Pricol Limited (PRICOLLTD) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Good day, and welcome to Q3 and 9M FY '24 Earnings Conference Call of Pricol Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Pricol Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the third quarter and 9 months ended of financial year 2024. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. P.M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Director of Strategy; Mr. Priyadarsi Bastia, Chief Financial Officer; and Ms. Madhura Mohan, Management Executive. Without any further delay, I request Mr. P.M. Ganesh to start with his opening remarks. Thank you, and over to you, sir.

[Audio Gap] FY '24. We won the best award from Daimler Truck during Q3 for the technology and innovation. We made a state-of-art driver information system for Daimler Truck. Slide #2, what you see is the best quality performance with one of our big OEMs, JCB. And on the third slide, you see an award from Tata Motors, “the ED’'s DWM Cup Assessment“ from Tata Motors. Also a few select launches, which we thought that we should highlight. You would have seen a couple of weeks back Hero MotoCorp launching a series of their motorcycles. And we are very proud partners with Hero to be a part of the driver information system launched in this key model. The left-hand side top what you see is an Xtreme 125 CC motorcycle launched with our driver information systems. On the top middle whatever you see is for the new model Mavrick I'm sure that you would have read in the paper. The launch has happened a couple of weeks back for their 440 cc motorcycle. We have made a driver information system. And also the newly launched Tata Motors EV Punch, we have made again a state-of-art driver information system for Tata Motors, both for the EV vehicle and also for the IC engines. Switch Mobility, we have done, again, a state-of-art driver information system, Switch Mobility. You know that's the EV division of Ashok Leyland. And the innovation award whatever I showed to you is the right one at the bottom, you see the driver information system whatever we designed for Daimler. Coming to financials. Highlights are like for Q3 of FY '24 ended up our EBITDA margin stood at 12.51% from revenue from operations at INR 5,571.91 million. For the 9 months of FY '24, our EBITDA margin was at 12.55% and the total revenue was at INR 16,419.57 million. On the growth -- on the revenue from operations, we have grown by 21.61% on a Q3 to Q3 comparison. And our EBITDA was -- has grown by 34.49% during the same period. And for the 9-month period, we have grown by 17.86% revenue from operations. And on a 9-month period of the EBITDA level, we have grown by 18.79%. Thank you. That finishes my presentation. Over to you for the question-and-answers. Thank you.

[Operator Instructions] Our first question is from the line of Bhalchandra Vishwanath Shinde from Kotak Life.

Sir, regarding the product launches wise, are we working on e-cockpit with any customer and means what are the stages of development right now? And can we expect any positive news on that front?

Thank you for the question. Yes, we are working on the e-cockpit with one of our major customers. The SOP is likely to start by FY '26. Being under NDA, I am not able to reveal the name of the OEM. Yes, you're right, we are working on the e-cockpit solution.

But by when we can expect some news on that?

See the launch of the product is expected, as I've told you, during FY '26. During the time when you have the product getting launched, then we will tell you during that time that this is a product that -- which model that we have launched for that customer. It is already under development.

Okay. Okay. And on the TFT clusters wise, I mean so on the clusters wise, if you can give me mix wise, how will be our mix right now? Means, how much will be normal analog then digital and TFT cluster mix? And even on the 2-wheeler, 4-wheeler and commercial vehicle mix?

See whatever we have launched for DICVS is LCD digital cluster, it has got both analog and digital. And whatever we have been launching for 2-wheeler and some of the commercial vehicles have got a mix of both all the LCD-type instrument clusters and also TFT. As explained during some of our previous calls, the dependency of the market is to move from LCD to TFT that's what we see that it is happening. But it takes some time for the complete conversion to happen. If you remember, like 5 years back, most of the instrument clusters whatever we were supplying were mechanical in nature. And then after the BS-VI got implemented in 2020, the migration started from the mechanical to digital electronic clusters. And now it is moving into the high-end digital electronics, that is moving from LCD to TFT.

And how will be the mix for -- of 2-wheeler, 4-wheeler wise?

