Jyoti CNC Automation Limited (JYOTICNC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Jyoti CNC Automation Limited Q2 FY '25 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar. Thank you and over to you, sir.

Thank you, Neha. Good evening, everyone. On behalf of ICICI Securities, I welcome you all to Jyoti CNC Q2 FY '25 Earnings Call. Today, we have with us Mr. Parakramsinh Jadeja, Managing Director of Jyoti CNC. Without much further delay I will now hand over the call to Jadeja sir, for his opening remarks, which will be followed by Q&A. Over to you, sir.

Thank you, Mohit. Good evening, friends. I'm delighted to extend a warm welcome to each one of you to the earning call of Jyoti CNC for Q2 FY '24-'25. Thank you for the level of trust and confidence you have placed in us in our journey so far. We truly understand the responsibility that comes with your investment and we promise to deliver the best of us. We shall start with company presentation and have the question-and-answer session, then later. In terms of consolidated financial performance of Q2, in terms of revenue from the operations from Q2 FY '24, it was INR 302 crores has went up to INR 430.7 crores, almost a 43 percentage of growth in revenue we're able to clock over here. In terms of EBITDA and the margin, let's say, on FY '24, it was 18 percentage and is now today is went up 25 percentage. In terms of EBITDA numbers, it was INR 54 crores is now -- is reached INR 106.6 crores in quarter 2. In terms of the operational PAT, the quarter 2 FY '24, it was INR 16.8 crores, and it has grown up to close to 352 percentage and is up to INR 75.9 crores, close to INR 76 crores. And this revenue from the operations in the business mix, if you look at that out of this INR 431 crores, Aerospace has contributed close to 38 percentage. Auto and Auto Component, vertical has contributed to be 29 percentage, General Engineering has contributed 16 percentage. Dies and Moulds has contributed to be 2 percentage. EMS business has contributed 11 percentage and others are almost 4 percentage there. And average price realization per machines we are able to clock to INR 41.37lakhs. And the number of machines, what we have sold in this quarter is close to 1,041 machines to be clear. If I make it just -- summarize for the H1 numbers. So H1 numbers from FY '24 to '25 has grown up by 55 percentage and the total H1 numbers has reached to INR 793 crores almost over here. In terms of H1 EBITDA last year was 14.6 percentage and this year has reached to a 25 percentage is close to 170% growth has been clocked and INR 200 crores of H1 EBITDA has been touched over here. In terms of the PAT, last year, H1 is close to INR 3.4 crores, it has reached to INR 127 crores, almost to be like that. Each one performance in terms of our verticals, the Aerospace vertical has contributed to be close to 47 -- 43 percentage. Auto and Auto Component has contributed to be 28 percentage. General Engineering is 17 percentage. Dies and Mould is 1 percentage and EMS is 6% there. And in terms of revenue, is divided into 2 areas like India, we have a close to 55 percentage and we have exports is close to 45 percentage there. In terms of the order intake in Quarter 2 FY '25, the orders we have seen a very nice -- the order book we have received in this quarter. And in terms of numbers, it is INR 1,283 crores is order intake in this quarter. Out of that, even Aerospace, we have received close to 23 percentage, Auto and Auto Component is close to 15 percentage. General Engineering, we have received close to 17 percentage, Die and Mould close to 1 percentage and significant movement we have seen in terms of EMS and it is reached to almost 41 percentage over here and Others are 4 percentage there. So in our closing order book today, let's say, opening orders was close to INR 3,403 crores was there. New orders has been came to INR 1,283 crores And the dispatch, if we remove the dispatch now today, the visibility of a very good future ahead and the growth forward for us is to be look like to be INR 4,289 crores orders are here there. In terms of our order book. Total order book today, out of this INR 4,000 crores, close to INR 4,300 crores, the Aerospace is contributing now is to be 43 percentage, Auto and Auto Component is 15 percentage. General Engineering is 16 percentage, Die and Mould is 4 percentage. EMS has reached to 17 percentage and Others are close to 5 percentage like that. Now we move forward to be, let's say, to talk a little bit more about Jyoti. So Jyoti is basically a first-generation business, and we are into metal cutting industries. We make the CNC machine for manufacturing and metal cutting. We are fully vertically integrated company, and we have our own foundry. We do the machine shop. We do all the component critical manufacturing in-house over here. We have a sheet metal shop, paint shop integrated to be there. We have our own sub-assembly, assembly and fully controlled temperature, assembly, sub-assemblies are there to produce the most precision world-class manufacturing facilities has been like here. In terms of our key strength is in R&D capabilities are there. All this our design and development, we are able to do it this in our Leonardo Da' Vinci R&D center, where we have more than 140 engineers are working to designing and developing every day a new product over here. In the last 2 decades, we have designed and developed more than 200-plus product variants out of 44 product verticals. We have developed a very specific product basket of today's need of the hour in industry called as Industry 4.0. Our product is serving them as part of the 7th SENSE is fully integrated design and developed over here. We have a very -- many, many AI-based tools we have developed is called as PreciProtect’. And this takes care of the complete machine through the real-time accident proof machines to be there. And we have a many, many solution provided completely application-oriented team is a part of that. So it is always supporting to the -- our customers there. In terms of our manufacturing capacity, let's say, the last year, we were having a 4,400 machines. And now with this our new bottleneck and everything has been removed, we have reached the September end is close to 6,000 machines and this is fully integrated into one plant over here, and we have one facilities there in France there. Similarly, we can do in a same plant this kind of a multiple by 3 more fold, we can do that much of a space are available into existing plant at Rajkot over here. Huron is basically our technology backbone. Huron, since the company is established since 1857, is located into Central Europe, part place called as Strasbourg. It's in border of France and Germany. And very near to the most world machine tool builder as well as the most automobile and general engineering and the highest precision manufacturing area, in the central part of Europe there. Because of that, we have a technology access. We learned a lot of things from that to make the sophisticated 5 Axis machine. And with that, our product baskets and everything on a 5 Axis machines and all are very large there. Mainly because of that, we are able to cater mainly Aerospace