Pricol Limited (PRICOLLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Conference Call of Pricol Limited. [Operator Instructions]. Please note that this conference is being recorded. At this time, I would like to hand the conference over to Mr. 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 first quarter of the financial year 2025. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's con 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. P. M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Director of Strategy; and Mr. Priyadarsi Bastia, Chief Financial Officer. Without any dealing, I request Mr. P. M. Ganesh to start with his opening remarks. Thank you, and over to you, sir.

Good evening, all of you. My name is. I'm P. M. Ganesh, CEO and Executive Director of Pricol. Welcome again for the earnings call of Q1 FY '25. The presentation already has been uploaded. I'm sure that all of you would have had a chance to see it. So straight away I will straight go to the key financial highlights of Q1 of FY '25. To start with the revenue from operations. We have done INR 6,029.09 million of sales at an EBITDA of INR 806.51 million showing an EBITDA margin of 13.38% for the quarter ended FY '25 -- sorry, '25. At the PAT level, we were at INR 455.61 million with a PAT margin of 7.56% and the earnings per share stood at INR 3.74. Our consolidated long-term borrowing continues at nil. The key highlight is that at the consolidated level, our ROCE has been at 20.54% in Q1 of this financial year, as against 23.18% previous year same time. I will move on to the next slide which gives you in terms of the Q1 to Q1 comparison in terms of growth. The revenue from operations growth has been at 15.48%. EBITDA stood at 21.24% in terms of its growth. Cash profit was at 25.66% growth. And at the PAT level, we were at 42.65%. We have been continuously improving our profitability based on our improvement in the internal efficiencies. I'll go to the next slide, more on to the details. The EPS Q1 FY '24, I'm just reading the last line, INR 2.62 vis-a-vis of INR 3.74 during this financial year. With these key highlights, I will open the floor for questions from various investors. Thank you so much.

[Operator Instructions]. The first question is from the line of Vipulkumar Anopchand Shah from Sumangal Investment.

So my first question is, can you break down revenue from DIS and actuation and control and fleet management systems?

Good evening, Mr. Vipul, this is Ganesh here. The rough breakup between DIS and ACFMS is like 70% of our revenue comes from driver information system and 30% comes from the ACFMS vertical.

And sir, you have shown the slides of new product launches. So what type of volume are we expecting from these new product launches over the next 12 to 18 months?

This is a new product and a new model, whatever we have shown of Bajaj and other certain other new customers. The one is quite significant. I cannot give you the exact numbers because of the NDA with the customer. But the volumes and value are going to be quite significant in the next 12 months, Mr. Vipul.

So right now, you won't be able to give any numbers for that. And last question. Sir, if we see the content per vehicle. So what would be our content per vehicle and where we were 2 to 3 years ago in the same journey?

Sure, Mr. Vipul, I will give you a rough estimate about the vehicle per contract because as we have been discussing in the previous earnings calls as well. The content per vehicle of Pricol has been increasing primarily because of the value add in the product whatever we are offering to the customer. For example, like I will not go two years back even, I can go before the COVID times, where most of our products, and we have been telling this in most of our investor call that we were supplying more of mechanical meters, okay? And the digitalization has started ever since the BS-VI regulation came into India in 2020. After that, the value add of Pricol has been on the continuous increase. And now as we speak in the last couple of years, we have been focusing more on the upgrade of the digitalization by going from the LCD to TFT and more of connected vehicle solutions. And as we speak, we are going much further into the value stream of our products. So if you ask me in terms of content per vehicle, it would be difficult because vehicle to vehicle, the prices are very different. But if you ask me in terms of value addition for products that is continuously increasing, if I take x as my reference, in 2019, we have been quite easily like 2x or marching towards 3x in the future to come. That is where I'm giving you a ballpark estimate. It may not be very accurate. But to give you the way in which that we are progressing, is maybe x to 2x and then further going up in the coming years.

So as compared to '19, we are at 2x or 3x?

I think it's a very rough estimate. It's very difficult because some of them continue to be still on the mechanical side, but many of them have changed into LCD type and few of them have already upgrade of TFT. So it would be very difficult for me to give an exact number. But what I can tell you is roughly, it could be like 2x of what it was five years back in terms of the content per vehicle of our product.

And over next three years, will it become 3x of where we were in '19, sir?

Quite possible in my opinion because the way in which digitalization is happening in the industry, I'm sure that, that will definitely take us to that number.