Mix in the sense, our revenue to the...

Yes, revenue mix, especially in cluster.

Cluster revenue, actually, if you go through the ACMA production, 2/3 of the vehicle production comes from the 2-wheeler segment, as you are aware. Similarly, since we have balanced out and present in all segments of the market is something very important because we have mitigated the risk by being present in all segments of the market. You know that in Q3, the tractor shipments were down. That is why some of the Tier 1s had a setback in terms of their revenues, primarily because if you are too much tractor dependent, there was a degrowth in tractor. That way we have derisked our segments quite very well. So if you see that 2/3 of the vehicle production in India comes from 2-wheeler. Our revenue in driver information system is also 2/3 of the total revenue comes from the 2-wheeler segment, okay? Commercial vehicle contributes to about 15% of our total revenue. And similar, if you match it with the ACMA, you'll find that 15% of the vehicle production comes from the commercial vehicle of the total production made. And about like 7% to 8% comes from personal passenger vehicles that's an area that we're aspiring to penetrate more as we are going on, which I explained to you also in the previous earnings call. And the remaining are the tractors and off-road vehicles. That is how we are poised .

Got it. And last question on the margins wise, you have given a...

I request that please join the queue. I think there are a number of callers who are waiting can we please request you to please join the queue, please.

[Operator Instructions] Our next question is from the line of [ Monika Arora from Share Giant Advisors ].

I had sort of certain bookkeeping questions, like what is the bifurcation of cluster and non-cluster business? And also, I wanted to understand is segmental bifurcation?

[ Monika ] to give you a rough estimate on the bifurcation, the cluster business contributes to about 70% of the total revenue and the 30% comes from the non-cluster -- non-instrument business, okay? On the segment-wise, I think I just explained to the previous caller about the segmentation like 2/3 of our revenue coming from the 2-wheeler and 15% coming from the commercial vehicle and 5% to 7% comes from the personal passenger vehicle and the remaining coming from tractor and off-highway segments.

Okay. And sir, what is the bifurcation between exports and domestic?

Currently, we stand at 10% of the total revenue coming from exports, primarily because there has been some slowdown both at the U.S. and Europe markets. And we hope recovery to happen from next year onwards. Regarding the project launches for export, we are on track.

Okay. Okay. And sir, would you be able to share the EBITDA margin for cluster business?

[ Monika ], can I please request to please join the queue because there are a number of participants. If you don't mind, can you please join the queue.

[Operator Instructions] Our next question is from the line of Harini from Sundaram Alternates.

So I just had one clarification on whether are there any hindrances because of the Red Sea crisis on your import because I had a sense that your purchases are majorly import based. So do you have any hindrances because of the ongoing crisis?

I'm so sorry, I think we lost in between. You are not very audible. Can you be little slow in your question?

Am I audible now, sir?

Yes, you're audible.

Yes. So I just wanted to check if there are any impact because of the Red Sea crisis on your imports and your raw materials? Do you have any issues over there?

No, actually, what happens is because of the Red Sea issue, the logistics time has gone up by a couple of weeks because it has to be rerouted. So what we are doing is we have started that rerouting and now it has come in to normalcy. So we are not facing any issues currently because of the Red Sea.

Our next question is from the line of Karan Gupta from Varanium Capital.

Am I audible? Hello?

Karan, your voice is not audible.

Hello? Is it better now.

Yes, Karan, please go ahead, Karan.

Yes, yes. So my question is related to, as you said, you are moving from mechanical instrument cluster from digital, then TFT and high-end digital instrument cluster. So as the electronics part is going up in your instrument cluster. So as we -- and you are expecting this kind of thing that margin will be impacted because the more electronics thing will be coming to our products. So our edge of manufacturing thing will be judged to like the plastic models or which packaging materials of that instrument cluster. So you have seen anything -- expecting anything the margin will be impacted in this thing?