companies to be there basically. And because of the Huron, it's a very esteemed brand and that brand value adding us more and more customers that are there to us for the worldwide there. We have in terms of a sales and distribution network, we have close to 29 sales and service center across the India. We have 2 distributors and dealers are there in India and rest of the areas are Jyoti's directly is reaching to the customers there. We have a global customer base out there. We have more than 60 countries. Our -- until today the installation has crossed more than 130,000 plus machines, mainly in Europe and Asia. And even we have a good installation into China, Canada, U.S. and Mexico to be there. In terms of our end user industry segments, I would like to highlight you something more like that because the metal cutting is required to every segment of the part in manufacturing there. So we are covering aerospace, die and mould, automobile, electronics, railway, agriculture, infrastructure, oil and gas, health care, pumps and valves, power, bearing and et cetera, like that. We have divided, let's say, total our presence into entire value chain, we call it the entry level product. There we have a complete product baskets are there. In total, we have a 200-plus product variants are there. We have a mid-range machines and we have a high-level machines. We have divided these categories based on the value of the machine, let's say, up to the INR 50 lakhs machine is called as entry level product. In mid-level machines we call it up to INR 50 lakh and more than INR 50 lakhs -- more than INR 50 lakhs to INR 2 crores is up to mid-range machine and above INR 2 crores and all its called as high-end machines like that. And Jyoti is in this entire product basket there. In terms of our client in Aerospace, we have HAL, Tata Advanced Systems, Airbus, the TAI, the GE, the Avic, the Sikorsky, the Boeing, Safran, Rolls-Royce, Bharat Forge. And in terms of automobile, you have all the names we have it, is Tata, Mahindra, BMW, Volvo, Mercedes, Audi, Volkswagen, Ashok Leyland, Fiat these are our and there are Tier II, Tier III all the suppliers are there. In terms of other client, let's say Arcelor Mittal, Azad, Harsha, the Bosch, many, we have more than 12,000 plus customer base are here. Recently, in the last quarter, we recognized by 3 different awards in terms of one is Iconic Brand of India by the -- our Times Group has been -- ET, Economic Times has given this award. And another 2 was into Best Product and Display Award into different exhibition in the entire country. Our road ahead over here. See India is in terms of the manufacturing is growing on a great speed over here. And our assumptions are like that in the next 5 to 7 years Indian manufacturing is going to grow. Today is around 14 to 15 percentage and India is our total -- our government and everybody are looking to more than 22 -- in between 25 percentage. And there, the machine tools total growth have been anticipated, more than 20 percentage of the CAGR in the next 5 to 7 years here. India is, let's say, is consuming close to $3 billion worth of CNC machine tools in India today. Out of that, close to -- still 60 percentage is to be imported, and there our -- going forward is our opportunities are there. We have -- let's say, our vision and our mission is like that propelling technology and prospering life. And with a strong management team, world-class infrastructure, wide product basket, strong R&D capabilities, large installation base, global footprint and the legacy and technology from Huron, we are looking to be a very robust growth in coming days, and we have divided into this let's say, 4 different categories. Today, category #1, we called as automobile and general engineering. Second is called as aerospace. These 2 areas we are largely been established now. And the third area we are developing in terms of the order book, it has been receiving significantly over here. In coming days, this is going to be third vertical, it's called as EMS. In fourth vertical, it is going to be our future and it is a nice area that all our R&D team is working. In the next 2 to 3 years, we will see the good revenue. It is in the semiconductor equipment to be there. So this are our 4 -- going forward is in 4 vertical for our business segment over here. Right now, we are -- our growth engine is we are looking to be aerospace, EMS and now electrical vehicles are there. And in future, we are looking to be the semiconductor industries to be here as well. In terms of our strategies for the next leap what we are looking. Number one is to be a people development. Number 2 is to be a product development, three is market expansion. And fourth is manufacturing capacity expansion over here. In the people development, that's the key, the biggest challenge what we are going to see it over here because the business is -- the way our order books are there and still the big pipelines are there, the key is that we need to ramp up in our execution capabilities and this all the capabilities are directly related to the people. So we are working towards to develop our own excellence -- center of excellence. There we are able to develop this kind of people very quickly over here there. So that's our one of the first strategy to be there. Product basket is always the new product because every day the customers are coming with the new challenges and all. So our R&D teams are making many products like that. And this year, we have developed 3 more products we call it as a GU5 Five. This is called as Tachyon 4FT and [ TS 120 ]. These are the three category of the product, GU5 is basically aerospace machine. Tachyon, the new Tachyon is basically the product for the EMS and health care industries. And TS 200, this is the third product that we have developed is for the automation and for the more and more large production capabilities are there the twin spindle machines are there basically. Market expansion, we are looking to be entering, now today, we are very good in terms of a presence in India, in Europe. We are now looking to the U.S. there. Very soon, we will have some tech centers and our sales offices are going to be within one year. This is our target to be there in market expansion into the U.S. there. In other areas like Thailand, Vietnam and Indonesia, there also we are working with some of our representative over there, and we are looking to be more business from that area also to be there. In terms of manufacturing capacity, it's going to be a big requirement that the way we have today's order book as well as we have a pipeline is available with us. And just now, we have completed our bottleneck and all. So our Phase 1, we have reached close to 6,000 machines as per annum capacity. And this we are extending based on this -- our pipeline as well as our order books like that, additional 10,000 machine capabilities they are doing over here. And on the same plant, and on same geography over here and that additional facilities, we are expecting to finish in this 2 financial year, this year and next year over there. Yes. That's it from my side. I think we will go forward on a question-and-answer session now from here.

