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Gabriel India Ltd
Earnings Call Analysis
Q3-2024 Analysis
Gabriel India Ltd
Gabriel India Limited began the new year on a positive note, seeing a healthy 14% year-over-year revenue growth for Q3 FY '24, totaling INR 814 crores despite the usual cyclical slowness for the industry in Q3. They also observed notable improvements in their EBITDA margins, which stood at 8.8%, a substantial increase from 7.2% in the previous year, marking a continuation of margin enhancement efforts.
In the domestic market, Gabriel India continues to dominate with a strong 32% market share in the 2-wheeler and 3-wheeler segment, securing new lucrative orders including the TVS new platform and EV platform wins. Furthermore, they have also secured significant inroads into passenger car segment having gained the Swift platform as the second source for Maruti Suzuki - a high-volume platform for the automaker and various high-profile EV platforms like Tata's Curvv and MQB 2.5 from Volkswagen.
The company's vision rests on four strategic cornerstones: exports, domestic dominance, mergers and acquisitions (M&A), and technology. Though exports remained flat at INR 23 crores for the quarter, the company is in the final stages of securing significant orders for passenger cars and two-wheelers from European customers. In terms of technology, they have not only expanded their technical capabilities but also started a tech center in Belgium, reflecting their commitment to continual innovation.
Gabriel India's M&A activities have begun to bear fruit, especially with the new sunroof production for Hyundai's new CRETA. This M&A activity is complemented by their emphasis on technology, seen in the established tech center in Belgium, which signifies not only global aspirations but also a dedication to developing cutting-edge vehicle suspension systems and other related technologies.
Gabriel India's adherence to quality and sustainability has been recognized with several accolades, including the Platinum Rating Award for two of its plants, the Manufacturing Champion Award, and the Sustainability Champion. These awards underscore the company's commitment to excellence and sustainability, aligning with the global move towards more responsible business practices.
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Ladies and gentlemen, good day, and welcome to the Gabriel India Limited Q3 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Kolhatkar, Managing Director of Gabriel India Limited. Thank you, and over to you, sir.
Thank you. Good morning, everybody, and a very warm welcome. And before I start, a very, very happy new year to everybody, happy 2024. Joining me today on the call is Rishi Luharuka, our CFO; Nilesh Jain, our Company Secretary; and SGA, our Investor Relations Advisers. We have reported results after our Board meeting yesterday. I hope you've had a chance to glance to them. I'll, of course, take you through the presentation as always.
So what I'll do is, in fact, straight away going to the presentation. So if you all are referring to the presentation, I'll straight go to Slide #5, where it shares the highlights of the quarter, Q3 [indiscernible] So revenue was INR 814 crores. So it was a good -- reasonably good third quarter. As you all know, third quarter typically for the industry is cyclically low, Diwali being in that month and also the year ending December month.
So obviously, it's always a little low. Despite that, we had a 14% year-on-year -- compared to quarter, year-on-year growth. And this growth extended 9 months to 11.1% increase in revenue, taking the total 9 months to INR 2,484 crores. In Q3, what is more heartening was that our EBITDA margin stood at 8.8% compared to 7.2% in Q3 FY '20, (sic) [ FY'23 ] which is clearly a significant improvement.
And as we have been sharing for several calls, we've been working on improving the margins. I mean based on feedback from all of you as well. So this, we have been able to do. So 8.8% EBITDA margin for Q3. As you can see -- again, on slide 5, from Q4 FY '23, it is 7.1%, then to 8.6%, then to 8.7% and now at 8.8%. If you now move to the next slide, which is Slide 6.
Again, the same figures in a different format. Now I'll come to the industry dynamics. So in terms of passenger car in Q3, there was the total industry sale of INR 11 lakhs as INR 1.1 million, again, which is higher as compared to INR [ 10.86 lakhs ] in Q3 FY '23. About 4.79 million passenger vehicles was sold in calendar -- last calendar year, which is an increase of around 7.7% with sales of 4.43 million in 2023 -- February '22, I'm talking of the calendar year. Mainly, we are seeing a wide adoption of sport [indiscernible] vehicles and electric vehicles. However, electric vehicle penetration impacting it still remains very low at just about 2% to 3%. But nevertheless, the numbers are increasing, in fact, on a monthly basis, now we are seeing electric vehicle sales crossing 8,000 in terms of passenger cars.
Passenger car grew in Q3 FY '24, mainly due to robust economic growth, new launches, which happened typically during Diwali and then in December, the year-end discounts offered the automakers. Out of the total PV sold, UVs accounted for 58%. So this -- we have been seeing this trend for several quarters now. But now it's peak that almost 58% of the total sale of PV is utility vehicles.