No. The margins will not be impacted. Rather, the margins will go up. If you see that more and more electronic clusters that we have been since 2020, our margins have been going up. Primarily, it is not just assembly alone. We do an end-to-end solution for the customer, starting from the design, development, manufacturing engineering, doing our own tools and thereby giving a complete end-to-end solution to the customer. So it is -- the margins are just not depend on only the manufacturing or putting the plastics together and selling to the customer. It is the end-to-end solution that whatever we could give it to the customer is what it looks like. And then therefore, the margin gets improved.

Okay. So in this case, use cases will also be increased. So I think margin will not get impacted. So electronics part will increase software things also will increase. So in this case, margin will not be impacted. Is my understanding is correct?

Yes. In fact, I can explain to you a little bit differently let me see. We are moving from a product-based company to a solution-based company, okay? This is what we had explained in the few earnings call also. If you're only doing a product with electronics, then your margins will not be very high, okay? But if you give a solution, moving into like a technology product giving solution to the customer, your margins are not under threat.

Our next question is from the line of Chirag Jain from Emkay Global Finance Services.

Congrats for a very strong performance. Sir, just a couple of questions. One, in terms of you can share the thought process of getting into like the disc brakes and UBS -- sorry, disc brakes and BMS and any customer wins on these 2 product lines and probably from when we can see revenues flowing in? And second, also in terms of our revenue guidance and margin guidance by '26, is there any revisit in terms of those numbers?

Mr. Jain, if I've understood your question, you asked about battery management system, correct?

Yes. And also disc brakes. Broadly, what is the thought process of getting into that category and also in terms of any customer wins, order wins and when we do see commercial production and probably revenues getting reflected?

Okay. Okay. Very good. Mr. Jain, I'll answer like this. Disc brakes and battery management system, we are doing something as a modularity. Making like a common product across various lead times to the exclusive customers. We know that the 2-wheeler market is getting very fragmented. So we know that we have started with like off-the-shelf driver information system. There when you were able to offer as the off the shelf product, having a very, very shorter lead time in terms of design and development and straight away it is like the customers can sit and use the product. That's what we have done during the last 1 year for various new-age EV customers. Disc brakes and battery management system is something which is under development. In the next 12 to 18 months, we would be launching those products for a number of EV customers across various 2-wheelers, which will not only include what you call the new-age EV, which is going to be the primary focus and also to our traditional OEMs. And this is built on the concept of modularity by which every time the customer need not keep designing the product right from the start. With this very small minor modifications, we will be in a position to offer to various customers. I hope, Mr. Jain, I had explained your question.

Yes. And any sense in terms of when it will start getting reflected on revenues? Can we see in FY '25? Or it would be FY '26 onwards?

Majority of the revenue, in fact, if you ask me for full year revenue will start from FY '26. But Q4 of FY '25 would be like starting of these businesses.

Okay. Noted sir. And any thoughts on the revenue and margin guidance that we had shared for 3 years for FY '26?

It would be a little difficult for me to explain about how the revenue and margin is going to be because this is a new product, it has been coming very well, very much liked by our various customers. I'm sure that it will have a very, very high potential to grow because more and more EV coming, you would have seen Finance Minister also has said in the budget yesterday that high focus is going to be given on the EV market. We expect a very, very good revenue to happen from next year on these 2 products, which are primarily made for EV customers.

Okay, apologies. I was asking about from a company standpoint overall. I think you had given a guidance of closer to INR 4,000 crores, INR 3,400 crores to INR 3,600 crores in terms of organic guidance and roughly about 13.5% to 14% margin. So would that guidance broadly remains?

See [indiscernible] in the direction of whatever Managing Director has been giving us a vision. But you have to understand that it depends upon the customer launches. Our order books have been very, very strong. And we have been doing with a number of projects in our basket of products whatever I've been explaining to you, including our existing business and the new products whatever we are launching like battery management system and disc brake and electrical oil pump and many more telematics solutions and many more. So our order books are quite strong. It depends upon the customer launches and how the market is going to be. If you recall, during this year, which is going to end up, EV vehicles had a lot of struggle in the market, primarily because of certain policies which govern the market and it went a little slow. Those types of things are bound to happen. Otherwise, I think regarding the projects and the products whatever we are offering to the customer, I think we are right on track. Mr. Jain, can we just move to the next caller, Jain. And if you have any further questions, you can just come in the queue. Thank you.