[Operator Instructions] The first question is from the line of Ankur from HDFC Life Insurance.

I had a couple of questions. One on the overall industry itself, while you said it's about a $3 billion overall machine consumption. You said about 40% in domestic. Within this, obviously, auto is a fairly large proportion. And given the slowdown that we've seen in the auto industry, how would you see growth rate overall? Or do you believe there are new segments like for us, EMS, of course, is a fairly large and upcoming segment. So if you could just help us how do you see the overall industry maybe grow in the next 1 to 3 years. Within that, how do you see -- or which segments are the largest growth drivers and therefore, which one help us...

Yes. Thank you, Ankur. See, basically, in terms of automobile industries, yes, is the biggest growth driver for any metal cutting industries and for us also. In our segment over here also, but right now, in auto and auto area, there's a lot of transformation happening there. And people are moving from, let's say, more and more on the EV side, and there are a lot of new components have been designed and developed over here. It's a completely new arena has been opened and more and more hybrid side, people are moving there and the more components are like that. So they are acquired basically for -- for our assumption like that, we are looking to be more consumption required in the next 3 to 5 years in auto area to be there. And based on this, all the government and all, people are looking to be more and more on the export side, all the component manufacturing is these people are exporting more and more. And then right now, in China Plus One, let's say, many of companies are moving to buying the parts in auto and auto industries also to be here. So in terms of the auto numbers is stagnant in terms of consumption. But our -- in our inquiry level and our order book in our component manufacturers are still investing and their confidence is so high. So we are looking close to good numbers are going to come and growth rate we are looking to be a 20 to 25 percentage on auto and auto component machines also to be there in the next 3 to 5 years there. Other segment, what is in India, we are looking is to the general engineering, okay? The general engineering, because of these exports and all are increasing, and a lot of manufacturing other areas like that here. So there, we are seeing good numbers are coming there. Of course, the third area is electronic is completely a new area for all of us here, and that is to be our growth driver to be there. So in terms of Jyoti our strategies are like that. Where we are here, let's say, we are looking to be a 15 to 20 percentage in our auto and general engineering growth to be there. And the rest other growth we are anticipating to the 2 areas. One is the aerospace and second is the EMS there.

I understand. And sir, since you spoke about EMS, it seems we've got a fairly large orders in Q2, right, almost if I heard you right, about INR 500-odd crores order in Q2. If you could just talk about this order, is it the same customer delivery time line? What is the current order book? How much of sales this year, next year? Just some more details, please?

