Pricol Limited (PRICOLLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY 2024 Conference Call of Pricol Limited. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand over the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good evening, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Pricol Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the fourth quarter and financial year 2024. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's 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 the 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 their opening remarks. We have with us Mr. Vikram Mohan, Managing Director; Mr. P. M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Director of Strategy; and Mr. Priyadarsi Bastia, Chief Financial Officer. Without any further delay, I request Mr. Vikram Mohan to start with his opening remarks, followed by financial and operational highlights of the company. Thank you, and over to you, sir.

Thank you, ma'am, for the introduction. A very good evening to all of our esteemed shareholders who are participating in today's call. Welcome to the call for FY '24 financial performance and also quarter 4 FY '24 financial performance. I hope all of you had a chance to see the slides that have been uploaded, the data that's been uploaded. Our revenue from operations for this quarter on a consolidated basis has been INR 5,662.12 million, with an EBITDA of INR 725.84 million, resulting in EBITDA margin of 12.82% with a profit after tax of INR 415.02 million, profit after tax margin of 7.33%, with an EPS of INR 3.41 per share. For the year ended 31st March 2024, our financial performance on a consolidated basis, we have had a revenue from operations of INR 22,081.69 million, with an EBITDA of INR 2,786.42 million. EBITDA margin of 12.62%, PAT of INR 1,406.12 million, with a PAT margin of 6.37% and an EPS of INR 11.54 per share. At a consolidated level, our long-term borrowings are nil as of 31st March 2024. And at a consolidated level, our return on capital employed is steadily increasing and has hit a number of 23.18% in FY '24 against 20.68% in FY '23. At a consolidated level for the quarter that has just gone past Q4 of FY '24, our revenues have grown at 11.09%, which have been lower than our expectations, primarily because there have been delays in start of production from 4 of our customers. Though we have confirmed volumes and LOIs and capacities for the same, we have had delay in start of production because of initial vehicle trials and launch issues, which have since got launched and normal production has resumed from April. So this catch-up will happen in the coming quarters. Our revenue from operations for the year have grown at around 16%, slightly below our expected levels of about 19%, which also we hope to catch up in the coming quarters. This is primarily because of delay in start of production for certain confirmed businesses of ours, of about 4 vehicle makers. In quarter 4, our EBITDA has grown on a like-to-like quarter comparison by 16.44%, which is in line with our expectations. And for the year, our EBITDA has grown by 18.17% over the prior period. As mentioned by me in previous calls, you would notice our EBITDA is steadily increasing in spite of high freight costs and other aberrations that we saw this year, supply chain aberrations because of the volatile geopolitical situation across the world, I am quite hopeful that our CEO and his team will ably be able to keep improving EBITDA and level off at around 13.5%, which is normalized EBITDA over the course of this year. This is the quarterly income statement, the highlights of which have been read out in the previous slides. And all the capital market data and everything has been provided in the presentation. I think without further ado, we would like to move straight to the question. [Operator Instructions] Thank you very much for your cooperation in that one.

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

Sir, regarding our new product development, I would like to know the update on the -- especially on the E-Cockpit where are we and how do we see any advancement on that towards the customer on which stage we are?

Mr. Shinde, thank you for the question. I'll probably break this up into 3 parts and further elaborate on this rather than only talk about E-Cockpit, which is a very advanced product. One of the products that was supposed to directly contribute to revenue in the coming 2 years is the disc brake, which is a very strategic product of our ACFMS division. I'm happy to inform you that with 6 customers we have started production and, ramping up both capacities and increasing LOI, and we are on track to meet our schedules. With regard to the E-Cockpit, I would request our director strategy, Siddharth Manoharan, to talk about it. as well as the connected vehicle solutions to other strategic projects. Over to you, Siddharth.