Our next question is from Vipul Kumar Shah from Sumangal Investments.

Right, sir. My question is regarding some time back, we had tied up with Sibros for this cloud-based driver information system and end-to-end solution. So what is the progress there?

Sibros solution is something that we have integrated with our telematics, which is the part of the Connected Vehicle Solutions. Currently, it is on the POC, we call proof of concept with various OEMs like the battery management system and the other products whatever I just explained. So this is currently under testing with various OEMs, which will see some kind of start-up production happening by Q4 of FY '25. And therefore, more revenues coming during FY '26. So we have already done the internal POCs with the Sibros integrated solution. It has come out quite well. And the customers are quite confident about this integration. And now currently, it is under POC with various customers.

So this will help us in increasing our content per vehicle? Or it will be -- it will broaden our offering? So how it will help us?

It will definitely do both. One is the content of the vehicle will increase because telematics as a product strategy is going to have a very deep penetration into the new era vehicle. You know that most of the EVs have got telematics inbuilt because you need to track many of the vehicle parameters, including the battery performance. And we are also developing battery telematics as well for few of our customers. So telematics is going to be a large play as we are going to hope the [indiscernible] where the market wants. So it is going to have value addition in terms of our product portfolio and also with Sibros integration, more and more, we are going to have the Connected Vehicle Solutions offered to various customers.

And last question, sir, this is exclusive -- no, no, this is related to this question only. So only one line question, if you allow.

Yes, Mr. Vipul. Please go ahead.

Yes. So this Sibros tie-up is exclusive to us only? Or they can tie-up with other manufacturers also?

Yes, I will put it like this. It is -- I will not use the word exclusive for us. But the solution whatever we are offering, along with the driver information system -- see that's why I said this cannot be like isolated and seen only like a Sibros solution exclusive or telematics because the complete bucket of solution that we offer to the customer as an end-to-end as a Connected Vehicle Solutions and Sibros would be a part of it, okay? So we have the driver information system connected with the telematics solution and adding Sibros for the cloud. So it will be a combination of everything. So if you ask me exclusivity, it is not there. But if you see this kind of connected with the solution whatever we are offering to the market, I think we'll be rather very exclusive in whatever solutions we're giving to the customers.

[Operator Instructions] Our next question is from the line of [ Piyush Jain ], an Individual Investor.

Sir, I wanted to know in this quarter, if we have got any new model order or we have entered into any contract with any new OEM or something? And in addition to this, earlier we used to show that we are doing this battery management system and Sibros or something. So nowadays, the presentation are not showing anything on this. So anything is going on this we are working on this or the revenue will come into from which time?

I would just re-explain whatever I explained, like the new product portfolio of Pricol starting from battery management system, this big telematics solution with Sibros integrated solution, then we are also doing for the EV vehicle new era coolant pumps and oil pumps for battery cooling applications. In fact, some of the new products like the battery cooling applications, EV coolant pumps already have been launched recently during Q3 with both Tata Motors and Ashok Leyland. And going forward, we expect more and more EV vehicle into the commercial vehicle segment. These products revenue will keep growing. Regarding telematic solution, battery management system, and also on disc brakes, I explained that the likely start of production is going to be during Q4 of FY '25, and we will see more revenue coming into it during FY '26 because it is under POC with the various customers at this point of time. Otherwise, if you ask me about new customers, we have been adding a number of new customers, especially the new-age EV players. In the Indian market, we have been keep adding customers where we are able to offer official products. We have done a number of official products of driver information system to the new age EVs in the last 2 quarters. And we will continue to offer these solutions to new set of customers as well for the EVs. These new products whatever I spoke will start SOP from Q4 of FY '25. I hope that I had explained to you.

Our next question is from the line of [ Monika Arora from Share Giant ].