[Operator Instructions] The next question is from the line of Chirag Jain from Emkay Global.

A few questions from my end. First, on the revenue growth guidance. So in the first quarter, we did 15% growth and the underlying [indiscernible], the outlook seems to be quite healthy even in this financial year from where we derive majority of revenues. So how do we see...

Your voice is breaking. Can you be a little slower and then talk clearly please.

Yes. I hope this is better. I just wanted to get a sense in terms of the revenue growth guidance or outlook for this financial year and next year. How do we see the overall revenue panning out?

Chirag, actually, this is a forward-looking statement, which we are not supposed to do it. But we are poised for a good amount of growth. I do not want to put any percentage attached to it because of the forward-looking nature of the statement. But you would have seen in the last couple of years, three years rather, how the growth has been at the Pricol. And as the previous caller mentioned, the growth or the content per vehicle has been on the continuous increase, is what we have been explaining, even if the segment level growth is going to be flat, still Pricol will continue to grow primarily because of the value addition in the product as you are seeing to this extent, yes.

And also if you can share some update in terms of the new projects that we were undertaking, especially on the e-cockpit side, disc brakes. I think the commercial production has started. And also with respect to Honda ramp-up over the next 12 to 18 months, which you highlighted last quarter. How those projects are progressing? Especially the cockpit, which would be, let's say, the business that will start probably next financial year onwards?

Yes, e-cockpit under intense testing at our facilities. And we have also gave some -- we have given some [indiscernible] samples to our customers for validation. Currently, as we speak, it is in the right direction in terms of testing and validation. Disc brake also is in the same position of intense testing and also at a vehicle level testing at the customer end. In the next 12 to 18 months, we should go into SOP of these 2 products.

Okay. And just lastly from my side. The margin guidance was roughly about 13.5%, and I guess we have already done 13% in the first quarter. And usually, we see that the second, third quarter, fourth quarter typically tends to do even better in terms of the overall revenues. Is there a revisit to our margin guidance probably upwards?

It would be difficult for me to comment because it is quite dynamic in terms of the product mix. We hope to continue at the same level. Let us see if something is going to be favorable for us in Q2.

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

Congratulations on the strong margin performance. Firstly, probably continuing on the revenue growth that you were alluding to. You have always wanted to grow ahead of the industry, very good to hear that you still stay on this stance. But the last two quarters, we have been seeing some kind of moderation on the outperformance versus the industry. Is there something to call out because last quarter, you had mentioned there was a one-off on account of a ramp-up on certain models with some client. Is there something similar in this quarter? Are there any one-offs or something that we should be looking out for? Or what's your outlook on the outperformance versus the industry?

We continue to outperform the market quarter-on-quarter. That has been the trend in the last three years at least. And even this quarter, as we speak, we have definitely outperformed the market. The segments where we are significantly protect primarily the 2-wheeler commercial vehicle and the off-road vehicle, where we have outperformed the market when compared to the vehicle level performance. The reason being, as I'm just repeating again is because of the value add in the product has been continuously increasing for Pricol. That is the reason we are able to outperform the market by a significant margin.

Yes, no, I definitely understand that point. No, just my reference was basically coming from. So if I look at the past 4, 5 quarters or even more, we've been at least outperforming by high double digits or at least double-digit outperformance, where as we've seen some amount of tapering on that? Is there something to allude? Because last quarter, you had mentioned that three models or three launches were getting delayed. So that was one reason. Is there some impact on account of that continuing in the current quarter? Or how do we read it, sir?

Yes. You're right in the sense of it depends upon the vehicle launch by the OEM, where we can outperform very significantly or marginally. But that depends upon the vehicle launch. But we are in the right track of all our new project development for the next two years, at least, where we have got confirmed the business from various OEMs. So this trend is going to continue. Maybe there will be a little spike in terms of outperformance versus a certain tapering in certain quarters. But it is going to be continuously, we are going to outperform the market for sure.

Got it. No, that's very helpful. Maybe just another question to probably squeeze in was. We've been hearing a lot of news reports where there are other conglomerates who are coming into the TFT clusters. So you see it because you are almost working with all the new age and the existing OEMs, where do you -- because that's where the EV adoption and the TFT clusters are coming in. How do you see that? And your thoughts around that, if you may.

