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

Ladies and gentlemen, we welcome you all to the Q2 and H1 FY '26 Earnings Conference Call of Jyoti CNC Automation Limited, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties that are difficult to predict. Now I hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

Thank you, Shloka. Good evening. On behalf of ICICI Securities, I welcome you all to Q2 FY '26 earnings conference call of Jyoti CNC Automation Limited. We have with us [Technical Difficulty].

Mr. Mohit, would you please repeat your introduction, you are not audible at the moment?

Hello.

Please go ahead.

Hello. Yes. Thank you, Shloka. Good evening, everyone. On behalf of ICICI Securities I welcome you all to Q2 FY'26 Earnings Conference Call of Jyoti CNC Automation Limited. Today, we have with us from the management, Mr. Parakramsinh Jadeja, Chairman and Executive Director [Technical Difficulty] followed by Q&A session [Technical Difficulty].

Thank you, Mohit. Good evening, everyone, and a very welcome to our Q2 and H1 FY '26 earnings conference call. Along with me, I have a senior management team and SGA, our Investor Relation advisors. Results and presentation have been uploaded on the stock exchange. I hope everyone has had a chance to go through the same. India is currently witnessing a strong capital investment cycle, supported by a favorable government initiatives such as PLI schemes and various states and central program that encourage manufacturing. These efforts are reshaping the country's industrial landscape. While India has traditionally been known for its strength in a service sector, the last decade has marked a clear shift with the growing focus on becoming Atmanirbhar and building domestic manufacturing competitiveness. This momentum is particularly visible in sectors like defense, electronic manufacturing services, semiconductors and automotive, where the capacity creations and technology investments are accelerating. In this environment, the role of mother machine manufacturers, those who build precision machines that in turn a produce other machine tools, become especially important. As industries expand, the need of high-quality CNC machine tools rise significantly. Today, the Indian CNC machine tool market is estimated around USD close to $3.5 billion in annual demand, yet nearly 60 percentage of this requirement is still met through imports. This highlights both a challenge and meaningful opportunity. India must reduce a dependency on external suppliers and develop strong domestic manufacturing capabilities in this strategic segment. At Jyoti CNC, we see ourselves at the center of this transformation. Our vertically integrated manufacturing setup, strong in-house R&D and deep understanding of high-growth industries give us a clear edge. We not only design and manufacture advanced CNC machines, but we do so with precision, reliability and cost competitiveness suited to global standards. Our acquisition of Huron, a global leader in high-precision machining, has further strengthened our technological edge and helped us expand our footprint across international markets. Over the year, this strong foundation has allowed us to expand across a wide range of industries, including high-growth sectors such as aerospace, defense and EMS. We have built a relationship with customers of high repute both in India and overseas and have steadily increased our wallet share with marquee a client by delivering reliable performance, position and service support. We believe this is our moment, not just to grow as a company, but to contribute meaningfully to India's journey of industrial self-reliance. By building world-class machines in India for India and the world, we aim to be among the leading machine tools manufacturers globally. Now let me share what we are doing at Jyoti CNC to prepare for the next phase of a growth. The first, we believe that our people are the heart of the our progress. As we scale up, we need more than 1,000-plus skilled engineers in coming years. To support this, we are continuously investing in training, upscaling and grooming our workforce. We are also a setting up our own training institute to develop talent in-house, so that our people grow with the company and company grow with the people. Second, as announced, to meet the rising demand we are seeing from both traditional industries as well as new edge sectors. We need to expand our manufacturing capacity based on our current order pipeline and market outlook. We are scaling our production capacity from 6,000 machines per annum to 16,000 machines per annum by September 2026. This will ensure that we are ready to serve customers quickly and efficiently without compromising on quality. Third, as I mentioned in the previous call, recent geopolitical developments have led to higher demand from defense and allied sectors from European customers. We have been engaging closely with these customers and recently participated in a major global exhibition called as EMO in Germany, where the sentiments and outlook were very positive. In summary, we are expanding capacity, strengthening our talent base, depending our capabilities and preparing to serve as much larger and more global customer base. We remain financially disciplined and further focused and we are confident of delivering a sustainable growth in years to come. Coming to the financial and operational performance of Q2 and H1 FY '26. We reported a strong consolidated revenue growth of 17.9 percentage for the quarter. Standing at INR 508 crores, our performance for this first half of the year was also strong with consolidated revenue of INR 918 crores in H1 FY '26 compared to INR 792 crores in H1 FY '25, reflecting the growth of 15.8 percentage. In terms of a revenue contribution across the industries in quarter 2, 36 percentage came from aerospace and defense, 26 percentage from auto and auto components, 21 percentage from general engineering and other remaining 17 percentage from the other areas. Our order intake for quarter 2 FY '26 stood at INR 619 crores. This includes a 44% from aerospace and defense means INR 272 crores, 23 percentage from auto and auto component INR 142 crores, 22 percentage from the general engineering, INR 136 crores and 11% from the other sectors. The capacity utilization for the quarter 2 FY '26 was 88 percentage. Picking up of our current order book, it remains healthy and well diversified at INR 4,546 crores, reflecting steady in demand -- steady demand and continued customers confidence. The industry-wise breakup is as of follows: 40 percentage of aerospace and defense, 20 percentage of a general engineering, 17 percentage of auto and auto components, 15 percentage from the EMS, 4 percentage from the die and mold and balance from the other sectors. Coming to the margin. EBITDA for Q2 FY '26 stood to INR 124.6 crores as a growth of 17 percentage compared to the same period last year. EBITDA margin were 24.5 percentage, which is broadly in line with the last year, primarily due to the increase in employee expenses and other expenses. But still, it is in line with our near to guidance over there. Profit after tax for Q2 FY '26 stood at INR 85.5 crores compared to INR 75.9 crores in Q2 FY '25, reflecting a growth of 13 percentage. We believe we are into strong position to build on this momentum. The industry opportunity is large. Our order book is healthy and our capacity expansion and talent development efforts are progressing well. With our vertically integrated manufacturing capacities, strong R&D focus, an expanding presence across high-growth sectors, we are confident of strengthening our leadership in the Indian market and growing our footprint globally. We remain committed to disciplined execution, customer trust and building a world-class machine in India for the India and the world. We may now open the floor for question and answers.

