, going to the presentation, what I figured out is the volume that we have been able to generate as far as railway wagons is concerned has dropped to a level of around 1,954 crores from 2,520 from the last quarter. Given the kind of order sales that we have, what would be the reason for this?

So as I mentioned, very clearly, see, if you look at Q1 FY '24, there has been a significant jump. But yes, from the last quarter, there has been a drop, and I mentioned very clearly that this is because of the disturbances because of elections. As you are aware that the election is over 7 phases, and we are not only in one location, we are in -- our plants are in various locations. So definitely, there was a lot of disruption due to that. And further, typically in the extreme summer, the production do drop because of the weather-related issues. But already productions have picked up significantly. And we expect that in the coming quarter, production numbers are going to be very strong, and we are very confident to achieve our targeted production of 10,000 wagons for the year, which we have projected.

Appreciate. Second question, sir, around the EV. So while you understand that we must be doing some kind of pilot exercise by testing the EV, have you also started doing marketing of it? And while the production is going to start towards October that you have given an indication of, do you -- what is the kind of order book expectation that you have going into the next quarter or the quarter that we are already into?

So in terms of the market demand, I think we are seeing a significant demand from the market, and there is a lot of -- I think that demand is going to keep on picking up. As you are aware that our vehicle is for the last mile connectivity, and there's a significant price advantage which we offer. Initially, definitely, we are looking at the B2B segment and mainly the aggregator and we are seeing a very strong interest from them. We are very, very confident that we have -- that once we launch, we'll immediately fill up all our order books. So we don't see any challenge in terms of the demand. And today, if you look at competition, there is -- in this segment, there's hardly any competition which is there. So we have very high expectations from the segment.

And when do you intend to start going and taking the orders for the product, sir?