So SUVs are really gathering a lot of momentum. And this momentum will continue in 2024, yes, while there is the election here. So the growth may not be as robust as what we have seen in the past 2 years, but it will still be a decent growth that we are all expecting in 2024 as well.
Coming to commercial vehicles. Commercial vehicle production stood at 2.5 lakhs. So we are well on track for 1 million commercial vehicles for the year. So the industry -- I mean saw a 3% increase year-on-year. This is definitely much lower than what we saw in the earlier years where we had very significant growth in commercial vehicle. But now this is tapered down that expectedly.
So if you remember right, in the start of the year, we had predicted PV sales to be in just about double digits, which is what we are seeing. And this will definitely get affected in the coming year, going to the elections. That again, is based on the cyclical study that we have done over several past election cycles, where we see a little muted growth in commercial vehicles because the CapEx decisions as far as government is concerned, it takes some time.
However, having said that, I think we all know the Indian economy trend and the strong foundation that it is on. So we have -- I mean we have nothing to worry at all in terms of the longer-term outlook. Coming to 2-wheelers and 3-wheelers, this has been encouraging that we have seen a notable recovery in 2-wheeler segment after the festive demand.
The favorable momentum extended to Q3 with sales volumes reaching 55.88 lakh units, which is a year-on-year growth of 19%. The upstream is attributable to various factors, including festive season, elevated rural sentiment. As you know, the sentiments were very different post-COVID, but they are slowly changing, thankfully. The wedding season, of course, also played a part in this growth in the 2-wheeler sales.
In the electric vehicle segment, the sales surged by 34%. So this, of course, is much less than expected. I mean when we had -- when we felt EV sales free the -- I mean the benefit is going away in June. So after that, obviously, we have seen a speed breaker in 2-wheeler sales -- electric 2-wheeler sales. So we are seeing only a 34% growth with the same figure in the previous years used to be 100% -- 400%, in fact, 200%.
So this is likely to get some flip, we'll have to see as to what is the government stance on this. We all know also that the same too is going to -- the end date is actually March. So we'll obviously how this pans out in terms of the government policy. The total domestic sales reached 2.61 million units reflecting substantial overall growth of 14%, domestic demand is robust across variants, particularly related mobility.
Coming to -- I mean, coming back to the slides, of the presentation. If we go to Slide 7, this is a 9-month performance, where I already shared that we did INR 2,484 crores for the 9 months so far with EBITDA of 8.7% and PBT of 7.2%. Balance sheet cash position of INR 214 crores, cash flow from operations to the tune of almost INR 100 crores compared to INR 21 crores inflow in 9 months.
And CapEx, we incurred about INR 50 crores during the period. Slide 8 is, again, the financials in a different format. We already discussed that so I'll move to Slide 9, which is the trend. So as you can see, the good part is ROCE continues to be strong at almost 32% and margins, the improving trend is very, very linear.
I then move to Slide 11, which again tracks year-on-year performance for the past almost a decade. And you can see again the trend of EBITDA margin improving, the ROCE at 32%. And moving to Slide #12, again, 7 ratios here, which, again, I'll not spend time on.
Coming to Slide 13, which is the revenue mix slide. You can see that 2-wheelers is now 61%, passenger car is 24%. Obviously, we are also seeing increased diversion passenger car. And of course, in terms of both Gabriel business as well as the overall passenger car industry which we just discussed. Channel mix remains largely the same. 86% being OE, 12% is aftermarket and 2% is exports.
So exports is -- we will come to that slide, of course. Turning to Slide -- I'll move ahead a bit quickly. Slide #16 is the Core 90 initiative, which we have been continually discuss in detail, which has been the basis and the foundation on which we are trying to drive the margin improvement.
Slide 17 shares our vision, which we have defined pre-COVID that's why you'll see still a vision 2025. We do not want to change the date. We all know COVID took away 2 years, but we said we'll be among the top 5 shock absorbers in the world as manufacturing is concerned, which is based on 4 cornerstones, exports, domestic dominance, M&A and technology. So I'll spend a little time on each of this as to where we are.
Exports, we did about INR 23 crores in the quarter which is flat. But however, here, we are working on big order as far as passenger car is concerned for exports, not yet finalized.
In addition, we also have some 2-wheelers -- 2-wheeler orders from 2 European customers, which we are working on. These are in final stages, so we are not yet able to share a firm LOI, but hopefully, in the next quarter, we should be able to share that, and we'll be able to convert that into a firm LOI as far as exports is concerned, in 2-wheelers.