Good evening, Mr. Shinde. With regard to E-Cockpit, currently, as you know, we have developed prototypes and proof-of-concepts and currently it is being showcased to various passenger vehicle as well as commercial vehicle customers. It is in concept stage and discussion with many of them. And we've also announced a partnerships with a Chinese company called TYW for vertical integrating the screens and other components. So at this point in time, we are well positioned to showcase these products with some of our customers, and customers have also shown interest to take it to the next stages of discussions. So as managing director rightly mentioned, this is a very advanced product and adoption will take some time in the market. And coming to the connected vehicle solutions, especially with our partnership with Sibros, we have showcased some of our proof of concepts to both domestic as well as international customers, and some testings are ongoing at this point in time with international 2-wheeler OEMs as well, which has seen a very good response. And in this coming year, you will see some update information flowing in from our end.

The next question is from the line of Rushabh Shah from RBSA Investment Managers.

Sir, would it be possible to share the percentage increase in blended ASP in FY '24 over FY '23? Since we share -- we don't share the blended ASP as such.

Can you repeat yourself a little slower and louder please, Mr. Shah?

Yes, sure, sir. So I'm just asking you, is it possible to share the increase, percentage increase in the blended average selling price for all the products of Pricol in FY '24?

That's a very, very difficult question to answer because we sell mechanical clusters, which are slowly phasing out, which is an average selling price of INR 300. We are selling electromechanical clusters, which are slowly ramping up, which is an average selling price of INR 8,800-odd. We are selling low-end TFT clusters, which are selling around INR 1,500. Higher TFT clusters, which are selling at INR 8,000. We are selling disc brake systems, which are selling at around INR 1,150. We are selling -- chain tensioners which are selling at INR 75. We are selling complicated industrial oil pumps, which are selling at around $800. Now I think it's impossible to blend all of these and give a blended selling price because we are not a commodity company and each of our products are so different in terms of functionality, systems and composition.

The next question is from the line of Vipul Kumar Shah from Sumangal Investments.

So my question is, can we break up a turnover between 2 main product verticals, driver information and connected vehicle solutions and actual control and fluid management systems, how much each vertical is contributing to the turnover?

Good evening, Mr. Shah. This year, the turnover would have been about -- not would have been, has been about 69% to the DICVS and about 31% to the ACFMS. In the coming years, we will see the ACFMS' contribution slightly increased to get to about 35%, 36% as the adoption of disc brake and production volumes for the same go up.

Sir, there is a lot of echo from your side. So would you speak a little slowly [indiscernible].

It is about -- Mr. Jane, is there a lot of echo from my side. Do you want me to change my mic position. Purvangi?

Sir your are sounding clear. You can proceed.

Am I coming clear?

Yes, sir.

Mr. Shah, this year, it's about 69% of the contribution from our Driver Information and Connected Vehicle Solutions division. And from the actuators, controllers and the fluid management systems division is about 31%. Going forward, the ACFMS for the latter division will increase to about 35% next year as the adoption and production volumes of the disc brake will increase.

The next question is from the line of Nirav Seksaria from Living Root Analytics.

Yes. I had a question for the management. So what initiatives are we taking to increase our market share in the passenger vehicle segment?

We are not going to significantly increase our market share, but our aim is to get to about a 10% share of business in the passenger vehicle segment. As I mentioned in many, many calls prior, our focus areas are 2-wheelers, commercial vehicles and off-road vehicles where we want to have the majority market share in India. Passenger vehicles, nevertheless our aim is to go to about 10%, where today with Tata Motors, we are at 58%, and few other vehicle makers, we have just started making the foray. But my hope and wish is to level off at around 10% because -- and focus on the segments where we already have leadership.

So what is the current market in the passenger vehicle segment?

It's about 6.8%.

The next question is from the line of Sahil Rohit Sanghvi from Monarch Networth Capital.

Can you please give me a split of the contribution from 2-wheelers, EV. PV, you have already said, and the other segment, I mean, if you can give me the revenue split for FY '24?

Two-wheelers is about 60% to 63%. PVs is about 6.8%. Commercial vehicle is about 25% and balance coming from off-road vehicles.

Sorry balance coming from?

Yes, please.

Balance coming from? Sorry, I did not get your last...

Off-road vehicle and industrial segments like your JCB, Tata Hitachi et cetera.

