Bharat Forge Ltd
NSE:BHARATFORG
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 092.45
1 791.4
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Bharat Forge Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Bharat Forge Q4 and FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Kalyani, Joint Managing Director, Bharat Forge Limited. Over to you, sir.
Good afternoon, ladies and gentlemen. This is Amit Kalyani. I have with us our teams from Finance, Investor Relations and Global Business. I will hand over to our CFO, Kedar, to give you an introduction, and then I will start.
Good afternoon, ladies and gentlemen, and welcome to Bharat Forge conference call. We had a strong performance in the quarter with revenues of INR 2,329 crores depicting a growth of about 17% compared to last year same quarter. Stand-alone EBITDA for the quarter grew by 25% to INR 654 crores, translating into margin of 28.1%. PBT and PAT also grew by 48% and 59%, respectively, to reach INR 526 crores at PBT level and INR 390 crores at PAT level. Similarly, performance for the financial year '23-'24 also saw a record revenue of INR 8,969 crores with EBITDA of INR 2,469 crores, translating into EBITDA margin of 27.5%. This is a 200 basis points expansion as compared to the last earlier year. The balance sheet continues to remain robust with surplus funds net of long-term loans is now about INR 800 crores and ROC net of cash was at 20%, which was also a significant improvement over earlier year. .
At consolidated level, quarter 4 revenue grew by 15% to INR 4,164 crores, and EBITDA grew by 36% to INR 653 crores. For the full year '24, the consolidated revenue grew to INR 15,682 crores, representing a 21.5% increase. EBITDA margins also improved by 260 basis points on a Y-o-Y basis to reach 16.4%. During the year, the company secured new business worth almost INR 6,300 crores across all key businesses, including Defense, the traditional business as well as the casting business. From a CapEx perspective, India operations incurred CapEx of about INR 800 crores. Overseas subsidiary incurred a CapEx of about $60 million in FY '24. For the next year, the CapEx would be -- for overseas entities would be about $65 million, which is mainly towards the U.S. aluminum Phase 2 and some maintenance CapEx in Europe.
Talking about the overseas subsidiaries, we are seeing operations in European aluminum business has stabilized. And now we are working on getting the price increase from our customers. U.S. operations continue to show incremental improvement. We had certain one-off costs in Q4, which has adversely affected the performance. But now again, we are -- we should be back on track. In quarter 4, European operations posted an EBITDA of INR 33 crores, while the U.S. operations has posted a loss of -- EBITDA loss of about INR 34 crores. The Phase 2 CapEx in the U.S. is on track. The current utilization for aluminum business in the U.S. is about 50% and -- of Phase 1 and for Europe, it's about 75%. Now I will hand over the mic to Mr. Amit Kalyani.
Good afternoon, ladies and gentlemen. So I'd just like to take off from where Kedar stopped. To sum it up, FY '24 has been a very strong year for BFL. Our Defense business has taken off in a very meaningful way. Our industrial castings business is now starting to show the performance that the promise -- show the performance that we believed it had the promise to do. And this is in the second year after our acquisition. We acquired this business in July '22. The stand-alone business of Bharat Forge is doing well given the market conditions and weakness is specific only to a certain segment of our Industrial business, which is largely oil and gas.
We have made initial breakthroughs in 2 new sunrise sectors, and we expect that these will become large growth sectors for us going forward, and these will continue to -- this will ramp up from next year, but will become meaningful by about '27. I would credit our overall management team and especially, the team in finance for managing our balance sheet extremely well. In spite of all the CapEx and investments that we have made in the last 5 years, our balance sheet is pristine, and it provides us with a lot of dry powder to take benefit of opportunities that may arise.
I would now like to talk about some of our medium- to long-term priorities. BFL has transitioned substantially over the last 5 to 6 years. We have been able to cushion the impact of potential cyclicities from any one business sector or more with new initiatives like defense, industrial castings having a large business accruing. In the future, the EV business also will provide such a growth opportunity and further accelerate the growth of the business. The Aerospace business is now on the cusp of a major takeoff and on a solid growth trajectory, which will continue to see momentum in the next year as well.