So basically, it's a similar customer base are here. They have -- we have now many -- I told you in the past also. Now we have 3 more projects are there and every project has given us this contribution. And even the, let's say, we are looking to the large number in terms of -- in EMS, it still is to come and that is going to come on the next year still, okay? This is just the beginning over there.

And how much would be the current order book for this customer sir, is it possible to share? And what kind of sales are we looking at?

Already, let's say, I have given the numbers over here in terms of -- it's close to INR 700 crores now.

Okay. And this would be over how much time about 2 years, 3 years, how much would be the execution time?

This we have to deliver in 1 year time.

In one year time. And just one more thing, sir. On our overall market share, just if you could help us on the CMT machine side, both on turning and milling, where would be in terms of market share overall?

So overall market side, in terms of -- let's say, there are 2 areas are like that. One is called as a number of machines, okay, and value-wise there. So we are close to -- in terms of a domestic player if I look at that, so our market share is close to 10 to 12 percentage. And in terms of the total, let's say, import and everything together let's say, our percentage is only 4 percentage there.

And also on competition, sir, if you could just generally talk a bit, is that fairly stable? Are we seeing any new entrants there? Or is it still that same consolidated share where the top 5, 6 players are controlling most of the industry? If you just talk about competition for the top 2, 3 players...

All are the same people, all are same manufacturers. Actually, in this industries, I am the last one has come over here as a new company kind of thing are here.

Right. So the reason I asked is because when we last spoke to you, you spoke about import substitution happening, especially on the larger machine, sorry. So anything there which you would want to highlight? I understand on the EMS side, of course, that substitution is happening.

Yes. Definitely, this EMS numbers and these aerospace numbers, what you have seen is completely is import substitute there basically. Auto and auto component in an entry-level product, the Indian machine tools, the market share is close to 80% to 90% and rest are importing. So our -- in Jyoti, whatever the growth we are seeing is basically is in -- EMS also is completely imported areas to be there.

The next question is from the line of Harshit Patel from Equirus Securities Private Limited.

So my first question is on aerospace and defense, we have received orders to the tune of close to INR 380 crores in the first half of FY '25. I remember you had guided for an order intake of close to INR 1,000 crores or INR 1,500 crores for the full FY '25. So do you believe we are on track to receive that?

Absolutely.

Sure. So this INR 1,000 crore-odd orders, these are mainly Huron driven, mainly export driven? Or does this include the domestic orders also that you might get from Ordnance Factory, the private players who are doing CapEx in the...

Both are there, both are there, okay. But 80% is going to be -- is from the Huron driven and mainly our exports there in Europe area. And rest are, we are looking to be in Indian defense over here. And many customers in India has started procurement over here.

Perfect. Sure. And just a follow-up to that, I believe we were doing some debottlenecking, some capacity expansion at the Huron level as well. So are those activities over and now we are fully geared up to deliver those machines?

Huron, this new facility is going to be ready in the end of this year basically still. It's still is going on there.

Okay. So by the end...

End of the year, our -- the Huron facility is fully going to be ready.

So then what kind of revenues at the peak fixed asset turnover that facility can do when we would have completed this expansion project over there. So what are the peak revenues basically we can expect from Huron?

Yes, after this expansion, in Huron, we can see up to EUR 80 million to be there.

Understood. Perfect. Sir, just my second question on this INR 400 crores CapEx that you have announced, which you will do at Rajkot close to 10,000 machines. So which industry these machines will be aimed at? What kind of realizations we can do? What would be our peak revenues that we can achieve from here? These capacities will also come with the inherent backward integration that we already have at Rajkot. So if you can give some more color on the capacity expansion that will be helpful.

Yes. So basically, we are expanding this 10,000 facility on our entry-level product over here. And let's say the EMS product is also is an entry-level product. Of course, this is a fungible kind of a thing, I can do turning, milling combination over there. But largely, what we are seeing and we have a pipeline over here in EMS and with our customers and with the guideline what we have it, so we have dedicated of this almost 70% to 80% of this facility is for the -- the range of the machine is close to INR 30 lakhs to INR 35 lakhs would be there basically. And this is completely based at Rajkot. So it's an expanding facility in terms of foundry capacity, then machining and assembly and sub-assembly, and our sheet metal facility to be there.

So you will commission this gradually, I mean, phase-wise or this will entirely come in one short, let's say, 1.5 to 2 years down the line. How are we doing this?