The next question is from the line of Pranay Roop Chatterjee from Burman Capital.

Sir, I have only one question. If I look at the 2-wheeler industry, and I'm trying to compare before COVID, let's say, FY 2019 versus FY 2024, at the industry level, in your sense, out of every 100 scooters and motorcycles combined sold, what do you think the mix was between mechanical, electromechanical and fully digital TFT clusters in FY 2019 versus in FY 2024?

Sir, I will not be able to off the bat answer the question because Unfortunately, my brain is not [indiscernible]. But if you can send a question to our Company Secretary, I will get after you to answer that question.

The next question is from the line of Harini from Sundaram Alternates.

Just 1 thing, when you were mentioning that on the revenue, it was because of delay in SOPs, is it possible to quantify as to which segment, is it majorly from 2-wheelers? Are we seeing those ramp up right now? Some color on that, sir?

I don't want to talk about specific customers, but yes, there have been across 2-wheelers and commercial vehicles primarily, about 4 customers in total. And as I mentioned, by April, it got normalized. And from this quarter, again, SOPs are getting back to normal.

The next question is from the line of Vipul Kumar Shah from Sumangal Investments.

So what percentage of our turnover should be coming from the products which we have introduced in the last 2 years? Any ballpark figure?

Our average of NPD, what we call new product revenue, has been hovering between 20% to 25% every year, and we are hoping to keep that momentum going for the next couple of years also, Mr. Shah.

The next question is from the line of Pratik Patel from Chartered Capital.

My question was related to the provisions, which I can see. It's a long-term provision as you raised from INR 148 million to INR 190 million and short-term provision has been rising from INR 111 million to INR 269 million. So can you just highlight the number why it's so high?

I request our CFO, Priyan to answer that question. Priyan, over to you.

Good evening. This long-term provision is pertaining to the employee benefit provisions, which has increased, and the custom provision is a warranty provision, which has it.

The next question is from the line of Nirav Seksaria from Living Root Analytics.

So what is your CapEx plan for FY '25? And what was the capacity utilization in FY '24?

Pardon me?

What was the capacity utilization in FY '24 and the CapEx plan for FY '25?

FY '25, the CapEx plan is going to be about between INR 200 crores and INR 220 crores as announced. Over 3 year, INR 600 crores CapEx for organic growth. This is not inorganic, if any, opportunities arise, number one. Number two, our capacity utilization at a current level is hitting almost about 85% and which is why we are now enhancing capacity and undertaking CapEx at our new plants in Pune, upgrading our facilities in Coimbatore and in Manesar.

Okay. And the capacity -- the new CapEx is for which product vertical?

Across all product verticals more leaning towards the DICVS. So it's also buildings coming up. And it's for machinery, a lot of it for PCB manufacturing.

Okay. And sir, if I could ask 1 more question. What is it -- what about of battery management system like how we are going ahead with it?

That is going a little slow and has not yet reached fruition. And when the first LOI starts trickling in that quarter, we will announce that.

Okay. But we expect a high margin from this segment, right?

No. It was never a high margin. We were looking at normalized margins. That's why the blended EBITDA. And like I mentioned in my earlier call, we are taking 3, 4 new product initiatives. Not everything is going to be successful. One will be hugely successful, two will be moderately successful and one we could fail. It is with that modicum of risk that we have entered into about 3, 4 different product verticals.

The next question is from the line of Deepak from Barclays.

So I just wanted to ask you like in your last presentation, you have, like I mentioned that you are going to touch the revenue in financial year '23 INR 3,600 crores so, is it intact? And the second question is like have you added any new clients this financial year or in the future you're going to add?

We have commenced some new business with new clients, especially with Honda Motorcycle & Scooter India, which is going to significantly increase our top line in the coming years. Most of it is going into production 18 to 24 months from now. Significant LOIs [indiscernible], I don't want to elaborate more because it is -- some of it is confidential. That's with regard to the question on the new customers added. In terms of share of business, yes, it's increasing with certain customers because of new platforms that we have added. In terms of INR 3,600 crores of the organic side, we are intact about INR 3,200 crores. On the inorganic side, hopefully, over the next quarter, we will be able to have some more clarity as we are analyzing effects under due diligence right now.