Coming to Slide 20, which is the domestic dominance pillar. Here, I'll come to the [ NDL ] segments. This is on Slide 21, which is on -- which you can refer to, which shows the performance on 2-wheeler and 3-wheeler. So here again, we have had a 32% market share. We have also got some good new orders.
We have won on a TVS new platform. We've also launched in the last quarter the Aprilia KS 440, which is with the inverted front fork. So this is a mass production vehicle with inverted front fork by Gabriel. We also are working on a semi-active suspension with TVS. We have had several trials overseas as well as in India. And we have also won new EV platform from TVS.
Here again, in 2-wheelers, I'm glad to share that in Bajaj, we have won Platina business, which we were not there earlier and we are also working on some other, let's say, marquee brands of Bajaj for some possible new orders as well. Going to Slide 22, which is the EV. It continues to be strong. I mean, our business is quite strong on this front. And we have won new orders, as I said, about TVS new EV platform, we already got that.
We have won the Suzuki EV platform, which will be launched towards the end of the year, Suzuki 2-wheelers. The OLA motorcycle, of course, we are on that as well. So our EV penetration hopefully should continue and sustain at the good levels that we have seen so far.
Coming to Slide 23, which is passenger cars. So we have a 24% market share. Our market share which largely increases every quarter. And we also -- I'm happy to share that we have won the Swift platform as second source for Maruti just to share that we have -- I mean, Gabriel has never been on this platform, the Swift and [ desire ] platform, which is a very high-volume platform for Maruti.
But now finally, we have been able to break through as a second source. But nevertheless, we have a good opportunity to increase our relationship with Maruti Suzuki. We also have one Tata Motors Curvv EV platform. That is the first EV platform that we'll be working on Tata. We are also working with Tata Motors on another EV platform, but hopefully, that we'll be able to confirm in the next quarter because the discussions are yet in the final stage.
We also have won the MQB 2.5, which is a new platform of Volkswagen. Currently, the vehicles that you see is in MQB 2.0. I mean the Kushaq Slavia and Taigun and -- yes. I mean these are actually the MQB 2.0 platform. So we have also won the 2.5 platform. Slide '24, that shows pictures of the SUVs. We just disclose that SUVs form 58% of the market now. So here, I'm happy to share that Gabriel is very well entrenched with all the SUVs.
You can see right from the Skoda or Kushaq, Volkswagen Taigun, Toyota Hyryder, which shares the platform with Suzuki Grand Vitara, the Suzuki New Brezza, Mahindra XUV, Mahindra Thar, Mahindra Bolero and Suzuki Jimny and of course, the [indiscernible] [ PSA, P3 ] as well. Coming to Slide #25. This is on CVs. Yes, we continue to have a dominant market share of almost 90%. So we are on all platforms that are being produced in India by India [indiscernible]
And also, as far as the DAF Netherlands is concerned, we are already working on axle dampers. We were only on the cabin dampers. Now that business has grown based on the confidence and the delivery from us because we are a Zero PPM supplier we have won the award, 2 years in a row. In fact, this year also we should get the award. So based on that, they extended us to the axle dampers, which we -- which is under development right now.
Slide #26 is the railways. As I always say, the volumes are small, but we have had a good growth build on, of course, recovery of the railway production and also our -- I mean our share of business is going up, I mean, to a mature stage. So our growth in this has been almost 40% compared to the quarter last year.
Aftermarket continues to be strong. We did about INR 104 crores of sale in aftermarket in Q3. So we'll continue the good work here. We have already launched several new projects, new products as well in this and we'll continue to do so going forward.
Coming to M&A. We all know, I mean, the Inalfa Sunroof System, we have tied up with them. We announced this on May 9, and I'm happy to share that in December, we delivered the first production sunroof to Hyundai. And in fact, in the month of January, we have started production at full scale level. So that's a record, really record -- record of getting the plant up to scale and up to speed. We are supplying for the Hyundai new CRETA, which you have seen that got launched in the month of January.
This is a, I must say, a very satisfying ramp-up that we have done. Thanks to the team and great support from Inalfa. These are -- if you see -- if you refer Slide #30, you can see the pictures. We have shown the plan view. This is how the plant looks as of actually last week and the internal view as well as how the assembly line and the [indiscernible] line. So we are producing here almost at the rate of 300 to 400 per day.