[Operator Instructions] The first question comes from the line of Harshit Patel from Equirus Securities.

Sir, firstly, on our capacity, you have mentioned that our overall utilization currently stands at about 88%.

For this quarter.

For this quarter, yes, sir. And our expansion from 6,000 machines to 16,000, that will become operational sometime in September '26. So in the interim period of 3 to 4 quarters, how do we plan to grow meaningfully, given that we have such a huge order book?

Yes. So that's the only constraint today, Harshit, with us. And we are trying to, let's say, optimizing all our processes and everything and trying to stretch. So today, this quarter, we have reached to 88 percentage of utilization. And the next 2 quarters, we will have a something a little bit more than our capacity, we will grow more the capacity over there. But until the full capacity will coming to the our utilization, we have to wait for this -- the further more growth over there.

Understood. Sir, secondly, our order intake momentum has continued in the second quarter as well. And for the first half of FY '26, we have received almost INR 425 crores worth of orders from aerospace and defence alone. Sir, could you explain where these orders have come from? And out of this INR 425 crores, what would be the India contribution? And what would be from Europe and other geographies? And also...

Complete this.

So just a follow-up to that. Given that we are about to complete our debottlenecking exercise at Huron, and we have kind of doubled our production capacity over there, if you can give us the execution roadmap?

So Harshit, basically, out of this INR 425 crores, so the first time we were discussing all the time to, let's say, the India is coming in our kitty more and more of that, okay? So in these 2 quarters, and particularly in the last quarter, okay, we have received close to INR 180 crores worth of orders only from the Indian defense area there, all our ordinance factories and all. And rest others are we have a global customers from Europe even from the China, even from the Turkey and mainly from the Germany. So -- but the larger component has come from the Indian domestic player over here. So this is about the order book intake what your first questions are there. Regarding the second question is your -- the Huron. The Huron facility has been switched on now. It started our operational from September. And you may -- we will see the witnessing over there to -- on a revenue conversation will come on a last quarter largely over there because the process time of assembly of the machine is close to 4 to 6 months. So first batch of production is already on floor and we have started. So it is going to be executed there, all this capacity will be utilized and everything. So the first fruits we will see in the last quarter of this year, it means the next quarter. And then following the next year completely, we will come into a full fledged on utilization over there. Hope this will be in line with your questions.