So basically, it will be ready in terms of, let's say, in the first phase it will be finished with the -- first bay will be finished and we can have a capacity to add is close to 5,000 and the next will be like that. So within 2 years, it will be finished completely on 10,000 machines. It is not going to be an half way like that, but utilization will start in between over here. The way we have order book and all, so we need to ramp up our execution on the next year to be there.

The next question is from the line of Nidhi Shah from ICICI Securities Limited.

I have a couple of questions on the guidance that we have mentioned in the previous call. So firstly, on the order inflow, we mentioned that we would be getting orders of around INR 2,500 crores to INR 3,000 crores. Now given both the quarters, we are already close to INR 1,600 crores, which is on the -- which is sort of higher than the upper side of the guidance, would you like to revise that guidance for the order inflow of the quarter -- for the year?

No, I don't want to revise that. I want to be stay there, what I anticipated, and we are going to be deliver that basically.

So would that indicate then that we would probably not be able to do more than about 12 to 14 more in order inflows -- INR 1,200 crores to INR 1,400 crores more in the remaining year or is it that we're just being conservative about the order book?

What the guideline we have given, we will maintain those things basically. We will be there.

All right. And also on the revenues, the previous quarter, you had mentioned that you would -- that is a similar level of growth. Now this quarter has been -- has seen a 55% increase in the -- sorry, 45% increase in the top line, but it is nowhere close to the 75% that we saw the previous quarter. So again, for the full year, what numbers are we projecting in terms of revenues and PAT?

I cannot give you that, let's say, today the forecasted number to you there, okay? But you can see that assumption like that quarter-to-quarter, you have to look at that, Jyoti, to be quarter-to-quarter of the last year there, okay? And you will see the growth on every quarter to be there.

All right. So can we then -- again, I know you mentioned that you cannot really say anything. But can we assume something like a INR 2,000 crore or INR 2,400 crores type of numbers for the full year?

If I say yes, then you can say you've guided like that. Okay.

All right. All right. And lastly, I just had questions on the EMS. So these EMS machines, as you mentioned, they are on the smaller side. So does that mean that these -- what is the margin profile like for these machines? When we -- obviously, now the order book is increasing for this segment, how will we see the margins play out when these EMS orders are executed? Will the margins increase or decrease?

So we have a balance on that on a product mix there, okay? So we have in counter to that, let's say, even in the past call, I have given you that I have 3 category of the product line. One is entry-level product, mid-range and high machines. So in an entry-level product, I have a -- let's say, our gross margin is coming to be close to 40 percentage there, okay? And mid is 45% and large machines close to 55 percentage there. So with this mix, whatever the margin we are maintaining today, I think we will maintain the same profile on coming days over here.

The next question is from the line of Sanidhya from Unicorn Asset Management.

First question would be on this capacity expansion that we are doing. So we are saying INR 400 crores capacity expansion in 2 years, and we are also saying that we are going to raise internally and externally. I think our cash flows would be sufficient enough for this year -- should be sufficient enough to fund at least more than 50% of what we are planning. And why is 2 years like not able to understand. Can you explain it more?

The 2 years is like that, let's say, 2 -- it's 2 financial years, basically, okay? So the 1 financial year is this and next financial year of coming years, okay? Based on that, this capacity will be ready there. And internal and external both are being given because almost we are going to do with our internal accruals only. If any timing mismatch are there and if we require something to borrow that, so we have put up over there into that, but most of these things are going to be internal accruals only. It is sufficient enough internal accruals to match this our growth to be there.

That would be debt, right, no equity issue?

Definitely. We will have a short time line we will use. Most probably it has not been required, okay? But while we are planning, we should definitely tell. So we have less internal or external, but it is not raising the capital to be there.

Yes, surely because my numbers are stating you will have sufficient headroom for that. And can we assume that FY '26, the entire CapEx would be completed before the year-end?

Absolutely. Absolutely.

And sir, why is the delay in terms of the bottlenecking -- debottlenecking that we were doing. So if I see currently, you're stating for 85% of capacity utilization for this quarter. And if I do the number, I'm sure we didn't use the additional 1,600 machine capacity that we are going for the debottlenecking. So what took us so long to do that?

No, no, it's the time. It's the construction, the installation, the equipment and the way the new capacity we are doing is fully automations are like that. So the installation capacity time is required basically, the execution time is required. I'm ready to do it if anyone are able to establish my plant for 15 days, I will be most happy person to do.

Okay. So should I assume that now that we have done 85% utilization of 6,000 machines can we do for the next 2 quarters?

You can assume like that. So that's why we are adding the facility also there now.

Yes, definitely. And sir, last time on the TV interview, you said that we would be doing more than INR 2,000 crores of revenue, but looking at the current time line, it looks quite difficult. Secondly, on what could be the maximum push that we can do on the average realization per machine?