This will only keep going up. And lastly, on the technology. We have started the tech center in Belgium in Genk. We have now moved to a larger premise, which also can develop as our workshop. Earlier, it was only an office. Now it's an office plus workshop. So we can do some trial and treatment as well. We have now in addition to the CPO, I mean who is Mr. [indiscernible] group and expect, we have also added one more person expert in the suspension field. We'll also work with Formula 1 racing teams. He is also onboard and we operate sort of [indiscernible] . Coming to the tech center, while we had -- if you refer Slide #34, we have seen the picture of the new tech center in 4-wheeler as far as Chakan is concerned, we've also done a small facelift of our wholesale tech center, which we had inaugurated in December 13.
So we decided that we should also do a refresh and renovation of the tech center. So that is complete now. So not only have we done a facelift in terms of [indiscernible], we've also increased space inside and added some more validation equipment where we can meet the market demands much faster.
So that's about the 2-wheeler tech center. And just if you go to Slide #36, we won the Bajaj award, Platinum Rating Award for 2 of our plants, both Chakan and Nashik both the supplying plant won the platinum award which is really -- we are very proud of the same.
At the CI convention in Hyderabad, we won the Manufacturing Champion Award and also I'm happy to share the Sustainability Champion. The sustainability is, of course, very, very dear to us as a company as employees and as a group as well, we continue leading a lot of efforts in this particular aspect and looking at every investment that we do or every product that we make with the lens of sustainability. So I'm glad to share we got our industry recognition for the sustainability.
We already had an award from Royal Enfield for sustainability. So we'll continue our efforts to improve our journey on sustainably. And just to share, we have just released our ESG report, which is -- which will be on the website very shortly. We already finalized the report, and you will see it on the website very shortly. So that's quickly about the quarter that went by. And you know that I have shared with you. So I would now end my address here and going to listen to your feedback and your suggestion. Now thank you. Over to you.
[Operator Instructions] The first question is from the line of Mumuksh Mandlesha from Anandrathi.
Congratulations on the healthy margin performance, market share gains and the robust order bills and also getting the sunroof plant ready in a short period of time. Sir, my question is on the sunroof division. Can you provide more update in terms of new orders or RFQ bills from the Korean and other OEMs? And also the first model, which we are supplying is seeing a robust demand in the market. So how do you see the revenue in the first year? And lastly, can you also update on the status of JV formation?
Okay. Thanks Mumuksh for having your appreciation. Coming to sunroof, your question specifically in terms of orders for Korean. So as I said, we are supplying for the CRETA, first shift. And we already got the order for a new [ car ] platform, which we're working on. The effect of that will be in 2025, early 2025. So that is what we have in hand right now. In addition, we have got RFQs from -- because this product, of course, we can get only when a new -- completely new vehicle comes on the planning space as far as the OEM is concerned.
So we're working on RFQs from 2 other OEMs right now in advanced stages. So we'll have to wait for maybe -- maybe a month more for before we can confirm anything on that front. So a very good interest from all OEMs in terms of extending RFQs or showing their interest. Yes. And in terms of your last question of what could be a likely order and you know, Mumuksh that we do not share any guidance in terms of revenues. I really can't do that. But happy to share that the sunroof plant has started producing at a, as I said, currently at almost a level of 300 to 400 per day.
So JV formation, to your question. Yes. I mean the file is moving from its move from the Ministry of External Affairs to MHI heavy industries, I mean from -- it has been cleared by both of them. Now as we going to the next stage. So I think maybe hopefully, by next quarter, we'll get -- not hopefully, quite surely, the next quarter, we'll be able to share something positive on this.
But however, as we have discussed, we have a PLA with Inalfa till the time the JV is formed. And I must say that getting -- I mean, excellent support from Inalfa, Korea and in Inalfa, Netherlands as far as this business is concerned and in fact, it kind of SOP ramp-up will not have app, they have very strong support. And how the expat operating from Chennai plant. And now yes, I'm happy to share that most of the expats have left, and it is the Indian team largely that is now delivering this stable production demand.
Got it, sir. So can you also provide an update on the new product line opportunities which we are scanning and when we can see the next coming, sir?
Yes. I think we are actually working on, I mean, a couple of them right now as we speak. And as we have discussed, we are told in this -- the coming financial year, our target is to -- I mean announce at least one more. I mean that we are working towards that target. But right now, I can only share that we have proactively working on two opportunities.
Got it, sir. Sir, on the EV side, you're seeing the E2-wheeler, E3-wheeler revenues growing 40% to 60% growth. Can you indicate how you're seeing the key customers like OLA, TVA from Ather and a planning to ramp on EV production in next 1 to 2 year perspective? And also, how are you seeing the getting orders from Bajaj for the EVs and the super-premium motorcycle?