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

Yes. So my question is regarding to commercial vehicles and off-road vehicles. So how you are seeing the traction of mechanical clusters to digital clusters? Because these are the segments where right now, I mean it has been -- the mechanical clusters are using. So now how you are seeing the traction? They are shifting to digital or maybe LED?

I'll request our CEO and Executive Director, to take that question.

BS-VI regulation came into India, most of the mechanical clusters already have been changed to electronic clusters. From 2020 onwards, most of the commercial vehicle manufacturers are using only electronic clusters.

And CapEx for '25, you said [indiscernible]. So that is the part of your...

INR 200 crores to INR 220 crores for organic CapEx, which is part of our larger INR 600 crore CapEx plan.

Okay. For FY '25?

Yes.

The next question is from the line of Hetvee Marviya from Catamaran.

So my question is, first, I just want to clarify that the market share in our digital -- in clusters in car is 6.8% or is it the share of revenue for us in 4-wheelers? And second, my main question was that, since we have got significant market share in our focus segments of 2-wheelers as well as CVs, I wanted to understand where is the incremental growth that we expect from?

In passenger vehicle segment, our share of business for clusters by volume is 6.8%, which we expect over the next 3 years to grow it to 10% and that's what our ambition is. Where is the incremental growth coming from the 2-wheeler and the commercial vehicle segment is increasing our share of business with certain customers by displacing competition or going up the value chain by certain clusters from electromechanical to -- electronic and mechanical to electromechanical, thereby increasing our value.

Understood, sir. And if I may ask, do we have a number for how much contribution is from EVs since that would be the ones that go to...

It's still in very early stages ma'am. We are now engaged with multiple EV players, almost 18 of them. And in fact, our entire Sricity plant has been dedicated for EV cluster manufacturing, which is slowly ramping up.

Got it.

And I'd just like to clarify for your benefit and the benefit of all the other investors on this call as I've mentioned many times before. Our product is propulsion agnostic. So the question of whether it is EV or non-EV or even tomorrow fuel cell or hybrid, our product is propulsion agnostic. So really, the question of EV versus non-EV does not come into play because everything else in an EV cluster is the same. In fact, we are in almost all the top EV clusters, we are present today except for fuel level, which is physical at petrol level here, it is -- battery level. So the question of -- we have a propulsion agnostic product. I'd just like to reiterate that.

The next question is from the line of Harini from Sundaram Alternates.

So I just wanted to understand that there is a significant increase in the capital work-in-progress. Is it completely dedicated to the disc brake facility that we are setting up or just to clarify.

As I mentioned to you, 1 plant is under construction. Another plant is just commencing construction. New lines have started getting constructed. New machines have started coming in and getting commissioned. So these are all capital work-in-progress.

Understood. Understood. Also, if you could throw some light on what is the total capacity that we'll be putting up for disc brakes?

Eventually, we will have a capacity of about INR 300 crores per annum. Currently, we have put up a capacity for about INR 120 crores per annum.

The next question is from the line of Nandan Pradhan from Emkay Global Financial Services.

So I would just follow up on the initial question that was asked in terms of the new product development. You mentioned that you've got 6 customers and you're ramping up capacity, that was in context to which product exactly?

Pardon me, sir?

You said that you have orders from 6 new customers and you are ramping up capacities for the same and have LOIs coming in. So that was...

New customers, 4 existing customers, the start of production got delayed, vehicle launches or vehicle ramp-up, which has since got corrected and these are confirmed LOIs which has delayed production has resulted in loss of sales in Q4, which was anticipated.

Okay. No, I mean, there was a question in context of the E-Cockpit and you mentioned this was in that context? Am I getting it right?

Customers we spoke about -- the only customer we spoke about, which we have added is Honda significant volumes in the coming 18 months and onwards and increase of share of business with certain customers by displacing competition or going up the value chain.

The next question is from the line of [ Shikha ] from Time & Tide Advisors.