So I wanted to ask 2 questions. One is, what could be the profitability, EBITDA margins like tentative kind of EBITDA margins for the clusters business, sir?

Profitability for the clusters?

Yes, sir.

[ Monika ], you have seen the EBITDA margins whatever we have declared and you would have seen that like 2/3 of our revenue coming from instrument cluster. So that answers your question.

Okay. Okay. And sir, one last thing. Who can be your like top 5 customers? If you just take top 5?

Sorry, if I understand your question, you wanted to know our top 5 customers, right?

Yes, correct, correct.

See primarily, as I explained to you that 2/3 of the production is coming from 2-wheeler. So naturally, the top customers will come from the 2-wheeler, starting from TVS Motor, Hero MotoCorp, Bajaj, Royal Enfield and then Honda Motorcycles. We are working with all of them Suzuki Motorcycles. All of them are our top-notch customers. And all the connected vehicles, we have Tata Motors, Ashok Leyland and Volvo Eicher. If you ask me the revenue as the top what we produce. That is how we are aligned. One is the market segmentation and also in terms of revenue, that is the order in which our revenues are there among the top customers. On the off-highway vehicle, again, JCB has got the largest market share and so our revenue also with JCB as the largest revenue on the off-highway vehicle.

Our next question is from the line of Karan Gupta from Varanium Capital.

So my question is related to the competition in less present in passenger vehicles comparatively on product range. Am I audible, sir?

You're very audible. Can you just be a little slow on your question?

Yes. So my question is related to the competition like we have very less presence in passenger vehicle comparatively in our product range. Yes, so my question is related to the competition part in passenger vehicle, I see you have less presence comparatively in our product range. So in instrument cluster or in e-cockpit as we are entering into, so our major competitor in this segment is Visteon so very large player in India, so what kind of competition you are seeing? Or what do you guys have done any competitor analysis in this thing as you are entering to the new e-cockpit segment because for a long time, Visteon is working in this thing. And the profitability that's why I asked earlier question about the profit margin -- sorry, EBITDA margin. So their margin is very less as they are more into the electronics part entering into the electronics part. So what do you think about this competition with Visteon.

No, I will not name as just one competitor. There are multiple competitors in this area apart from Visteon many more people are there. It is not the competition which matters. It is the solution whatever you give to the customer is very, very important. For example, we started penetrating into the passenger vehicle segment starting from 2020 onwards. And we have done fairly well in terms of our penetration into the EV segment. We have penetrated quite well into Tata Motors and also into PSA in the last 2, 3 years. And we continue to offer innovative solutions benchmarking with the global standards for the personal passenger vehicle. These are going to take some time for you to have a rapid penetration like what we have done for the other segments of the market. Since we had a non-complete until 2020 of entering into the personal passenger vehicle for driver information system. But in the last 2 years, I think we have done fairly well in terms of our market penetration into the personal passenger vehicle. And we have been getting opportunities from number of OEMs in the personal passenger vehicle for driver information system. And as I told you during the beginning of the call, in the e-cockpit solutions also, we are working with a large OEM, which is going to see the start of production from FY '26. So that's where we stand. So we have not much concerned about the competition in the sense that we have to keep looking at innovative solutions to the customer, so the customer keeps giving us opportunity to grow with them in this space.

How do we differentiate our solution as you have been saying we have different solutions are out providing the solutions systems how this thing will pan out the solutions part and because in passenger cars or maybe in commercial vehicle cars, solutions will be same, but the customers are trying or a lot of the customers desire is the same solution for every passenger vehicles or any 4-wheels or any commercial vehicles. So what's the differentiating in terms of providing solutions or the desired thing to OEMs?

