Precision Camshafts Limited (PRECAM) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY 2025-'26 Earnings Conference Call hosted by Precision Camshaft Limited [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Shah, Whole Time Director, Business Development. Thank you, and over to you, Mr. Shah.

Thank you. Good afternoon, ladies and gentlemen. I'd like to thank you all for being a part of this Precision Camshafts Limited Q3 FY '26 Earnings Conference Call. In case of any detailed questions related to finance, please e-mail us your questions at [email protected], and we'll provide you answers in a reasonable time. We've submitted our investors presentation for Q3 FY '26 to the stock exchanges on 5th of March, and the same is available on our website. Investors are requested to refer to the same. I'm happy to share that Precision Camshafts Limited has reported a net profit of INR 9.58 crores for this quarter in comparison to a deficit of INR 42 crores in the previous quarter and a profit of INR 5 crores in the corresponding quarter ended December 31, 2024. The financial performance for the quarter was primarily driven by an increase in revenue of INR 2.44 crores and a rise of other income of INR 80 lakhs compared to the previous quarter. These gains were partially offset by higher payroll costs attributed to the revisions in the wage code, that led to an increase in gratuity and leave encashment expenses. Additionally, other operating expenses were higher compared to the preceding quarter. Overall, the performance and operations of the company during the quarter have remained stable. The Indian market continues to grow and be resilient to global slowdown. In these difficult global times, PCL posted a standalone revenue of INR 153 crores with EBITDA margin of 14% and the stability comes from the increased demand from the existing customers in India. As mentioned in the previous quarter, our management has focused on this growing market, and we are happy to share that PCL has been awarded several new businesses in the last year, which will extend our order book til 2032. PCL has been awarded new business from key customers. All of the below that I will explain are over and above the running business that we have at PCL at this point. We have received new orders from Maruti Suzuki for 3-cylinder engine camshafts, which has an approximate volume of 12,40,000 camshafts per year in past condition, starting in 2027. We've received business from Tier 1 of Hyundai India for supplies to their new Pune plant with approximate volume of 280,000 camshafts in past conditions starting in 2026. We have received business from Mahindra for their existing running engines as a resourcing of approximately 600,000 camshafts per year in fully machine conditions starting in FY '26, '27 and the peak volume would be in FY '27, '28. We have received business from Uzbekistan Auto for their running engines with an approximate volume of 120,000 camshafts per year in fully machine condition, starting in FY '26, '27. And with Tata Motors, we have benefited from the increase in volumes and increase in share of business by getting approximately 280,000 camshafts per month -- per year in fully machine conditions starting in FY '26, '27 itself. In addition, we have got new business from Renault Nissan India with volume increase of 120,000 machined camshafts per year again starting in FY '26, '27. Besides this, we see extension of business beyond what was originally planned for Toyota India as well as for General Motors in Brazil, which the volumes would go to 2030 and beyond. Of course, I'm sharing all of this information, subject to market conditions in the future, but we are happy to share that these new orders represent a cumulative business potential of nearly INR 1,500 crores over the lifetime of these programs over and above the strong and stable business that PCL currently enjoys. This significant addition to our order book provides greater revenue visibility and reflects the continued confidence that our customers place in PCLs capabilities, quality and long-term partnership approach. With these programs now moving firmly in the execution phase, they represent a milestone in PCL's growth journey. Our teams are fully engaged to ensure a smooth and timely ramp up. And at the same time, our management continues to actively pursue new opportunities in Europe and North America, where we see encouraging traction from existing and new customers. This ongoing engagement gives us confidence that our global business pipeline will continue to strengthen in the coming years. To support these new programs, PCL is investing approximately INR 120 crores towards capacity enhancement and advanced manufacturing capabilities. A key part of this investment is development of a state-of-the-art manufacturing facility at our new location in Solapur designed to meet global standards in efficiency, quality and scalability. The plant infrastructure is already completed and installation of machinery is progressing well and will be completed in this calendar year. Once fully operational, the Solapur facility will significantly enhance our production capabilities and position PCL to efficiently serve both current commitments and future growth opportunities, strengthening our position as a reliable global manufacturing partner. We recognize that the industry's transition towards electrification is critical long-term consideration. And our strategy to address this is to continuously assess the ICE demand which continues to grow in India and globally. Diversification into adjacent precision engineered components and evaluation of opportunities aligned with these evolving technologies. Further, I would like to inform investors the second tranche of our solar power plant located in Mangalweda, Solapur with a capacity of 14 megawatts was commissioned in the month of December 2025 and with this addition, the total solar plant now has a total capacity of 29 megawatts. The enhanced capacity is expected to assist the company in reducing its dependency on nonrenewable energy sources. Resulting in lower power cost and a reduction in the company's carbon footprint. Now coming to our subsidiary MEMCO. It reported a net loss of INR 45 lakhs in the quarter ended compared to a net profit of 1.5 lakhs, in the previous quarter. This was mainly due to a loss of sale of approximately INR 2.8 crores in Q3. Our e-mobility subsidiary, EMOSS in the Netherlands, reported a loss of INR 0.4 crores during the quarter as compared to a net loss of INR 0.4 crores also in the previous quarter. And the total revenue earned was INR 24 crores as compared to INR 22 crores in the quarter before. Despite the prevailing market conditions in Europe, the company has maintained a stable operational position and continues to secure sufficient orders to meet its operational expenditure. However, market conditions are evolving, and we will keep investors updated of the same. Turning to our e-mobility business in India. I would like to inform shareholders that PCL has slowed down its Tata Ace conversion business due to changes in regulations and not enough visibility as previously mentioned. However, the development of the electric heavy commercial vehicle continues, and we hope to deliver the vehicles to customers very, very soon. Coming to the financial performance of the company. The stand-alone business grew by 2.17% quarter-on-quarter to INR 153 crores and EBITDA margin was at 14%, whereas PAT margin was at 6.2%. The consolidated business decreased by 9% quarter-on-quarter to INR 188 crores, and the EBITDA margin was 12.5% and PAT was 4.89%. MEMCO posted a revenue of INR 11.82 crores, and EMOSS posted a revenue of INR 23.5 crores in the last quarter. With this, I would like to end my address and like to open the floor for question and answers. Thank you very much.