I have just 1 question. I'd like to understand your exports for the quarter, and I think our target was to take it to 20% by FY '26. So where are we on that?

Can you be a little louder and that's echo, please. I'm not able to understand anything what you're asking.

Yes. I was trying to understand where our exports were for the quarter and for the year and how we see that ramping up. I understand the target for FY '26 is to reach 20%. So I want to understand where we are now and where the growth is coming from?

As mentioned in previous calls, that is one area of failure in the company, which we have not been able to achieve the vision of achieving 20%. And we have to scale it down to only 10% from the visibility we see, especially the economic conditions in the U.S. and Europe being much, much weaker than India. We are hoping to achieve about 10%, and we are currently at around 8%. And I candidly mentioned in multiple calls, this is one area where we have not delivered on our vision or our promise.

Right. And this 10% is for FY '26. That's the target?

Yes, Ma'am.

The next question is from the line of Smit Shah from Monarch Networth Capital Limited.

Sir, my question is regarding margins. So I just want to understand that what has significantly changed for us considering you are guiding for 13.5% margins going forward. If we see in FY '22, we had clocked around 11.7% margin and '23 around 12%. So what has changed for us these delays? What I want to know, some savings and other expenses? Or what is it about?

Actually, it's [ VAD ], productivity improvement, process improvement, and we see a clear visibility to get to about 13.5% and kind of stabilize there. I've always maintained that we see a visibility of 13.5% based on our plans of how we want to do it, and we are on track to achieve that. In fact, this year, our margins took a slight hit because as you're aware, we were engaged in certain corporate patterns, which took up a certain amount of cost, administrative costs, which were not planned, otherwise, even these margins would have been a little higher for this year.

Okay. Okay, sir. And 1 more question, if I could just ask you, and that is, have we maintained our market share in the 2-wheeler cluster side? Or are we -- is there some stiff competition there that we are noticing?

We have actually increased our market share, and we are hoping to further increase our market share with the LOIs that we have received, Mr. Shah. And then I can talk with some -- [indiscernible] say that because the proof of pudding is the LOIs that we have received.

Sir, can you give us a number of the market share that you have currently in 2-wheeler clusters?

Mr. Shah, I'd like to restrict to 1 question, please. Already you're on to the second now -- third question. I think there are quite a lot more people on the queue.

The next question is from the line of [ Arpit Mangrey ], an Individual Investor.

So I have the question on TFT clusters. So do we have such technology of onboard map navigation? Because like in data and [indiscernible] what we have provided is that turn-by-turn navigation system.

We have provided. We are the first in the country to provide turn-by-turn navigation on our 2-wheeler in the country.

Okay. So the map navigation, do we have that technology with us.

We were the fist company in India to introduce map technology turn-by-turn navigation much before our competition in the country.

No, I'm not asking about turn-by-turn. I'm asking about the whole map which we see in TFT cluster. Can you provide sir?

Yes. Yes, we do have that technology.

The next question is from the line of Vipul Kumar Shah from Sumangal Investments.

What will be the asset turn of our expanded capacity for which we are spending close to INR 200 crores?

We are -- I am pushing the team for 4.5 but I'm quite confident of achieving 4 to 4.25.

4% to 4.5. Is that correct?

Yes. That's right, based on the product mix.

The next question is from the line of MN Kumar, an Individual Investor.

Sir, are we doing anything about the heads-up display in the passenger car area?

It's already under development. In fact, in the last auto expo, even in our plan, we demonstrated our indigenously developed HUD, Mr. Kumar.

Sir, if I may squeeze in one more. Can we put the market share information. Once you used to do some 2, 3 years before.

[indiscernible] Mr. Kumar, because we don't want to give it out because competitors could tend to misuse this. But I think you would appreciate that.

The next question is from the line of Nirav Seksaria from Living Root Analytics.

Just a follow-up on previous participant's question. Sir could you give us the market share for 2 wheeler segments if it has increased?