So there are certain unique features that Pricol can offer for a customer, starting from our in house R&D, okay? This has been our core strength. And in the previous earning calls, we have been explaining like 4.5% of our revenue is invested in our R&D year-on-year for the last 5 to 7 years. And this is what is giving us results now. And the flexibility that whatever we offer to the customer because of our in-house R&D is one of the key highlights, which is a differentiating factor to us. Not only that, we have got our own in house machine building, we do our own lines. We do our own tools, we do our own plastic injection molding in-house, we do our own PCB population. And not only that, we have got exclusive tie-ups with many of the chips manufacturers as long-term contracts with them. So they offer the new generation of ICs to Pricol. So there are multiple differentiating factors, which we can offer to the customer as the end solution, which will give definitely a solution differentiation when compared to whatever is offered in the market. Of course, I will admit that yes it is going to be a difficult task, but we are doing quite well as we speak in the last 2 years in terms of market penetration into the different segments.

Our next question is from the line of Khush Nahar from Electrum.

Sir, just had one question. What is the update on the acquisition that you're eyeing in the non-auto space?

On the acquisition part, as soon as we are able to get into some kind of concrete thing, I will let you know. It is too early for us to talk about it. As soon as we have some firm information, we definitely keep you posted on that. Thank you.

Our next question is from the line of Bhalchandra Vasant Shinde from Kotak life.

Sir, regarding 1 order, I would like to know. One of your peers has said that they have started supplying clusters to Tata Motors. So what will be the difference, what part we supply? And are we seeing any dip in that revenues over the next 1 to 2 years?

No, no, not really. As I told you that there are a number of players in this market, and the competition will continue to be there. Why in Tata Motors? Across all the customers, there are competition, and we have been growing in our business, though a number of competitors are there. As I told you, we keep giving innovative solutions to the customers and keep growing in this segment. So even if there is going to be one competition, I'm sure that with more innovative solutions whatever we are offering, we'll keep growing with that.

Got it. So there is no impact on Tata Motors' revenue currently?

Absolutely not. We have been growing with Tata Motors continuously.

Our next question is from the line of [ Piyush Jain ], an individual investor.

Sir, just want to know any new customer or any new model something which you have won in this quarter?

[ Mr. Piyush ], you would have seen in my presentation that only in Q3 alone, the last 3 months, we have launched a number of driver information systems, which is -- during the presentation, which I showed you. Just to repeat, a couple of weeks back, Hero MotoCorp has launched a new range of motorcycles, 125 CC Premium Xtreme and also they have launched a 440 CC Mavrick a couple of weeks back, and we are very proud suppliers of both the instrument clusters for their launches. And with Tata Motors, the new range of EV Punch which have been launched, we have provided the solution on the driver information system. What I'm talking is only just the Q3. What we have done as launches during the last 3 months. And for the IC vehicle of Punch, we have launched a new driver information system with Switch Mobility, which is EV subsidiary of Ashok Leyland we have launched the driver information system. And as I told you, with Daimler, we have launched a state-of-art driver information system for their new range of trucks and buses. And we also have won the Best Technology and Innovation Award from Daimler during Q3.

Okay. Sir, my question was specifically to this are we in touch with Hero MotoCorp or Harley-Davidson 440 or something?

Yes, for the thing is to that on the Harley-Davidson platform, yes, you're right. So this cluster whatever has been launched is based on that platform.

Is Mavrick 440 is Harley-Davidson same thing or it's a different model?

It is not actually. Harley-Davidson is different. I'm only talking about Mavrick. Both are completely different. So Harley-Davidson U.S., if you ask me, we do export a number of products -- a range of products to Harley-Davidson.

Okay. And the domestic Bajaj, Hero one.

Sorry, can I just have your question repeated?

Yes. I just want to know, are we supplying for the Hero, Harley-Davidson Indian version? Or we are in talk with them?

No, we are not supplying to the India Harley-Davidson, no.

Ladies and gentlemen, I now hand the conference over to management for closing comments.

I will request our CFO to give the closing remarks. Over to CFO, Mr. Priyadarsi Bastia.

Thank you, ladies and gentlemen, for joining the call. This quarter was a good quarter. We performed pretty well and customer support was there. Suppliers were pretty supportive. So we feel Q3 same we're expecting for Q4. Thank you so much for joining us for this call. We can end the call.

Thank you so much, ladies and gentlemen.

Thank you on behalf of Researchbytes Corporate Services Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.