Yes, competition is going to be there and competition is there also. As we speak, there are a number of competitors in the market. But what differentiates Pricol is the value addition, whatever we give it in the product. We have got our local design center. We have got a large amount of backward integration, our close association with the customers for many, many years. And continued working of offering new solutions to the customer. I'm sure that, that will keep us in good pace when compared to competition.

[Operator Instructions] The next question is from the line of Rahul Ranade from Goldman Sachs Asset Management.

So just continuing on that point in terms of outperformance versus industry, just if you could share a template with us in terms of how should we, as outside us look at outperformance. So I'm assuming you are taking volume growth for the industry and then comparing our revenue growth with the volume growth, is that the right understanding?

We do the growth on both sides. One is the volume growth and also the value growth. Both are important. So what we do is we take the volume growth of the vehicle of that segment. Then we compare our volume growth with the vehicle growth, this is the first comparison which we do. Second comparison, we also do the value growth. in terms of how we have done. So the last three years has been the -- our value outperforming the volume and both the volume and value outperforming the market.

Okay. So we outperformed the market in terms of volume growth as well is what you're saying?

Absolutely. The reason is we have been able to get new business wins across various models. So that is the reason our market share has been continuously increasing.

And let's say, if we were to kind of obviously, because the industry as such is very dynamic and if one were to overlay, let's say, our estimates of industry growth? And then would it be fair to add a particular percentage in terms of data, in terms of outperformance and then arrive at an approximation of our revenue growth, would that be the right way to work it out?

It would be a little difficult to exactly do that. The reason is because it depends upon the OEM vehicle launch quarter-to-quarter. Suppose if there are going to be more vehicle launches happening during a particular quarter, then the outperformance is going to be significantly high. If it is going to be less of vehicle launches during that particular quarter, it will be a little taper. But however, since we have been continuously gaining on the market share with many new projects getting launched quarter-on-quarter, we will continue to outperform demand also both volume and value. The value portion will be a little more significant when compared to the volume primarily because of the value addition in the product.

And what -- just a ballpark in terms of what that outperformance will be, let's say, would it be whatever number we derive in terms of whatever growth is in terms of volume? And should we add let's say, 5%, 7%. How should we kind of think of that in terms of the content related pure increase that one could see.

That's what I mentioned. It depends upon the new product launches by the OEM. But if you see these past three years, it is difficult again to say, but if you average out, I think it should be like quite easily close to a double digit. Somewhere certain quarters, it is like 5% certain quarters, even like 10% when compared to the vehicle growth. But the bottom line is, we continue to outperform the market.

Sure, sir. No, no, I understand there will be quarterly ups and downs, but just, let's say, if one were to think of it more from a medium to longer range, one can worth it that 8% to 10% kind of a pure content related growth. Is that the right understanding?

Content per vehicle is what you're telling or...

Yes, just purely coming from the content. So one like would be coming from like you said, you outperformed the industry also in terms of volumes by getting more and more wallet share. But purely from a current standpoint, would an 8% to 10% be a fair approximation to work with?

That again, it depends upon the model mix. That's where the issues are there some times because quarter-to-quarter, the OEM vehicle mix changes a lot, okay? Again, that's why it would be difficult. Even if the content per vehicle are there, which is fixed, the model mix and changes can bring a significant variation in terms of the growth when compared to the vehicle growth. So it could be very difficult for me to average out quarter-on-quarter even if there is not going to be any new products, what is going to be your content for growth, which is going to take you for what we call growth when compared to the market will be little difficult for me to define.

Sure, sure. Sure, understood. No, sir. So from where I'm coming from and probably most of the others are also coming from the last two quarters, have been fairly strong for the two-wheeler industry as such. Even, let's say, Q1 FY '25 was a 20% industry growth, whereas for us, the top line growth is fairly muted at around 15-odd percent only. So I understand two-wheelers isn't 100% of the business. But just I thought it could get compensated with the content increase also. So that is where I'm coming from.

Absolutely, absolutely. That will definitely continue to contribute. But 2-wheeler, I think, has not grown by 20% for your information.

In terms of volumes for the industry on a Y-o-Y basis.

Sorry?

In terms of volumes for the industry on a Y-o-Y basis, Q1 FY '25 versus Q1 of FY '24 is what I'm looking at.

I don't think it has grown by 20%. Maybe you can check the data and then maybe we can have a call also offline.

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

Congratulations, sir, on a good set of numbers. My first question is about the segment split. Can you break the revenues as per the 2-wheeler, 4-wheeler, CV, off-highway?