[Operator Instructions] The next question comes from the line of Aniket Jain from YES Securities.

So actually, I wanted to check on there's a material increase in employee cost this quarter. So I believe that it is mainly due to the expansion plan that you are currently undergoing. So when do we plan to complete this hiring program that you're currently undergoing? That is question one. So when we will be completing the hiring program. So when will you stop hiring additional employees?

So Aniket, Aniket?

Yes. Yes, sir.

Yes. So Aniket, already, we have started hiring last year. And gradually, every quarter, you see this, our manpower cost also is rising because already based on our -- the next year capacity we are looking the people at our -- in our factory 1.5 year back. So already, today, we already hired the people. Still, we are hiring, but not much almost 80% to 90% people already on role there now.

Understood, sir. And sir, second question would be on the EMS revenue. So I see that this time, you have booked about INR 25 crores, INR 30 crores of revenues in EMS. So have the deliveries resumed now or will this continue going forward? And what is the plan to -- when will this order backlog be fully delivered?

So basically, in our last call also, I was discussing that it has been started slowly, and we are expecting to grow in the last quarter, okay? Third quarter also will be some of the things like that. But the larger we are expecting from the last quarter execution will be there.

[Operator Instructions] The next question is from the line of Anuj from Kotak Securities.

Yes. Congratulations on a good set of number.

Thank you.

Just wanted to understand what are the kind of volume growth that we are seeing in fiscal '26 and for the full year as well?

What are the....

Volume growth we have seen for the first half of fiscal '26 and what are our expectations for full year FY '26, sir?

Okay. So generally, we don't, let's say, talk on a number directly. We don't give this kind of a guideline directly on that, okay? on a forward-looking but let's say, the growth momentums are going to be maintained. And usually, our tradition into the first half and second half, okay, is more or less is a 40-60 kind of ratios are there. Okay. So always the third and fourth quarter is going to be the highest executions we are looking in terms of a numbers over there for our traditional industrial, practices on this manufacturing of a machine tools there.

Understood, sir. And sir, on the cost side, our margins are one of the best in the industry. What extent have we -- are we vertically integrated to have achieved these kind of margins?

So basically, we are fully vertically integrated. In terms of a our manufacturing side, it's on the cost side, let's say we do our castings. We do all critical part machining. The machine tools, the most critical assembly is generally the spindles, we call it as a turrets, we call it as a rotor tables, we call it pallet changer, a tool changer. And many of this precision and sheet metal manufacturing and all like that. Generally, the industry is this kind of a higher end assemblies and all people are importing from the Europeans and Japanese areas like that. There, in Jyoti, we are highly integrated. So that's the adding the -- the value additions we are reaching over here, much better from the industry standard. As well as our, let's say, the application point of view. Let's say, we do a lot of pooled up machines. We do a lot of customer-centric machines and supporting to the customers. There, we are able to value additions are much better. And third is, let's say, the product mix, okay. So we are having a very large product baskets and a variety of products and to let's say, the machine value, the minimum machine value in our product basket is INR 10 lakhs. And the biggest machines I'm supplying is INR 20 crores, okay? So kind of -- this kind of a product mix is allowing me to have a better margin compared to the industry standards there what the people are having there.

[Operator Instructions] The next question comes from the line of Yash Patel from Kotak KMC.

Sir, I wanted to ask you a question about the Huron control panel that you are developing. So what would be the margin impact after this panel has been developed? And are you going to use this panel in the extended capacity of 16,000 and all the 16,000 machines that you are going to develop?

Thank you, Yash. See Huma, is an -- our basically is operating system is then, we call it as a HMI is a front end for the my customer there, okay? So today, this Huma is in top of the what this -- bought a controller from FANUC [indiscernible] Siemens. So we have made this HMIs a common for all these two and make more user-friendly to the customers. In the future, yes, we are going to develop our own controllers, drive motors. That's already we have in progress. We are into -- in under the PLI scheme, we are also is going to be apply for that. With that, once that all the hardware and software are completely integrated with the Huma and we are going to develop this, yes, we are going to utilizing this all from a 16 -- all our 16,000 machines. And we are expecting to gross margin to be increased close to a 4 to 5 percentage over there.