What is your question of Bajaj?
On the -- how you are seeing the getting orders for the Bajaj EV models and the super-premium motorcycle models, sir?
Okay. Yes. So in terms of EV business, I think all the OEMs have -- especially the top ones, given a robust order book for us. TVS is ramping up, Bajaj is ramping up, so we don't suffer to Bajaj EV. But Bajaj has first plans of ramping up. OLA as [indiscernible] -- you're seeing that in terms of their market share and we continue to be #1. Ether also given demand projections. So we are seeing overall a good demand projection.
But yes, as I said, we, of course, have to see what happens after March because while we had done the same prediction earlier. But after June, we saw things change. So if there is no change in terms of the benefits being extended by government as far as FAME 2 or if there's any FAME 3, we don't know how it goes. We'll have to wait and watch.
But the good part is the battery prices have come down. Lithium prices have come down. So you're seeing -- you've already seen some correction in particularly the passenger vehicles. I mean yesterday, MG Motors dropped the price by INR 1 lakh, over INR 1 lakh. So we see that if that continues, then even if the benefit goes, the demand for EVs will continue to grow. So that is -- that's on the EV front. And in terms of Bajaj, I mentioned they are planning to ramp up the EV, but we are not on Bajaj EV, on the Chetak, I mean. While we are discussing something but we are not on Chetak right now. As far as the motorcycle is concerned, we have got the Platina, and we are working with them on some premium models as well.
Got it, sir. And just to -- listen sir, can you say the CapEx guidance for FY '24 and '25 for the stand-alone and the JV? That's all for my side.
Sure. The usual number of INR 120-odd crores is what we are planning for this year, while we have 3 years formulated our budget, closing that in March. But we see at this point in the 2 programs depending upon the LOIs, we would be investing. But as of now, crores 80 of investments have gone into the [ EV ].
You mentioned INR 80 crores, right.
Yes, INR 80 crores.
The next question is from Nihaar Shah from Enam Investments.
And great to see the margin and new orders coming through. Just had one clarification that I wanted on the expansion plan that you mentioned. Slide talks about the electrodynamic damper. Can you just throw some light on if this is a new product or a new type of suspension that we're developing or is this already been in production? And how do we see the future with this?
Are you talking about the adjustable electronic hydraulic damper, right? That's what you are referring to?
Yes. So basically you mentioned electrodynamic dampener on Slide 14. So just wanted to check if that the earlier testable dampener or is this something that's developed new by Q2?
No, it's actually -- this is the CapEx. This is not a product. So what we have listed in 14 is the CapEx for FY '23. So it's a electrodynamic damper testing machine. It's that old damper. But if you raise the question on the electronic damper, we are fine-tuning the final round of fine tuning for SUV we are doing, which is a demonstration product mainly from Mahindra. We have already done that and shown to the Mahindra tech team, including the CTO. The initial feedback was good.
But now we are refining that in Europe. And on the 2-wheeler front, there has been, I must say, surprisingly very good interest in this product. And we had a joint tuning exercise of it. TVS came in Belgium. They actually came to Belgium to do their right tuning themselves and check it out. And now we are also -- developed the same thing in India, so that we can do more testing here in Hosur. So let's see how it goes. It's early days for 2-wheelers, but I must say, we are surprisingly and pleasantly quite happy with the traction it has seen in 2-wheelers.
Got it. That's great. Also, a couple of questions on the order wins that you mentioned. So one is on the Swift platform, right? And that saw a big volume at platform. What is the typical share that the second source gets in these kind of products?
Typically, it's -- we operate on a 70-30. So I can source, it's 30%.
Understood. And is anything changing from Bajaj Auto side, typically in a lower shelf business with them. Is something changing in terms of other than on the Platina or the premium side that you're discussing with them?
No, I think the only thing as you saw, we got 2 awards, and we've been getting this platinum excellence awards for quite some time now. So as far as our quality is concerned, we are quite well rated in Bajaj. So I think it's somewhere -- when you start delivering a good product consistently. Obviously, you have to show some results, positive results, I mean. That's what we are seeing. Hopefully, we should convert this opportunity. So Platina is a good start, and I'm sure we'll be able to do something more.
Got that. And the last question from my side is recently, we've had a couple of exchange filings regarding a lot of management reshuffle that happened in April. Can you just talk about the transition that's happening and how they are going about that and any changes to the structure?