Of our total value around 65% comes from the 2-wheeler front. Roughly about 15%, 1-5 percent comes from the commercial vehicle. And we have close to about 10% coming from personal passenger vehicle. And the remaining comes from tractor and off-highway. This is the rough split up.

My second question is regarding the 4-wheeler side of business. So earlier, if I remember correctly, our sale used to be somewhere around 6% to 7%. Now we see this growing up gradually. Are we winning new orders? Have you onboarded new customers on the 4-wheeler side and if can you name them?

Yes, we continue to grow with 4-wheelers. There are more opportunities coming in our way, especially the Indian 4-wheeler area is where we are highly focused. We are getting many opportunities in the last five years. We started this journey, as you know, from 2020 onwards, reentering into the personal passenger vehicle segment. After that, we have been seeing continuous growth. I'm sure that the growth momentum is going to continue for us in the next few years in this area.

Sir, have you onboarded any new customer on the 4-wheeler side?

Yes. We are primarily a major supplier to Tata Motors on the personal passenger vehicle. And we are also working with a few of the other Indian personal passenger OEMs because of the India, I'm not revealing the name because the product has not been launched yet. But we are working with a few of the Indian personal passenger vehicle manufacturer in a very significant manner.

Okay. Okay. That's helpful. Sir, my next question is on...

Sorry to interrupt. May we request you to the enter into the question queue again for your follow-up questions as there are several participants waiting in the queue. [Operator Instructions] The next question is from the line of Khush Nahar from Electrum PMS.

So my first question is, is there any update on the inorganic opportunity that we're looking for since it is included in the FY '26 guidance that we have given. So any update on that? And my second question is any update on the labor case that was going on? So I see that in past, the annual labor case increased to around INR 55 crores as on March. So are we settling it? And what is the status in that?

The first question, I will request our Director of Strategy, who is there in this call to address.

Regarding inorganic opportunities, we have shortlisted a few assets and currently we are evaluating the same and in negotiations with parties. At this point in time, since all of them are in the NDA stage, we will not be able to disclose any further information. Maybe by next quarter, we will have some concrete guidance to the table to the investors. And I'll hand over to Ganesh.

Your second part of the question, I will request our CFO, Priya to answer.

Good evening. The increase in contingent liability on account of labor case is on account of the interest accumulates then for one more year. So there is no additional labor case which are coming.

Thank you, Priya.

The next question is from the line of Aditya from Sowilo Investment Managers.

Yes. My question was more on the lines of the split of revenue that was already answered. So thank you.

The next question is from the line of Hemant Soni, which is an Individual Investor.

Congratulations on a very good set of numbers, and thank you for providing the opportunity. We have an aspirational target of INR 3,600 crores of revenue by FY '26. If I extrapolate the Q1 numbers, we will be hovering around INR 2,400 crores, INR 2,500 crores, right, FY '25? So I mean, how are we -- I mean, progressing? I mean, will we be around INR 2,400 crores or INR 2,500 crores in FY '25, then there will be 50% jump. How are you planning here? Just wanted to ask this.

Hemant. This is Ganesh here. Thank you for your question. Actually, that would be a little forward-looking statement, as I mentioned during the beginning of the call. So what we can tell you is that we have got a very robust order books for the next two years with confirmed businesses from various customers. And we are in the right path in terms of the new product development with various customers. That's all I can say. How much in terms of the sales revenue we will reach for next year, I will reserve my answer being forward-looking statement, but I can give you the confidence that we are in a very robust path.

That is fine. But any ballpark number, any tentative number? Or maybe are we sure that we are going to clock double-digit revenue growth in FY '25? At least you can provide this kind of information.

We are already having a double-digit growth quarter-on-quarter. And even in this quarter, you can see that we have grown by 15.48%.

So it is fair to assume that we'll be clocking at double-digit revenue growth in FY '25?

Hope so. We don't know. But the past three years, we have been clocking double-digit revenue, double-digit growth.

And the aspirational target, which we have in mind is, I mean, pretty on track.

Yes, yes, it is on target. Yes.

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

I just had a question around exports revenue. In Q4, we had cut our estimates...

Sorry to interrupt you. Your voice is not audible. Can you be a little louder, please.

Is this is better?

Still, we're not able to hear you properly.

So. I will probably fall back in.

Speak a little louder Nandan.

This is high. Is this okay?

Yes. This is better.