[Operator Instructions] The first question is from the line of Gautam Rajesh from Everflow Partners.

My question was on the update or the status of the EV business, in the Indian EV business. With regard to our strategy and how are we going forward and currently where we are. If you can give us more details on the current position and where we plan or strategize to go in the future for the Indian EV business, that would be great.

The EV business globally has slowed down quite a bit in the last 2 to 3 years. And we see this very clearly from all our OEM customers, whether in India or globally where there has been a nearly reversal of strategy from going all electric to now looking at ICE and hybrid powertrains for the long-term future. This in one way is very good for the parent business and continues the growth of the Camshaft business. But it has had a slowdown on the EV business, whether it is in Europe or in India. I think the European business is stable at this point of time. But with changing market conditions, it's hard to say at this point how much growth is expected in the coming quarters or years, but that we will update shortly as we know. In terms of India, we expected quite a lot of opportunity in the Tata Ace conversion business, but that has not fructified due to recent changes in regulations, number one. And also all the complications in the ecosystem likely registration, insurance, financing, service, infrastructure, et cetera. So right now, our focus is on the HCV market, where we are electrifying a heavy commercial vehicle for a customer and will be going in -- will be delivered to the customer in the coming months. And from there, we look at strong order book, but this is again subject to the successful testing of the vehicle to start with and certain regulatory environment that we need to overcome in the coming months to ensure that we have a good product. That's kind of where we are.

Just a follow-up. Being a Tata Ace business, have we completely stopped it because of regulatory issues, registrations and the infrastructure along with that. And regarding the HCV, are we delivering it to clients? Or is the testing going to happen in a few months? And would that be in Q4 or Q1 of FY'27 and post that will we have an order book or do we already have in order book? And can you tell me about the regulatory testing that we're having.

So the Tata Ace is nearly stopped because of all the challenges that I mentioned before. Again, also, it's a razor thin margin kind of product. So it was very difficult to scale up in the order that we -- in the fashion that we wanted to. Number two, on the HCV, we are working directly with the customer for this vehicle. It is not something that we are developing and testing and hoping to get order. It is for a customer. And we have an LOI in place for certain volumes that we expect from one customer. Of course, we will expand it beyond this one customer going forward. But yes, the vehicle will be delivered to the customer in the next month and not our internal testing. If it's being.

If it's being delivered, what has the regulatory, you had mentioned some regulatory requirements?

Yes, we have to go through certification and homologation, which is...

That is before the delivery, right? .