So today, average realization, what we see is the INR 41 lakhs and in terms of our order book today is close to INR 50 lakhs. So in the next couple of quarters, you will see the rise in the average there.

And even after the EMS book because you were stating that EMS would be INR 35,000 per machine?

Yes, we have a combination of that execution is going to be -- we have a large order books are there and the machines are in pipe. So aerospace machines are going to be -- it's a combination of a model mix there basically.

And what kind of capacity utilization can we say for next year since the capacity would start coming in. So not the entire would come, of course, in the initial first half of FY '26, say. So how much do you think would come in and what utilization do you think is there?

So it's basically when the facilities are being ready, based on that, we have to, let's say, calculate the numbers there, next year.

I don't want a number, sir, definitely. Just lastly, sir, if I see the order book currently stands at 42...

Yes, yes, you are right on the track that what you are asking there, okay? Only thing is that, let's say, if my capacity, let's say, 5,000 machine capacity ready by December, okay, or like that. Based on that number, I need to be calculated and give, but we are looking to be as fast as possible to capacity to be enhanced over here there.

Definitely, we will have more calls and we can understand what's going on. Just lastly, on the order book side, so INR 4,200 crores is the current order book, and we are expecting that to complete in like 12 to 18 months. So may I say that INR 4,200 crores is what we can execute in next financial year completely and some additional as well?

Based on the capacity, let's say, once my capacity will be installed we will go faster there.

Yes, because my numbers are saying that we can do if we get the additional capacity. So wanted your understanding on that?

Yes. Let's say, if anything, I'll give you the numbers, it is going to be a forecasted number, I'm going to tell you. You are on a track. You are right on that, okay.

The next question is from the line of Kamlesh Jain from Lotus Asset Managers.

Congrats, Jadeja-ji for executing what you have been telling and this capacity addition demonstrates your capability. Sir, one question on the part of like cash flow. If I see your -- you had a INR 90-odd crores negative on the other financial assets, which I believe is more of an unbilled revenue. Because last year, it was like in March 2024, it was INR 180 crores and it has almost increased by INR 100-odd crores. So I believe it's more of an unbilled revenue, which we have for the EMS?

Correct. Absolutely right.

Yes. So when are we going to realize that? I know that machines will be in the testing phase and all that. And you have took the pain over the last many years and you have established that, you have got big supplier there -- big buyer there. So how that thing would be there on that part?

So basically, you will see these numbers are going to be decreasing in the next couple of quarters now. Because the way the large machines, you know that every machines are very big machines and all. Number of machines are in the pipe there. So once it's been dispatched. And we are looking to be a large dispatches are in quarter 3 and quarter 4. So you end of the quarter 4, you will see this number will reduce drastically to be there.

Right, sir. And sir, secondly, on the part of your expansion, if I understand correctly, you will get this capacity done by December 2025. Is it correct? The entire 10,000 incremental capacity?

Plans are like that.

Okay. Okay. And sir, like if I see your EBITDA per machine, like it has come down to INR 10 lakh now for this quarter. So going forward, what trajectory can we see on the EBITDA per machine? Because EBITDA margin won't give that particular picture because you're -- like say, the share of the EMS and all those machines, mid-level or that would continue to vary. But on EBITDA per machine, so where do we see that settling in?

So I told you that the 25 percentage is average margin, okay, and that we are maintaining and we are going to maintain forward also. And the average is INR 40 lakh plus. So you are right there and we will maintain on that track.

Okay. So around like INR 10 lakh, which is the current run rate?

Yes. Correct.

The next follow-up question is from the line of Sanidhya from Unicorn Asset Management.

Sir, 2 questions. First on the Huron side, so you were saying that for last 2 quarters, we have been saying that the capacity will be completed, like standard capacity would be completed till September. And now you're guiding for the year end. So what kind of delays are we facing and anything specific that we are stating there?

In Europe?

Yes, and Huron.

So basically, the capacity, the assemblies and everything is -- we were initially will look at to be December. And still, we are crossing our fingers, but there is some delays are going on there, okay. And in some installation of some equipment and everything is being delayed. But most probably, this facility will be ready somewhere in the end of December or middle of January to be there.

So nothing worth highlighting like did we face any particular event?

Nothing is there. Anything -- not anything as in special kind of a thing.

Okay. And I was looking at the annual report, so we had some unbilled revenues which the other person also talking just before me. So you're saying that, that would slowly try to come in, in the statement, right?

Correct.

And just above that there is interest and commission receivable from subsidiaries. And if I look at that number, so we have some investments in subsidiaries like Jyoti SAS, we have some INR 60 crore investments other than that, also, we are having some investments in other subsidiaries. What kind of investments are these?