JS Auto closed FY '24 with a revenue of INR 567 crores and an EBITDA margin in Q4, crossing 16.5%. This business will double over the next 4 years, more -- probably double or more than double over the next 4 years. And we are working on a number of new initiatives around more value addition, operational efficiencies and capacity expansion including NPD, which will translate into stronger numbers for both the bottom and the top line going forward. This business, just to tell you, has grown 30% Y-o-Y 2 years continuously and will continue to grow in a strong manner.
On the overseas front, as Kedar mentioned, achieving profitability and stable operations of our aluminum business remains top most priority of the leadership. Our European aluminum operations are already in the black while the U.S. business will progress towards operational stability in the next 2 quarters. We are very confident that for the full year of '25 and the fourth quarter, we will see an extremely strong performance from our global subsidiaries.
The aluminum business continues to see robust demand with growth driven entirely by drivetrain-agnostic components. So we are not at any risk from any potential slowdown in passenger car EV, which is something that is a cloud hanging over a lot of supply base globally. The defense business has also clocked a strong revenue of INR 1,561 crores this fiscal with execution for all our export orders progressing on schedule. More than 80% of this revenue is exports. The defense business will move entirely into the 100% owned subsidiary, KSSL, in '25 once their new facilities are fully commissioned and the licenses get transferred to those physical facilities. This will involve transfer of manpower and customer contracts from Bharat Forge to KSSL.
While it will not affect the consolidated results, there will be some change in the stand-alone earnings as this transition plays out. Some of our investments such as JSA have borne fruits while the progress on e-mobility is beginning to show a lot of promise, and it's moving in the right direction. FY '25 will see a lot of progress and growth in the e-mobility vertical as well. I'm confident that given the multiple growth engines, we should see a strong growth for '25 and our ROC to incrementally keep growing and cross the 20% mark in the next 2 years. I'm now happy to take your questions. And me and our team here will try to explain to the best of our abilities.
[Operator Instructions] The first question is from the line of Pramod Kumar from UBS.
Amit, my questions are on the defense side. You kind of highlighted in the opening remarks that 80% of the order book is now on exports. Is that number right? And that's for the outstanding INR 5,200 crores order backlog?
Yes. And this does not include the ATAGS programs in India, which are yet to be concluded, which should happen shortly after the election process is over.
Yes, exactly. So you preempted that follow-up basically that we started the entire defense story with the ATAGS opportunity and the defense localization opportunity. But looking at the numbers the way they are panning out, looks like export is turning out to be a pretty big opportunity than what we thought initially. So if you could just help us understand how -- what is working in your favor on the export side? And also probably some bit of a color of the breakdown of the product categories within the defense, broader defense pool? And how should one look at the domestic export split once ATAGS comes in and as the business matures? So -- because export is something which is really coming in as a surprise.
So look, let me answer it in a little different way. I think that globally, people have realized that defense spending is going to increase. We have products that are world-class and that are extremely competitive and are able to supply a broad range of requirements of global customers. One thing we're consciously not doing supplying into any conflict region, but we see tremendous opportunities for our products across the world, and these are products in the artillery segment. In artillery segments, we have 3 kinds of guns. We have towed guns, we have mounted guns, and we have ultra-light guns. And we have altogether 9 platforms already ready. So this is a huge range of guns, which can be supplied to multiple different kind of customers. .
Then we have multiple vehicles, protected vehicles of different categories, different functions and utilities. So that is another category. Then we have a lot of spares and consumables. That's the third category. And then there are lots of other products which are under development in the unmanned vehicle area, which are both land, sea and air. And that is another area of huge opportunity that we are pursuing. So we see a global opportunity. And just to correct -- just to reinforce what I'm saying, we are creating a capability to build initially over 100 guns per year and 550 vehicles a month, but we can scale this up, at least on the gun side to probably almost 5 guns a week kind of a number so 200 to 250 guns per year kind of a number and close to 1,000 vehicles per year. So we see a very large opportunity, and we are doing -- taking some steps to, let's say, capture this opportunity, both strategically and tactically.
