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

Ladies and gentlemen, good day, and welcome to Q2 FY '24 Earnings Conference Call of Motherson Sumi Wiring India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference over to Mr. V.C. Sehgal from Motherson Sumi Wiring India Limited. Thank you, and over to you, Mr. Sehgal.

So welcome to the quarterly call for the results of quarter 2 for this year. The company has shown a commendable performance and the results are there for you to see. We have had growth in the automotive industry, which has supported us. Apart from that, the company has been working relentlessly for continuous improvements and also the new capacities, which the company has created have been utilized well. So now we open the forum for questions and answers, please.

[Operator Instructions] The first question is from the line of Siddhartha Bera from Nomura.

Sir, my first question is in terms of outlook side generally, can you probably indicate how many new programs you are sort of looking to start in the next maybe one year time frame? I think in the past you had indicated like these number of programs you are expecting to sort of start going ahead. So some color there, some update there would be very helpful.

Siddhartha ji, this is Anurag this side. See, there are a lot of new models which we are working with the different OEMs in this year and in the next year also. So we are already working on various new models as well as the facelifts also. So currently it is difficult to give you any numbers on that, but we are working very closely with these customers.

Okay. My second question will be on the RM side. So we have seen a bit increase in the RM to sales in the current quarter. Possible to highlight why is that? Because last quarter, we had seen an improvement because of the model mix. Now we are seeing an increase despite commodity costs and even currency being favorable. So just your thoughts there, why has it gone up and how should we look at this going ahead?

Siddhartha ji if -- because obviously it is very difficult to compare one quarter to another because the OEM is likely -- automotive industry is a cyclic industry and mix of volume, we make in this quarter to the last quarter is almost -- it is different. The product mix is always there. So it is difficult to compare it to apple-to-apple. So I think I answered your query.

But generally, should we expect some benefit from hereon depending upon where currency is currently or where commodities are? And generally if you look at the industry mix also, sir, you will see that in second quarter also the premium mix of the industry has been quite high. So in a sequential basis, we have not seen any mix deterioration if you look at data from the OEM perspective. So trying to understand this more, why is it down? Any particular reason will be very helpful?

See, for the currency you are talking about, there is already a pass-through arrangement is there with the customer even for the few commodities also which has directly passed through. So we are working on that with the customer, maybe it is a quarter lag only, but they are getting settled down with the customer on regular basis.

The next question is from the line of Jinesh Gandhi from MOFSL.

A couple of questions from my side. One is, continuing on the cost side. So have you seen the last part of the benefit reflecting in 2Q from our cost-cutting initiative as well as RM costs in that -- pass-through negotiations which are there? Is it largely reflecting in 2Q or we are expecting some benefit coming in 3Q as well? I mean, the context being that our margins are improved quite reasonably well?

Okay. Just wanted to check, is Mr. Sehgal connected now.

I am there. Anurag, can you go ahead?

Right, sir. Jinesh ji, see, there are a lot of ramp-ups happening on the new models where efficiencies are under improvement, and this is subject to the customer. So it is -- along with that, we are doing a lot of other activities where the cost-reduction initiatives are there, localization is there, and operational improvement are also there, along with the customer recoveries also. So we are working it in many areas.

Right. Should we expect some of these benefits to reflect in the coming quarters or that is being largely reflected in 2Q? That was my question.

I think Jinesh ji, these are the efforts which we are regularly doing. So I think hopefully, yes, why not? And it's all subject to what customers are making and how we are servicing them. So it is not only just to look this into isolation. We have to look into the totality.

Got it. Okay. And the second question pertains to the new capacities which have started operations. You indicated they are in various phases of ramp-up. Any sense on how much have been ramped-up so far and by when do we expect full ramp-up, based on the inputs which you have from the key customers?

See these new facilities are already ramped up, up to 70% to 80%. And we are still ramping up at a few locations. So they are still ongoing.

Got it. And lastly, when I look at our CapEx guidance of INR 125 crores for FY '24, first half we have just spent about INR 26 crores. So do we still expect to spend an additional INR 100 crores in second half or CapEx is expected to be lower than what we had earlier guided for?

Yes. So we had a plan of INR 125 crores for the current year for CapEx. And most likely, we would be spending around that money on the CapEx.

The next question is in the line of Raghunandhan N. L. from Nuvama Institutional Equities.

Congratulations on good set of numbers. On the EV side, earlier we had indicated that multiple customers are being serviced on 2-wheeler, 4-wheeler and commercial vehicle side. Would it be possible to approximately indicate what would be the share of EV programs and revenue?

Anurag, can you take this, as much as we're allowed to say?

Okay. This is approximately currently 3.5% to 4% as of now. And this is covering all the segments of 4-wheeler and CV and 2-wheeler.

Got it, sir. Thanks so much for sharing this number. Relating to the same, this number should keep increasing in future. What I mean to say is at the parent entity, SAMIL, the order book trends are generally shared and EV share in the order book is also shared. So can you indicate some color on possibly the size of order book or EV share in the order book, which would give us an understanding how this 3.5% to 4% of revenue can keep increasing in future?

See, as the industry will grow in India, obviously, this sale will also increase. So it is all depending on how the industry will get matured with the EV, so it all depends on that.

Understood, sir. On the high-voltage wiring harness, will it be possible to approximately indicate what would be the current level of localization? What I'm referring to is because this is a new area, the bought-out components will still be on the higher side and backward integration, localization efforts will happen in future. So if you can give any color, what are the efforts in that regard and also, what could be the benefits in future because of these efforts?

See, different customers are having different content on this, and we are continuously working on these customers in localizing the parts, also. So it varies from one customer to another. But we are continuously in touch with the customers and providing the solution to them.

But broadly, would it be fair to assume that as these efforts span out over the next few years, that will also have a positive impact on profitability?

It is, Raghunandhan ji, very difficult to put the point directly that whether this is related to the profitability or not. But on the other side, I can tell you like we have developed a charging socket also, wires also. So we are doing a lot of work with the customer and providing the solution. Obviously, at some stage, they will be benefited to customer as well as to us also.

Got it, sir. On the increase in content per vehicle, during the last analyst meet, the opportunity was up to 8x in 2-wheeler, ICE versus EV and opportunity was 2.4x in 4-wheeler in terms of content per vehicle increase, ICE versus EV. So now that you are working on various EV programs, so roughly what is the range in which you are seeing the content increase happening? Just to get a sense whether, say, is it 50%, 100% or even higher than that?

I think, what we have given that the EV is 1.7x to 2.4x of ICE and EV and 2-wheeler is 4x to 5x, I think this is some indicative what we have presented. And I think this also vary between one customer to another. So it will be difficult to say, okay, no, this is the number which is going to be. So it will be varying to that. And as we are moving forward on, as I explained in the earlier conversation, that we are moving towards the good solution to the customer. So I think this figure will improve in some period of time.

[Operator Instructions] As there are no further questions from the participants, I now hand over the conference to Mr. V.C. Sehgal. Please go ahead, sir.

So maybe I can do the closing. Thank you, everybody, for your support and for your questions. Of course, we're always available for any follow-up questions that you have. The Board congratulated the management team for excellent set of numbers for this quarter, and we hope the momentum will continue in the following quarters as well. We look forward to speaking with you in the next quarter. Wishing everybody a very happy Diwali in advance. Please stay safe and healthy. Thank you very much.

Thank you very much. On behalf of Motherson Sumi Wiring India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.