So I had a question around the exports last -- in the last quarter, we had said that our exports would continue to contribute about 10% of the revenues versus our initial guidance of 20%, because there was some weakness in the U.S. market. So does that still stand? Or are there some green shoots that could revise our estimates upwards?

Export is a little concern in terms of slowness in the market, primarily the U.S. market. But still, we are able to maintain that 8% to 10% of the content of export in our total revenue. We expect that U.S. market will become a little better after the next three quarters. That is where we have the indication. But it is going to be a little muted for the next three quarters in terms of its growth.

The next question is from the line of Pradeep Rawat from Yogya Capital.

So my question is regarding the export side only. So how do we see export opportunity panning out in Europe, particularly?

Europe, we are working with a number of OEMs, both on the driver information system and also on the ACFMS side. And we have got key strategic customers at Europe, primarily the 2-wheeler customers in Europe like Ducati, BMW, KTM. We supply to most of them in the Europe market. And also, we supply to the tractor and off-highway. We are currently working on a number of opportunities in the Europe market. But all of them are currently under development testing at various stages. I'm sure that in the coming years, progressively, each one of them are going to be launched with these various OEMs. But export for sure is going to be on a significant growth path in the future to come.

Can we expect like faster growth from the revenue from exports like can we see a share of export increasing in our revenue mix?

Yes, that is where we are aiming ourselves. But again, it depends upon the customer vehicle validation at their end. Europe customers take a little longer in terms of the testing process. So it depends upon how fast we can have that into mass production with the OEM. We are on the right path at this point of time with multiple new developments going on with our key strategic customers. I'm sure that in the years to come, our export revenue is going to see a continued growth.

Yes. And in terms of margins and credit cycle, how are the export as compared to our domestic customers?

Export margins are definitely more than the domestic. But in terms of volumes, actually, export would be lesser when compared to domestic. But in terms of margin, export would be more than domestic. How much? It would be difficult because it varies from product to product.

Yes. And with respect to credit cycle, like how much debtor days do we have to give to them?

Credit period is generally calculated from the bill of lading. So generally, it is like 45 to 60 days would be the average for export.

And for domestic?

Domestic we operate on an average like 45 to 60 days.

And my last question is regarding our capacity utilization. So how much of the capacity utilization would we be working on at our current asset base?

Currently, it would be a little difficult because we have got multi-border lines. We have got flexed lines. So depending on the customer requirement, we keep adding lines as we have mentioned that we do our in-house line machine building and also the tools. So we keep building it depending on the customer capacity. So what we do is generally on an assembly line, we take on a 2-shift basis in terms of our capacity calculation depending on customer requirement for generally, we plan for N+1, something like that. N is the current year, so next year. So two years before is what we have our capacity. The third shift is generally kept for contingency plan. For example, if there is going to be any spike in the customer requirement or you know that we are part of the festival season now. If there are going to be any abnormal increase, then we use the third shift for those assembly. But primarily, we keep on a 2-shift basis in terms of our capacity.

The next question is from the line of VipulKumar Anopchand Shah.

Most of my questions have been asked. But just we had some MOUs or joint ventures for battery management system, and we had a tie-up with a software company also. Is there any progress on that side, sir?

I will request our Director of Strategy to explain this.

Thank you. Give me one second. Regarding the battery management system, currently, the prototypes are being developed, and this is in the final phases of development with our partner. I think by next month onwards, we'll be receiving the third level of [indiscernible] and we'll be doing a road show with customers for testing as parent. Regarding the [indiscernible] Telematics platform, again, we have provided certain joint integrated samples to the customers and currently we are also under testing with that.

So can we expect any revenue from these joint ventures in near future, sir?

We would like to just clarify that these are not joint ventures, but we are with a strategic complementing partnerships. We bring some part of the solution to the table, and they had some part of the value addition to the joint platform that we have developed together. So we have not given any revenue guidance for it as such. Once the products is tested by the customers and accepted, post which we'll be able to share revenue guidance, but we're not taking any revenue guidance for this financial year.

As there are no further questions, I now hand the conference over to the management for closing comments.

Thank you so much, once again, and see you soon during the Q2 earnings call shortly. I would request our CFO to give the closing remarks.

Thank you, team, the shareholders and investors group for your active participation in the call and asking questions [indiscernible] questions. This quarter was a good quarter for us, and we expect the same to continue. I would like to have further questions in the Q2 investor call. Thank you so much.

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