And Amit, these are all largely government-enabled projects which -- export orders which you are getting here, is our understanding right, sir?
So they are not -- I would not say they are -- what do you mean government-enabled?
As in the government to government relationship is like the mania or other ones, I guess like are you scouting for orders globally on an independent basis?
No. So we are also scouting for orders on our own. And we will do a lot of business development and new customer acquisition on our own also. But it's clear that the government is supporting this sector. And please remember that we have to get permission from the government before we export any weapon platform anywhere in the world.
And on the defense profitability, Amit, given that export is shaping up much better than what we probably thought. What does it do to the longer-term profitability and return metrics on the defense business than what we have already shared as aspiration? Is there upside to that number?
I would focus on -- the way I would answer this question is that I think the returns on this business will be comparable to our manufacturing business at least what we see now. And as it grows, let's see what happens. But I think ROC is going to be extremely good. And it will also be a stabilizing factor because it will become a meaningful size of our business going forward and will provide a lot of shock absorption without any CapEx that we need to do.
The next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management.
Congratulations on a great set of numbers. Sir, just wanted to understand a little bit on this executable order book. So if I look at the number in the fourth quarter, the presentation you've talked of INR 5,192 crores and if I look at the second quarter, we have talked of INR 3,000 crores. So addition of at least INR 2,200 crores. And obviously, we have executed also in the past second half. So which are these major orders that we have won? Is there a follow-on order to the European customer that we had or are we...?
No, I don't want to get into individual customers and product segment. All I will say is that we have got orders from existing and new customers for existing and new products.
Sure. Just wanted to understand in terms of platforms, any newer platforms or it's existing platforms which we have been selling?
From all kinds of products, so both.
Okay, sure. Secondly, in terms of the U.S. operations, I did understand from you, sir, that we are looking at further CapEx in the U.S. Given that we have seen issues in this quarter and utilization levels are low, just wanted to further understand that. And what is the outlook in terms of FY '25 profitability?
So look, we have customer orders and commitments that we have to meet for a certain number of parts. And that requires us to set up 2 phases. That is 2 lines in the U.S. Currently, our U.S. capacity utilization is not yet at 100%. But by next quarter or latest by the quarter after that, we will be at 100% of Phase 1. And then in '26, '27, we will head to 100% of Phase 2 as well. In this quarter, we had certain one-off costs due to weather and other one-time issues, which were out of our control. And that is what has impacted the profitability and the numbers to a certain extent. But I think we have a handle on that, and we should see even the U.S. operations with a positive EBITDA in quarter 4, fairly healthy profitable EBITDA in quarter 4.
Sir, quarter 4 of FY '25?
Yes.
Sure. And -- sure I'll -- okay, if there is time, just one quick one. You mentioned, sir, in the comments that we would see the KSSL or the defense business move out. So if you could just articulate that in terms of what does that mean in terms of profitability of the stand-alone and...?
Look, I think you have to stop looking at stand-alone and -- it is all owned by BFL. So you have to look at it because for many strategic and other reasons, it's very important for us to house our defense business in a separate vertical. That's what every global company, even Indian companies have done. Unfortunately, in our case, the licenses were originally received in Bharat Forge because we didn't have a large facility outside of here, and we were incubating this business. But now that the business is ramping up, and we're seeing significant growth. We need to create a stand-alone facilities, which can give us the necessary capability, capacity, safety, security, that a defense business requires.
Sure. On an earlier occasion, you had mentioned the ATAGS would come in -- the order would come in standalone Bharat Forge. So that also would have shifted to KSSL?
Yes, because that time there was only Bharat Forge, now obviously, everything is moving to KSSL. So the orders will also come into KSSL.
Next question is from the line of Binay Singh from Morgan Stanley.
Congratulations on a good set of numbers. Good to see defense moving up. In the segmental data, just on the defense side again, do we see that sequentially our defense revenues have gone up but the PBIT has gone down, [ can you ] talk to little bit about what is driving that?
No, this is all related to the product mix also. So you should look at more like an annual data rather than looking at quarter-to-quarter number. And we also had significant product development costs that we have charged off.