No, this is -- we will do this in parallel because we are testing the vehicle as well as certifying it parallely.

Is that for commercial use or not just for the customer? Like how can you sell it to the customer without certifying or testing it then?

It will, of course, be for testing purposes only, right, to start with. To the customers in their use case, yes.

[Operator Instructions] Next question is from the line of Pratik from Neomile Asset Management.

Could you let us know the sustainability of demand over the next 2 to 3 years? And does the company see any slowdown signals from the OEMs?.

Thank you for the question. I think as I mentioned during the opening remarks, we have received several new orders from customers, be it in India or globally. And we actually see an increase in business in the next 2 to 3 years compared to where we are today. For which we have done the CapEx in the plant as well as the machining lines. So we actually see an increase in business in the medium term and in the long term. So that's we don't see any decline or any slowdown at this point of time, at least from our current customers. Beyond our current customers, we are also engaged with new customers to look at new products and new camshaft business as well.

Okay. Okay. All right. And my other question is, could you provide us a closer look on the business performance of MEMCO and EMOSS? .

Yes, MEMCO, the company is small, it's about 5% or 6% of the total group revenue. It is stable, self-sufficient, self-funded is about INR 50 crores, INR 55 crores in turnover and has a profitability of around 13%, 14% EBITDA margins and continues to be stable. We have a target and a road map to reach about INR 100 crores in the next 2 years, and we are actively working with customers to achieve that target. So that's on MEMCO. On EMOSS, like I mentioned in the previous comments, the European side of business is stable, but again, subject to a lot of market conditions, geopolitical changes happening in the area, pushback on EV that is happening very clearly and so on. And on the India side of things, we are developing this electric HCV, which will be in the market in the next year. .

[Operator Instructions]. Next question is from the line of Kalpesh Shah an Individual Investor.

Sir, can you please share whether the company is actively evaluating any acquisitions or maybe strategic partnerships or diversification opportunities in order to strengthen its product portfolio or geographic presence.

Yes, absolutely. Thank you for the question. We are very actively looking at opportunities, but this will be necessarily in India. We are not looking at the European or American market for these type of opportunities, and we are actively looking in the Indian market where there is growth in the automotive as well as non-automotive sector, including agriculture, non-auto, industrial and defense, and we are looking at all opportunities, which will basically be adjacent to our expertise, which is casting, machining, forging and assembly. So that's the area we are looking at.

Understood. And any specific reasons as to why not the international markets? .

I think that the examples have been very clear in the last few years where the international markets are actually not growing at all. In fact, there is degrowth in these markets. Companies that are available for sale are under tremendous financial distress, and that's not something that we would like to take on board. We would rather look at a market which is growing, which is -- and more importantly, in our control and has a cultural fit to what we do as well. So that's the reason why we look at India very bullishly right now.

[Operator Instructions] Next question is from the line of Subodh from InvesterPlus.

Sir, as you had mentioned in the previous conference call and also mentioned in this one, about the expansion plans to Europe and North America. So sir, can you please throw some color on how would that affect on our domestic versus export revenue? And also what would be a camshaft versus EV composition in those areas? .

Look, the comment related to expansion in Europe and North America is purely related to our camshaft business and machine components business. It is not related to the EV business. EV business, I think, has been quite clear in what we are doing in India and what we are doing in Europe. We are engaged with several customers in North America, South America, in Europe and other geographies where we are looking for new business opportunities for camshafts and other niche machine products or niche cast products for which we are in touch with several customers. We also have representation in these areas from PCL side, which are actively working on these areas as well. And we see good opportunities there because these geographies are becoming increasingly difficult to operate businesses increasingly more costly in terms of energy cost, power costs and labor costs and so on, which makes India a very good alternative in terms of sourcing of such critical components. And that's where we see that we can use our experience, our connect with the industry and so on to grow the business more. At this point of time, Indian export is about 50-50. We see it remaining like that, actually, not because we don't want to grow the over export market, but because the Indian market is one which is growing in double digits nearly and we are of course, participating in that growth.

[Operator Instructions] As there are no further questions, I'll now hand the conference over to Mr. Karan Shah for closing comments.

Thank you so much all for participating in our earnings conference call for Q3 FY '26. I hope I've been able to answer most of your queries, and we look forward to your participation in the next quarter. Thank you very much.

Thank you very much. On behalf of Precision Camshaft Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.