Yes. I mean, these are actually regular changes that we do, not only Gabriel but even at group level, where it's career planning of individuals. So this is, in fact, as you know, this is one of the strengths of ANAND Group. So we have got like my sunroof plant head is and the group CEO is from ANAND Group company because we wanted a resource who could come on board without affecting the Gabriel team.
So we got from ANAND Group as a career planning for this is on sake. Similarly, Akul Jogi was our Deputy Managing Director, he will be moving to Mahale Filters to head that business as MD which is our JV with Mahale Germany for air filters, oil filters and fuel filters and also some more air intake manifold and some new EV products, which the JV -- the partner has.
And we already -- and Puneet, who was heading the 2-wheeler also moved on to other smaller JV of ANAND, which is with Haldex exterior in the commercial vehicle space. So we already replaced that. So we had a fair bit of planning done. So we are happy that Anand Sontakke who headed both business development and sourcing in Mahale Thermal Systems. And then we moved to Mahale Filters as Head of the PNL and he had moved out of the group, and he has joined us back, a very seasoned professional and proven track record.
So he's joined us as the head of 2-wheeler business. So these are changes, but happy to share that we were able to attract one of our good talent back into the group. So he will take over the 2-wheeler business. But rest remains the same. There is one more change that Vijay, who was our Head of Quality. He [ Supernet ], we had extended by 6 months. So we had planned that and we moved one of our resources called up a name that will [indiscernible] , who was earlier in supplier quality and again, a very good performer. We have moved him into the place of Vijay as planning for -- as it's part of the efficient planning.
[Operator Instructions] The next question is from the line of Viraj Kacharia from SiMPL.
And congratulations on good set of numbers in such a challenging environment. A couple of questions. Firstly, if you can just give some perspective in terms of the share of Gabriel, the premium motor secular premium 2-wheeler space. And similarly, in the higher ticket space in PV? So based on the pipeline and the order wins we have currently, how our share would have changed?
Thanks for this. It was nice meeting you at the Bharat Mobility show.
Yes, we did discuss on the sidelines as well on several aspects. So on the -- this particular question on the share in premium, we don't have it off hand right now, but we can revert back to you. But just to share that in the premium segment in terms of the passenger car, we just shared the picture of the SUVs that we are there, which is a high-growth area. So we are there on -- I mean, absolutely all the -- they're not premiums SUV but the higher-end SUVs, which are sold in India.
So right from the Suzuki Grand Vitara and Toyota [indiscernible] offered in the hybrid version. You know the demand is very strong there with a huge waiting list. The Skoda Kushaq, the Volkswagen Taigun, the Mahindra XUV, Mahindra Thar and the Suzuki Jimny. So these are all, I must say, they are on the higher end of the SUVs. So we have a -- if you can refer to Slide 24, you can see that our share is 35% on the utility vehicles. Yet premium vehicles this, in fact, will be even better. But let me revert back to you on these points [indiscernible].
Sure. Now just on the initiatives in export and aftermarket, right? I mean some time back, we said the aspiration of more than 20%, 25% of revenue from these 2 segments put together. Exports, we earlier talked about us engaging in advance stage that with respect to VW and other few other OE for supply. Any update you can give in terms of export, if any of those has materialized on the PV side. And...
Yes. So I can tell you that -- and I have already shared that it takes time, but both 2 key OEMs is that we have had -- we have had one very important visit last week, one of the OEM who is a global purchase head for the entire -- OEM for the entire globe as far as this commodity is concerned.
We had his visit, and it was a very, very positive visit. And he's assured that we will look at opportunities globally. So it's a good first of -- good breakthrough. And the second OEM, which we are discussing with, they are visiting us in the next week, not next week, on 23rd to be precise. So again, the head of that commodity globally, she is visiting.
So that will also be an important thing, which will definitely pave a new way as far as our exports with these 2 large global -- globally large OEMs are concerned. So I can only share this right now, both are on positive. We have been working on both of this. So it's on the right track. Yes, it will take time. One of them will materialize faster surely. I can say, I mean we can get an order in the next, hopefully, in the next 3 months. The other one will take a little more time. But yes, positive developments on both the OEMs, which we have been working with.
Okay. But these are typically single model, single plant order or when you're interacting at the global level, these are more spread across plans for more typically [indiscernible]?
[indiscernible].
On the -- just two questions. In the past, we talked about pricing as a strategy to gain share back in PV. And lastly, on calls, we've been talking about recovering the pricing piece. So in terms of the profitability in the PV, the thinking was to bring it to a normalized level as what you see in 2-wheelers and others. So in that journey, where would we be now? And incrementally when we're getting these new orders or the bidding for new pipeline, is that strategy still by and large there or now we have more evolved in terms of the overall offering or solution and that's our early here?