Okay. Okay. And secondly, like, just I was comparing last call to this call, Two points over there. One is that when we last spoke in mid-February, we were talking about moderation in growth in both domestic and export. The outlook today sounds a lot more positive. So could you comment a little bit about outside of defense, is there any other change that you see in other businesses also, a pickup or so? And secondly on CapEx, we talked about U.S. CapEx, if you could also share CapEx for India for FY '25?
So good question. First of all, there is a tremendous amount of order flow taking place from business moving to India from other geographies, including China and including Europe. Point number one. Point number two, at that point in time, we had probably estimated that the impact of the Middle East crisis with that whole Red Sea thing going on and other things would be significantly more than what it has turned out to be. And thirdly, we have seen, I would say, a more stronger outlook from our customers than what we had anticipated. Subodh, you want...?
We are winning market share.
Please, say.
One of the factors that we see is we are also winning market share within the existing available market. So this is both for existing products as well as new products in new areas. This is over competition in India, this is over competition globally. So we are seeing this as a very marked phenomenon in the last 1, 1.5 years.
And I think when we talk about better outlook from customers, are we also commenting on auto? Or is it largely non-auto?
It's a mix. It's a mix. This is in auto, CV and PV and Industrial is a very wide mix of everything that we are doping.
Very helpful. If you could just share the CapEx number for India for FY '25?
Yes. So it would be about INR 500 crores.
The next question is from the line of Amyn Pirani from JPMorgan.
My first question was, Amit, you mentioned in the opening remarks, 2 sunrise sectors. So are you talking about defense here and some one other sector or...?
So Defense is now already becoming mainstream. These are 2 new sectors.
Yes, okay. Okay. And you are winning new orders, like would you be able to clarify as to what exactly which segments are we talking about or is it too early?
No. I don't want to clarify here.
Okay. Okay. Secondly, on the European aluminum business, now we have been talking about the fact that pricing has been a problem. So as we look into next year, you've talked about the U.S. business as to how the profitability should look by fourth quarter or FY '25? How should we think about the U.S. -- sorry, the European business as a whole, including aluminum because that has been a bit of a laggard in terms of margin trajectory?
So I would say that the European aluminum business will be profitable in '25 both at an EBITDA and at a PBT level. Okay? .
Okay.
So that will be a big change from this year.
Understood. Understood. And any -- I know you didn't talk about auto and nonauto separately in the last question. But any broad idea as to how the U.S. truck market is looking for us? Are customers talking about a decline this year? Or are they thinking of a flattish kind of a year?
You may have seen some press releases from companies like PACCAR, companies like Daimler in the last maybe 3, 4 days and everybody is talking about a reasonably optimistic scenario, which does not mean necessarily growth, but like stability. And that is what we are following, that is also what we are seeing in our order book.
Next question is from the line of Gunjan from Bank of America.
I just had the follow-ups on the overseas subs in defense again. On the overseas subs, on the U.S. operations what is the one-off, can you quantify that? And also in terms of, yes, your guidance by the end of the fiscal we will turn profitable, could you also like little bit share what will be the key drivers? Because European operations, we have been at 75%, right? So what is the visibility on this improvement that we're guiding for next 3, 4 quarters on the overseas subs?
So demand is there. We have put in place operational improvement measures in Europe, which are already showing results. The U.S. plant was a greenfield plant. So there's a larger learning curve, but there also now we are clocking OE about 75%, 80%. So I think the factors that are required for our business to run well, which is having cost under control, production running at a certain cycle time and certain OEE and pricing being reasonable, are all coming into place and then that is what is going to make this happen.
And do you think that like the overall operations put together like we've been saying that over the midterm, we look -- we expect these margins to get to, let's say, double digit is something that you've spoken about in past. Now if I were to like sort of think about that trajectory, where do you think the entire overseas piece will be by exit of fiscal '25?
Definitely in double digit I would say very -- yes, I would say definitely double digit.
Okay. Got it.
By EBITDA level, yes.