So basically, this is what we are expanding this facility, okay? So there's assembly building is under construction there, what we are discussing and going to be finished in January to be there.

Okay. So no, I didn't understand what's the interest and commission receivable from these?

No, no, you say investment there, correct?

Yes. So if I go on the Page 149, 148 on the Annual Report. There's a section for Other Financial Assets.

See basically until today, Jyoti has fully supported from here, okay, in the last 15 years. And whatever our investment has been made over there, as per our Indian guideline, we need to charge the interest to be there, okay? And whatever the nonfund limits and everything we guarantee and so guarantee commission also to be taken from them basically, okay? And Huron was not making the profit over there. So they are not able to pay us in the past many years there. So that is the accumulated incomes are lying there basically.

Sure. Sir, what is Jyoti SAS France [indiscernible]?

So Jyoti SAS is a 100% subsidiary of our SPE who acquired this Huron Graffenstaden there, okay? So Jyoti SAS is a 100% subsidiary of Jyoti and he is holding the 100% Huron Graffenstaden to be there.

Okay. So the investment in the Jyoti SAS book would be the Huron investment.

Is the Huron investment.

[Operator Instructions] The next question is from the line of [ Sadanand Samant ] from Klay Securities.

So my question was on the competitive landscape, right? So most of the competitors are on the unlisted. So you have been pretty aggressive on capacity addition. So just want to get a sense on how the competition is also on the capacity addition part. And second on -- we have been, again, pretty good on the order inflow side, right? So has the competitive intensity increased in general with the CNC machine? If the industry has been growing at 20% plus, right. So how has the competitive intensity in general has been increased in terms of order tenders or client addition or any sense on that would be helpful.

So basically, it's -- we are -- I mean 3 to 4 competitors are here. There is no add-on competitor that's been add on there. And based on the India is increasing the capacity, let's say, the India is consuming more and more machines. And there is a great opportunity still because once suddenly the spikes are coming, always imports are increasing there. So other than me also might be all other manufacturers also competitor also might be in the near term, they will also invest and expand the capacity to be there because there is a great opportunity ahead to all of us over there.

Okay. Got it. And in terms of intensity, has it increased in terms of if they have added capacity? Do you find it still difficult to get orders from your clients? How has the competitive intensity as per...

It's not that much has been increased there. Still, there is -- we have a great room to compete to import machines there. So there is a great opportunity to us to compete to the, let's say, the people are enjoying the business today, we have to compete to them basically.

The next question is from the line of [ Jignesh Vaidya ] from [ Jiva Capital Limited ].

I wanted to understand on the CNC front, since you mentioned you have 140 people in R&D division. So I presume the machine control unit world over is only used for 3 main companies like FANUC and all. So sir, are we in the process of developing that machine control unit from our R&D division and how soon can we reach there?

Nice question. That all is a dream for us for the future. So already, our teams are working, and we are expanding this team rapidly over here. And we are expecting to develop something in the next 2- to 3-year pipeline over here there, okay? In the next future, we are going to be having a more investment plan is towards to the CNC controllers, drives and motors to be there.

Right, right, right. That would be, I think, really help in increasing our margins greatly?

So basically, we are looking to be our core -- our core business today is a mechanical part today, okay? And Jyoti's reason is to be there as a core should be mechatronics to be there, okay. So mechanical and electronics combinations and many more opportunities are opening for us over here. So definitely, this parts are in our radar there. And we are looking to be good investments on coming days to be there.

Right. And sir, on the semiconductor front, which is your future area. So how are we -- how Jyoti is kind of to have this opportunity scale up going forward?

Right now, we already started to our many products on our drawing board, and we are putting up a more R&D team on coming days over here. So that is going to be a great opportunity in coming days over here. So right now, 2 to 3 products we are designing. One prototypes and everything will be done. We are working with a very close to the -- our 2, 3 manufacturers come over here. We are directly in touch with them, and we wanted them to move faster, but this is also a new business for us. So the design and developing time is long time over here. So we are anticipating the business we can able to see somewhere in 2026 over here.

Okay. So some revenues would start flowing in?

Yes, yes. But large opportunities are opening up over here.

Right. Understood. Sir, with AI coming up and our machines integrating with the entire software like SAP in your -- with your clients. Just kind of scheduling or the kind of parts production, is it already done? Or it is being scaled up?

No, no. Right now, what I told you in my presentation that our product called is 7th SENSE. So there, you can do your factory automation and completely you can tracking, monitoring and scheduling all the plants like similarly to SAP there, okay? Even in a quite better in terms of user friendliness and all because it's completely on a soft floor requirement to schedule and planning, okay? So that is an integrated part of it is our product to be there.