Viraj, Rishi here. Your question had the answer in itself. 2-prong strategy broadly. One is where we require a customer penetration or a model penetration where the strategy of price may be required. Having said that, the Core 90 program thereafter kicks in to ensure that the profitability is normalized. Happy to share that YTD December has been very heartening in terms of the profitability margins per passenger car.
Are we there where we want to be? The answer is, yes -- no, there is still some scope of improvement there, but we've seen a significant improvement in the volumes of passenger cars.
Okay. Just two last questions. One is from a...
[Operator Instructions] Mr. Kacharia, Maybe request you to rejoin the queue. As there are more participants. Thank you.
The next question is from Shashank Kanodia from ICICI Securities.
I just wanted to check on the sunroof part, sir. In one of your comments, you mentioned that the ramp-up of the [indiscernible] dependent upon the new model launches because I think the initial standing was that we have -- it's an import substitution product and ready market given by Kia and Hyundai. So if you could please clarify.
Yes. Yes. So Shashank, let me clarify that this is an import substitution, of course, like this Toyota is -- this new Toyota that has been launched. So it's an import substitution from them. In fact, we have some import stocks, which we'll get over this month, and it will be a complete switch over to localized production by ISS InAlfa Gabriel. Similarly, Kia EV is the same. But in terms of new models, I mean, obviously, that's now when they develop a new model, it will be from day 1 with the localized sunroof.
Right sir, would you still be qualifying the supply to existing Hyundai and Kia models, right? So let's say KIA....
It could have a supplier Kia completely.
Right. And sir, since you mentioned that you already operate in roughly 400 units to a day. So by FY '26, we should expect this plan to wrap up to full capacity of 2,00,000-odd units?
FY '26.
Or do you expect that to happen in '25 itself?
FY -- again, do you are subject to volume OEs, mean, naturally, as I said, this is on a single store basis. So whatever the OE makes will be with our [indiscernible] that we have. But in terms of how their volumes as far as the end market is concerned, we can't take a guarantee based on the volume indications that we have, FY '26 should be close to our capacity.
At -- and so that peak levels, what kind of EBITDA and PAT margins you're supposed to make?
Pardon?
Sir, at that peak capacity of in FY '26, what is the EBITDA margins and PAT margins that we intend to clock?
The double digit is what we are targeting with 2 lines and like [indiscernible].
Right. And sir, one thing on the 2-wheeler's front. So the CV and the PV guys have largely alluded to some amount of demand slow down. But 2-wheeler space is picking off well. So your assessment of the 2-wheeler industry and with all this market share growth, are we supposed to be in double-digit in FY '25 in terms of revenues?
You mean revenue growth?
Yes, sir.
Well, again, I said we can't share. But yes, I mean, that's the idea. We've always -- over the past, we can see over the past several years, we've been trying to stay ahead of the market growth, which we have done. Yes, that will be endeavor, for sure.
Right. And sir, any aim for double-digit margins in terms of time line, let's say, 2 years, 1 year, anything you can quantify?
Well, as we have put this year. So we certainly will go to [indiscernible] in this statement. So double digit would be one more year.
Okay. So FY '26...
I won't specifically say a year but, yes, that's the idea.
Next question is from Argo Partial from Sanjay Gerald Broking.
Am I audible?
Yes, you are.
Okay. And based on your latest result, what is the corresponding volume growth rate? And additionally, how much does the price decrease or increase in that quarter?
Can you repeat your name? I couldn't get your name.
My name is [indiscernible] and I'm calling from Sanjay Agarwal Brokings.
[indiscernible] So your question is also, can you repeat your question?
Yes, yes, sure. Based on our latest result, what is your corresponding volume growth rate? And additionally, how much does the price decrease or increase in that quarter?
So also essentially a large part of the reduction in sales as compared to the second quarter is going to be decrease in volume. There is a reduction in the commodity prices to the extent of INR 8 crores to INR 10 crores, which have also reduced the value of sales that you see for quarter 3.
Okay. And one thing I want to ask is that what relates to the increase in operating margin? Could you please elaborate on any potential changes in [indiscernible] that might be anticipated for this current quarter?
A lot of things here. We've been speaking about this in all the investor calls that we have a Core 90 programs. Largely, it takes care of all the heads of P&L and the working capital management. We have dedicated groups which work on that throughout the year in order to reduce the cost or improvement in margins. It includes customer price correction. It includes reduction of these digits. It also includes a digitization and an automation journey for improvement in the operating efficiency. So these factors, we have been doing it for the last couple of years, and the results of which are now visible in a quarter where the volumes were lower, and yet we could maintain our EBITDA margin.