Okay. The second question I had was on the defense. Now this clearly -- it's been surprising positively now with the order book we have in ATAGS yet to come, how do you think the scale up of revenues now? Because I think we were looking at somewhere around INR 2,500 crores in 2 years. Now that we have INR 5,000 crores-plus order book. One, what is the time line for execution of this order book? And secondly, any change to the revenue scale up guidance there?
So look, I think the revenue scale of going from INR 1,500 crores to INR 2,500 crores, INR 2,600 crores is a very strong growth, especially because you're building a new plant, new facility and then after that obviously the growth can be even more steep.
And what is the time line typically for execution once you have -- this INR 5,200 crores, what would be the typical time line for execution?
Some of it is 3 years, some of it is 4 years.
Okay. And last one, mainly on the oil and gas, can you quantify what is the contribution now? Or should we sort of think about any major drag still coming from oil and gas in the Industrial segment?
It's above INR 300 crores right now. I think we expect this to go up a little bit this year because we have new products that we're developing, which we haven't supplied before. But I think that is the vicinity in which we are right now. Obviously, it will grow. It will grow quite substantially. But it's not -- our dependence on oil and gas in Industrial is not as strong as much as it used to be in the past.
INR 300 crores is for the fiscal '24, right?
Sorry? Yes, '24.
Okay, got it. I will join back the queue.
Next question is from the line of Jinesh Gandhi from AMBIT Capital.
Congrats on good performance. Quickly on the order book, which we have for guns for overall order book of over INR 6,000 crores. Would this CapEx of INR 500 crores per annum run rate be sustainable? Or we have to invest more in capacities given the opportunities which are coming up for you?
No, our capacity right now is adequate for fabrication and assembly. If we want to do certain more value addition or new product development, according to that we may have to do some more valuation -- I mean more investment, but currently, I don't envisage that.
Okay. Okay. So this INR 5,000-odd crores, defense order book can be met through the current capacities both...?
Yes, yes.
Okay. Got it. And secondly, while defense obviously is having overbearing influence on India non-auto business, how is ex of defense gun in terms of growth? Because I believe there also payments have been fairly good.
What?
Ex of defense India nonauto business, how it has grown in fourth quarter? And how do you see it growing going forward?
So in nonauto in India, we have business that goes into railways, that goes into construction, mining, agricultural, shipbuilding, energy, space, plenty of sectors.
So is that also seeing very good growth for us?
Yes, yes, absolutely, every sector is seeing growth.
Okay. Okay. And lastly, on aerospace, how it has scaled up now in FY '24, I believe their tailwinds also have been started to reflect from FY '24? And how do you expect that to grow in the next 2 to 3 years?
So I expect in the next 3, 4 years -- 3 years or so to double this business.
Now it could be what about INR 300-odd crores of revenue?
Yes, roughly.
The next question is from the line of Kapil Singh from Nomura.
On the defense business, just wanted to check for the quarter this KSSL revenue of INR 465 crores represents full defense revenue? Or if you could give an indication what is the overall defense revenue for the quarter?
Yes, it's more or less the same revenue because our -- the booking entity or the invoicing entity is KSSL so it represents the overall defense business.
Understood. And sir, just one more question on consolidated CapEx. I see that this year, we have done about INR 1,500 crores of CapEx. So should we expect a consolidated CapEx in the similar range next year?
No, no, it would be lower than that.
Ballpark, can you give an indicative range?
About INR 1,000 crores. Hello?
Hello. Yes, I said ballpark, can you give a indicative range?
Yes, about, I would say, INR 800 crores to INR 1,000 crores.
Okay. And could you give us an indication like this INR 1,500 crores, what are the areas, broad areas like domestic, overseas defense? How much of it has gone into which area?
I think Kedar will take that off-line and discuss with you.
Next question is from the line of Raghunandhan N. L. from Nuvama Research.
On defense side, revenue to increase from INR 1,500 crores to INR 2,500 crores ex of ATAGS. So this INR 2,500 crores would be for FY '25 or '26?
I didn't say INR 2,500 crores. We said it's going to grow. And that was our original what we had talked about, but it's going to grow quite healthily. So what's the question?
So how do you see that INR 1,500 crores revenue growing over the next couple of years, given the visibility of order book?