I think this 7th SENSE kind of products would be more of used in the EMS industry?

No, every manufacturer there.

The next follow-up question is from the line of Sanidhya from Unicorn Asset Management.

Sir, if we look at the Huron facility, so this quarter, is it safe to assume we did a revenue of INR 55 crores, in INR terms or any if you can give any...

Yes. In the second quarter, it's close to INR 70 crores.

Okay. INR 70 crores. And what is the utilization this quarter for Huron?

So the Huron is today, let's say have a planned capacity is close to EUR 40 million to EUR 45 million there. And this is almost more than 80% of that basically.

Okay. And with additional capacity by year-end, we would like almost 1.5x the size there, right?

Almost capacity is going to be double, but we are expecting to be 1.5 in the next year there.

Yes. Okay. Okay. And secondly, on the EMS, we see 41% orders from the EMS this quarter. So is it only from the one player? Or is it divided between two players? So there I want to understand just from the -- without naming any client just from the diversification portfolio.

So as we said basically 2, 3 projects are there. And then all projects have a different client there.

Okay. And on the side of -- we are hearing that display manufacturing is also starting in India, one of the players starting that. So are we supplying to them as well for display manufacturing their machines?

Yes, yes.

And for IT PLI 2 as well?

What was the question?

For the IT hardware, that is laptops, notebooks all that?

So right now, let's say, we can say that today is in the mobile and to be watch and even some computers, yes, these are our end users are making it.

Okay. So not into notebooks as of now? Any plans to go there?

So already, we are working with them and trials are going on. We are looking to be in future to be a notebook also to be there.

So hopefully, by next year, we shall get the approvals, right?

Yes. I told you that EMS is going to be our target area, and we are working with many of them. And one by one, it will be covered there.

And then lastly, on the U.S. side. So are we planning any big clients on that side because the world looks like moving -- maybe moving to manufacture in U.S. So if that story is to develop? Are we in the right place?

Basically, because of Huron and now we have a capacity increasing in Huron, and we have now capacity and more model has been producing here in India, and we are very competitive over here, let's say, on a scale. And U.S. in terms of aerospace is the largest consumer there, okay? So increasing our market portfolio and reach out to more customers to be there basically there.

Any plans for any facility in U.S. or warehouse or anything?

Yes. So we are going to create our technical center and the warehouse there.

In U.S.?

In U.S. there.

Any time line?

So within 1 year there right now.

Okay. And any -- we are getting any inquiries for the same. Therefore, we are entering into that?

Yes. We are speaking with the many our large customers to be there, our existing clients, and they are asking us to come over there, so we are looking to support them nearby there.

Do we see any impact on inventory and anything at all if we enter into that because maybe they want in time execution. So we might keep some inventory for that?

It's not like that. It's not like that. But while we are making the machines to be there on a tech center, okay, on demo center there. And entry level product, what we are making it over there, those kind of a product only we need to be stocked to sell faster to be there. Because in the U.S., people are looking to be delivery very fast over there.

Yes, exactly. That's my point because for any player that we ask, they are always stating that for U.S. player, we need to keep some inventory so that we can execute quickly.

Absolutely. Absolutely.

The next follow-up question is from the line of Kamlesh Jain from Lotus Asset Managers.

So like I believe 10,000 capacity expansion is going to be there in a year's time. So -- but over the next 3, 5 years, so what particular capacity levels we are targeting. Like post this expansion, we would be 16,000. So going forward, what is our end target like in the next 5 years, what particular capacity levels we are going to target on or embark on?

See, the capacity we are installing is basically to utilize as much as possible faster to be there. And once the execution will be increased better and better, we would like to utilize more there. But in terms of -- this is our Phase 2, okay? In the next 5 years, this is not going to be sufficient to be there, okay? So definitely, we need to expand further to be here there.

Because over the quarter, you have highlighted that the way that China has gone in the value chain with regards to the EMS side. So similar levels like can we say that it can be the 30-odd thousand capacity by the like say, by FY '28, '29. So just wanted to get a sense on that.

Yes. Basically, you are right. We are looking similar numbers to add on there on next future to be there.

And lastly, sir, can you provide a breakup between entry-level, mid-level for this particular quarter in terms of machines sold and average realizations which you provide for every quarter?

I can, let's say, in terms of an entry-level product, we have 934 machines and the average of INR 21 lakhs. Mid-level machine was close to 88 machines and the high-end machine was close to 19 machines, total close to 1041.

Okay. And 2.1 -- INR 21 lakh was the entry level and mid and high level?

Mid-level, the average was INR 1.01 lakh. And the high-level machine average is INR 5.8 crores.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you very much to all of you. The way you put on trust on us. We'll do our best over there. Thank you very much.

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