[Operator Instructions] And the next question comes from the line of Kamlesh Bagmar from Lotus Asset Managers.

Would you please give the breakup of machines sold in this quarter and along with the revenue?

What, Kamlesh?

Machines sold during the quarter with the breakup of revenue?

Yes, one moment, please. So we have sold 1,315 machines in quarter 2 at an average realization of INR 38.62.

And sir, breakup between like say a mid, high and entry level along with the revenue?

Yes. So basically, INR 200 -- number of machines. Yes, so value-wise, INR 252 crores, machine-wise, 1,237 machines. It's an entry-level product. Mid-level is close to 69 and at 69 number of machines also at close to 69 and average value is of INR 1 crore and a high value is 164 machines with the machine is 9, and the average machine is INR 18.26 crores, okay. So total is 1,315. This is the breakup.

Okay. Sir, and secondly, on the employee cost and employee cost has risen by roughly around 43% year-over-year, 19% quarter-over-quarter. But if I see the number of employees, they are, let's say, stable for last 3 quarters of 3,500 headcount. So why we are seeing such a sharp increase in the staff cost?

Yes. So basically, Kamlesh, this year our, let's say, the compensation quarter we have compensated the salary increase of the people in the second quarter, and it has been implemented from the first April, and given all the areas and everything, so settled down like that. That's why the cost is -- you are seeing sharp rise in this quarter.

So where can we see it normalizing and even on the other expense.

So the -- so now it is a basically -- this is a normal -- the cost of the manpower now. And in terms of this quarter, you have seen a little bit more expenses, this is a jump due to the 2 to 3 parameters. One is in manufacturing activities has been increased greatly, so that the cost has been increased. And that will be compensated with the next sort of dispatches on the next 2 quarters and marketing, let's say, this is one of the biggest events we have participated in Germany, is the highest cost for us. So because of that marketing cost has increased, these expenses are like that on this quarter.

Okay. Okay. And sir lastly, your 10,000 machine capacity expansion. So how that will be phased out, like it would be coming in September 2026, so how the ramp-up would be? So over the, like say, after a quarter from September 2026, would it get like, say, 10,000 machines it -- would it get to utilized at 20%, 25%. So how the ramp-up would be?

So. I've given you the -- in the past also the answer similarly, this ramp-up will be -- let's say, we are looking to be a growth continuation for the next 3 to 4 years. And we would like to maintain our -- this trajectory between 30 to 35 percentage. So this will help us, and we will maintain this our growth trajectory for the next 2 to 3 years based on this expansion project.

Great, sir. And sir, what are -- what is our target on the machines, like say, in this first half, we have sold roughly around [25 -- 430-odd machines]. From the year as a whole, so where do you see, like say, 95% utilization level for the rest of the year?

So definitely, we will cross 90% number, we will cross 90% plus.

[Operator Instructions] The next question comes from the line of Akshay from AK Investment.

Am I audible?

Yes, yes.

Okay, sir. First of all, congratulations for the good set of numbers. Sir, my first question is about Huron capacity. So what was the Huron capacity before the expansion and what is -- what it is currently? And what kind of average realization that we have over there for 1 machine, for average machine.

Yes. So basically, the Huron in terms of the capacity, there was a EUR 32 million deliverable from the model mix over there. And now with this capacity expansion, we have reach out to close to EUR 70 million to EUR 75 million top line we are able to execute it over there, based on the model mix there.

Okay. And based on this new expanded capacity when can we reach to 80% to 90% utilization over there in next year, how much?

So we are -- in a Huron also, we are expecting to grow year-on-year close to 30% to 35% there.

Okay, sir. So at consolidated level, we will grow by 30% to 35% for the next year, right?

Correct, correct.

Yes, this year itself, we are going -- we are expecting similar kind of growth in this financial year as well?

Correct. Absolutely. Absolutely. Excellent.

Okay. Okay. And sir, my second question is -- okay. That is already answered.

[Operator Instructions] The next question comes from the line of Yash Patel from Kotak AMC.

Hi sir. This is Nishant, Yash's [ friend ]. Just one small thing I wanted to understand is that [Technical Difficulty].

You are not audible.