See, based on the business that we have is what we have given the numbers, INR 5,200-odd crores in between 3 to 4 years or 4 years. And the big India orders are not yet included in this.
Got it, sir. Sir, on the ATAGS, you indicated that post election, hopefully, like there should be further progress, how do you expect the implementation to happen for the sample order? Do you think that by second half of FY '25 you would commence and over the next 3 years, it should be fulfilled?
Well, simply because I think India realizes that their equipment is old and they don't have enough. And with the kind of neighbors we have, I think it's imperative that we have to beef up our borders.
Got it, sir. And on the domestic CV space, how do you see the outlook for the current year?
We are expecting it to be flat as compared to last year.
Next question is from the line of Pramod Amthe from Incred Capital.
Amit, to understand more about the speed at which defense is moving. Can you give some color in terms of how much of these are repeat orders? Who are the competitors here? And are these more of a negotiated orders? How does this business really work?
I can't do that in this forum at all. I mean there's no chance I would share -- discuss defense business so openly. First of all, it's defense, okay? It's a business that is bound by certain laws and rules. So I can't talk about it like I'm talking about supplying crankshafts or transmission goods products.
But considering the order book which you disclosed, which is readjusting, is there a way to disclose your bid pipeline, which typically the ordering businesses have in case if we can give those disclosure in future so that you help us to build this...
The bid pipeline is huge. Significantly larger, much, much, much larger than the orders we have won.
Okay. But what's the usual hit rate you get there and how to understand this? Is it improving better versus what you used to have hit rate or the customers are more confident now to give repeat orders?
So I think customer confidence is there. We have a state-of-the-art plant. We have extremely good products, and we have great people. So people once they come and visit us, there is confidence. There are a lot of complications about supplying into this business, not a simple business. Okay? And that is why we are very cautious about who we do business with, how we do business, et cetera.
Okay. And once you move to the new facility for KSSL, how does it change the capability or the speed of execution of these orders?
We will have single piece flow lines, and we will have a whole -- complete line-based manufacturing setup. So as I mentioned earlier, we can do significantly higher quantities with less cost, less variation, less set up changes than what we do today.
Okay. But in spite of this, you are saying in the initial phase KSSL plant will have 100 guns per annum scale, the first phase?
That's assembly capacity. Please remember that the ordinance we can make 1 a day.
Sorry, I lost it. 1 a day...?
1 per day is what we can make in terms of barrels, breach and all the things.
Okay. At the new facility as you move in?
No, here, here, here. Here we are doing assembly.
Next question is from the line of Mahesh Bendre from LIC Mutual Fund.
Sir, stand-alone business is doing really well, but cumulatively subsidiaries are still making losses. So will they turn positive in FY '25 or '26 at PAT level?
Yes, Mr. Bendre, we discussed that. I think maybe you may have joined a little late, but we discussed this in detail that Europe will be positive for the whole year. And U.S. will turn positive in the second half of next -- this year.
Sure, sure. And sir, last 2 quarters the tonnage growth has been single digit, but our average realizations are going up. In fact last 13 quarters, our average realizations are going up. So will this continue? I mean, we are -- I mean looking at the volume tonnage could not be a good idea?
I think we have to stop looking at tonnage and value as a linked measure because when you're supplying components, that is okay. But when you start supplying products that 1:1 relationship goes away.
Ladies and gentlemen, that was the last question of the day. I now hand the conference over to Mr. Amit Kalyani for closing comments. Over to you, sir.
So ladies and gentlemen, thank you for joining our con call today. I'd like to reiterate that we see a strong growth going forward for the company. We are firing on all cylinders. Some of the businesses are even moving faster than what we had anticipated, like what some of the commentary we heard on the defense side. And we expect that a couple of the other businesses that we incubated over the last few years such as aerospace or -- aerospace and defense and industrial and EV will also start ramping up over this year and next year and become a meaningful contributor to our overall business. Once again, thank you for your time and interest in interacting with us and our team and your interest in our company. Thank you.
Thank you. On behalf of Bharat Forge Limited, that concludes the [Technical Difficulty].