No, I think this is the third time I've answered this in today's call, Mr. Seksaria. I said I will come to the table and say that our market share has increased and with our LOIs that is coming our way, it is going to only increase further in the next 2 years.

I'm asking you to quantify it? Is it possible to quantify it?

Mr. Seksaria, I just mentioned I would prefer not to give numbers out because I don't want it to be misused by competition.

The next question is from the line of Sahil Rohit Sanghvi from Monarch Networth Capital.

I just want some more details on the disc brake side, sir. I mean, which are these customers, are they domestic, and what kind of capacity have you set up right now? I mean are you given the...

We have added several customers. Again, competitive information. We've set up capacity for about INR 10 crores per month, and we will be enhancing capacity over the next 2 years to between INR 300 crores and INR 400 crores per annum based on the business expansion.

Correct, sir. No, this is good enough, sir. I mean the kind of penetration you've got in this very competitive industry. I just want to understand what kind of ramp-up are you seeing? I mean this INR 130 crore kind of revenue, are you targeting to get that in 2 years with these customers? Or can we...

In the next 3 years, we hope to go to about INR 300 crores or INR 25 crores per month is the hit rate that we are hoping to achieve in the next 3 years.

The next question is from the line of Khush Nahar from Electrum PMS.

And sir, 1 question. What is the reason for the increase in the other expenses in FY '24?

Increase in the other expenses? pardon me.

Yes, increase in the other expenses.

As mentioned, we were involved in certain corporate actions this year, which added significant administrative and legal costs. which is a onetime thing, which is behind us and hopefully -- not hopefully, we will not have such recurring cost because we engage some of the top legal firms in the country.

The next question is from the line of Hetvee Marviya from Catamaran.

Sir, I wanted to understand that within our DIS segment, currently, how much volume -- how much revenue would be coming from more advanced digital and TFT clusters and how much would be from the more traditional instrumentation cluster?

25% by volume; by value it will be closer to 50%.

And could you help us understand how has it grown in the past 1 year?

Maybe you can write to us, Ma'am, like I mentioned because it's -- and then we could give you a more elaborate answer, if you don't mind because I don't have it at my fingertips.

The next question is from the line of Bhaumik Shah, an individual investor.

Sorry, if I'm asking this question again, actually, if I -- because I got -- joined late today. Are you on track to achieve our FY '26 expectation of -- target of INR 3,600 crores revenue organic and INR 400 crore revenue inorganic. Are you on track with that?

We are on track to achieve INR 3,200 crores organic and INR 400 crores inorganic, which I'd just like to stand corrected, which is what I had projected in my earlier call where we have braved to achieve is 20% exports, which is going to be lower at 10%.

Okay. So now we are setting the target at INR 3,200 crores organic and INR 400 crore inorganic, right?

Yes. This is what has been maintained by me in my last 2 calls also that exports is one area, instead of 20%, we are now only looking at 10%. We are tracking and that's one area where we have scaled back our projections.

The next question is from the line of MN Kumar, an individual investor.

Sir, this is related to the export related thing. We were very optimistic about Caterpillar oil pumps and everything, et cetera. I think that is going on okay. Maybe the other things did not work. Can you give us some color about it, sir?

Caterpillar is going pretty well, and it's scaling up. I will request our CEO also to talk about it. But one area, one thing you must keep in mind is the, overall, the U.S. and Europe volumes have started really coming down because of the recessionary trends and the geopolitical situation, which is half the reason. The other half of the reason is some of the customers we were hoping to penetrate but we have not penetrated because their business has not increased, and they are quite happy with their existing supply base.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.

Dear investors, thank you very much for your confidence in the company and for helping the company scale new heights and for your patience. And we do hope to continue rewarding your patience with better and better results in the quarters to come under the able guidance of our CEO, assisted by our Director of Strategy and our Head of Finance and the rest of the team. Thank you very much for participating in today's meeting. And as usual, I will meet you all again virtually for the H1 call, and the Q1 call will be handled by our CEO, CFO and our Director Strategy. A very good evening to all of you.

Thank you, members of the management team. Ladies and gentlemen, on behalf of Pricol Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.