Motherson Sumi Wiring India Limited (MSUMI.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Motherson Sumi Wiring India Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the Chairman, Mr V.C. Sehgal. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen. Thank you for joining the results conference call of MSWIL. I am pleased to announce that the Board has approved the results of the second quarter on the fiscal year 2026. The company has delivered its best ever quarterly performance with revenues of INR 2,762 crores, out of which the new field new Greenfields contributed approximately INR 190 crores. EBITDA for the quarter stood at INR 280 crores, which is 12% growth on a year-on-year basis. MSWIL has delivered exceptional performance, significantly surpassing the industry benchmarks. This achievement reflects a robust volume content mix complemented by the premiumization of our strong print across the majority of the new OEM models launched. I'm pleased to announce that most of our that most of our upcoming Greenfields are currently in ramp-up phase aligned with the evolving customer requirements. With that, I conclude my remarks. Joining me today are Pankaj, Anurag, Gulshan and Vaaman who will be happy to address any questions that you may have. Thank you all very much and wish you a good Gurupurab.

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

Congratulations team on strong revenue performance outpacing industry and the sequential improvement in profitability margins. Sir, my first question on the Greenfields, utilization has reached 36%. It's an improvement compared to last 2 quarters. How do you see the utilization shaping up by Q4 FY '26 or by H1 FY '27? Would you expect utilization to reach optimal levels of 70%, 80% considering strong demand conditions and also launch of new products by customers?

Thank you. Anurag?

Yes. So Raghunandhan, the Greenfield utilization is all depend on how the volumes will take place from each of the customers. In case they are going to make the volumes which they have projected at the start of the business, then obviously, this utilization will increase. And in case it's delayed or something like that, then it will not be the fully utilized. One of the Greenfield is obviously has ramped up to the volume, which is given. The other two are ramping up at this moment to the volumes. Hope I'm able to answer your question.

So on the Greenfield side, one clarification. If I take the EBITDA margin for Greenfield, it is currently in the negative territory because utilization is ramping up phase. At what level of utilization would it turn profitable?

Anurag?

I think it's -- we have to wait and watch because as soon as the utilization comes and the volumes ramp up and the utilization reached to level of around more than 70% or 80%. At that time, you were getting utilized the plant completely for the what you have set up the and then you will get those results out of that. So as I said, that it all depends on how the volumes will take place, which is already on the ramping up stage. So we have to see -- wait and watch in that particular area.

Got it, sir. On the cost side, I had a question. As indicated in the presentation, copper prices have increased 5% Q-o-Q. Would this be the main reason why raw material cost to sales has increased sequentially or whether the increase in share of EV Q-o-Q has also led to higher RM side sale.

There are three new Greenfields and their costs are also there without the sales. But Anurag, can you clarify more or Gulshan, maybe you can.

So looking at the margin with respect to the Greenfield units would not be the right time to because it has been improving quarter-on-quarter. As far as copper prices are concerned, obviously, it has been increased from the preceding quarter and year-on-year also had an increase of 13% and depending upon the copper content in our models, obviously, there has been some increase in our cost, which is sitting out at -- and in both existing and the expansion in the Greenfield units. So it will take some time to absorb our other costs. As soon as the volumes will ramp up, obviously, that cost will be absorbed as it progresses further.

The next question is from the line of Siddhartha Bera from Nomura.

Again, congrats on a good set of numbers. Sir, my question is again on the Greenfield part. If I look at the performance at the EBITDA losses for the last couple of quarters, it seems that as revenues have ramped up from INR 120 crores to INR 190 crores, the losses also seems to have gone up from INR 26 crores to INR 46 crores. So can you share some more color on the reason for that? And should we expect some more increase in the losses before we start seeing the benefits? Or how should we sort of think about going ahead from here?

So with respect to the Greenfield units, our losses have been not increased. It has been improved because the volumes are in the process of ramping it up. As far as the numbers are concerned, with respect to the previous quarter, there was a loss of INR 31 crores and which -- I mean you are saying that it went up to 46% in the current quarter is just because of the fact that they are certain recoveries was there in the previous quarters. If you just remove that impact, the losses were around INR 70 crores, so on a gross level numbers. So the situation is improving quarter-on-quarter, if you just see with respect to the Greenfield expansion performance.

Okay. Understood. And second question is on the product mix side, like if we just see ex-Greenfield, we have been able to sustain that 12%, 12.5% margins for quite some time now. As -- like you said, I mean, the Greenfield will ramp up with OEM volumes. But is there any sort of adverse mix impact on the longer-term margins, for example, like our EV share has also gone up from 4% to 7% over the last couple of quarters. So given that the EV share will continue to inch up over, say a couple of years, do you sort of see that the margin trends which you're reporting ex-Greenfield, you can achieve that? Or because of EVs that may be difficult? So any color on the product mix, how the margins that are -- if you can share some color will be helpful.

Thank you. Anurag, Pankaj?

See, any way the company doesn't guide in terms of margins. The company, as a group, we have been focused on return on capital employed. However to answer your question whether a particular segment or a particular customer or a particular region will have a very different profile. It is not so -- it all depends on projects and project by project, the teams work -- look for opportunities and improving the efficiencies to get these margins. So that's how the company works, there are many different types of models to which we supply, many different industries in which we supply and what we see in our results is an amalgamation of all of them put together. So the endeavor of the team has always been to continuously strive to keep up a good performance, where we entered new domains or we set up new plants and also to continuously -- of course, we have to invest ahead of time to be able to give a flawless launch to our customers and then keep improving. And as time passes, the efficiencies and other benefits keep coming.

[Operator Instructions] we'll take the next question from the line of Raghunandhan N. L. from Nuvama Research.

On the staff cost, they seem to have stabilized at INR 475 crores to INR 480 crores in Q1 and Q2. Are the employee additions relating to Greenfield plants completed? Should we expect the staff cost to remain in a similar range going forward?

Anurag, Gulshan?

As the volumes will ramp up, there will be more requirement of the shop floor people, which will eventually happen as the volumes will grow. So I think it has not completely -- the total manpower has not come as of now. As the volumes are growing, we will be recruiting more. I'm talking about the shop floor people specifically. And because that goes hand in hand. As the volume grows, the manpower also number also grows accordingly. And efficiency will also improve during this period because the volumes ramp up, the numbers goes high, then the plant also goes to the different level of productivity.

The EV shift is leading to content increase. EV share has gone up 7% versus 5% last quarter, led by the ramp up of new plants, with the share of EVs further increase in coming quarters and possibly reach double digits by FY '27. Also, sir, now that the EV-related volumes are going up. Can you also talk of efforts on localization of supply chain, especially for the high-voltage harnesses?