Okay. And my last question is, what is your expectation about the demand scenario of the current and coming quarter compared to last quarter?
So typically, [ Orco ], the last quarter is fairly robust. Jan, Feb, March is, I would say, it would be, if you want a comparison, it will be more like Q2, not as good as Q2 because Q2 has a festive season thing, but definitely somewhere in between Q3 and Q2.
The typical cycle that the industry follows. So we should be -- I don't see any issues with that. And going forward from next year as an industry -- we -- as I already mentioned, we -- due to election here, we won't see as good a growth as we saw in FY '24. There is -- certainly, there will continue to be good growth in terms of 2-wheelers and passenger cars, but maybe CVs may see a little bit of a flattish growth. That's what's we are expecting.
[Operator Instructions] The next question is from Viraj Kacharia from SiMPL.
On aftermarket piece -- so if you look at the presentation, I think a majority of the business is still driven by shock absorber and related product. And so I want us to understand the growth in terms of, say, product or distribution both in India and across, what will drive the growth in this business? So last few years, we had a very good execution and growth seen in the business, but just want to still look next 3, 5 years, are we the drivers of business?
Viraj, the vehicle part only continues to increase. While we have seen the same growth in passenger cars and 2-wheelers as far as region is concerned. But if you see, particularly in passenger cars, the second-hand car still has been actually the highest ever. So if you add that, there has been a huge increase in overall purchase of cars.
And when you buy secondhand cars, obviously, there is scope for some more aftermarket parts getting into because people would want to refurbish the cars. And I don't think this will change. As long as the vehicle part goes on increasing the aftermarket demand will continue to do good.
[Techical Difficulty]
[Operator Instructions] We have the line for the management reconnected. Over to you.
Yes. Sorry, the call got dropped. So Viraj, we are also seeing on the aftermarket piece as long as the vehicle part goes on increasing, which is increasing both in terms of the new car sale and secondhand sales. So we see the aftermarket demand continuing to hold on to continue to improve.
So what are we asking in terms of item on the same gaps in the portfolio or any other new products you would like to add on even by the distribution, right, in India or a piece of view? Do you still see gaps or compared to where the potential would be, just trying to understand in that sense.
We are adding new products. In fact, in next year, we have already identified a couple of new products to be added to our kitty in terms of the aftermarket. So we are, one we do is scanning horses and we are in touch with our dealer and distributor network as well as to what they would want us to add because we also have to be allowed to their needs and requirements. So we keep doing that and we should be adding a couple of products next year where aftermarket kitty.
In terms of second question on JV piece. The understanding was that in addition to CRETA, we will also be supplying -- so there will be an import substitution of the new Seltos as well. So initially, we will start with 2 models and then further ramp it up in terms of new wins.
No, no, no. I think this is not understanding. We have clearly stated that we have got the localization of the new CRETA, which is what is currently in production. And the second, we said was a new platform of Kia, not the replacement of Seltos.
So if you look at financer, on the Kia, Hyundai and portfolio in India for now. What are the models they would be supplying? And if [indiscernible] terms of, say, import attribution of those over the next 2, 3 years, what can come to us in terms of a JV?
Yes. So CRETA is one, which is a major platform. And in fact, the CRETA, the new CRETA face lift also, which is planned maybe a couple of years down the line, even that is very likely to come our way. Obviously, Kia, this new platform is there, and we are working on something new with Kia as well. There are some platforms which we are not there currently. But those are mainly, I would say, the TVS type, the smaller [indiscernible].
The question is that is there any other -- [indiscernible] your understanding, Inalfa currently does not apply to any OEM in India other than for Hyundai CRETA program. And thus, the input substitution in the JV was meant for CRETA only. The rest of the programs are all that we will win in the JV itself.
Okay. I understand. On margin, when you say double-digit EBITDA margin for a GV, based on the order which you're seeing right now, the daily run rate already at the healthy utilization. So this margin is based on the assembly setup which we have currently high end. But as we kind of see improvement in scale and increased localization, on a mature basis, what is the margin investments?
We don't give the guidance, Viraj, so unfortunately, difficult to fathom. But to tell you that because it's the localization of a line or a product that is already there with Inalfa in Korea, there is not a very steep improvement in margins because of operating efficiency coming around. So the volumes will also drive additional cost of CapEx and overage as well.
[Operator Instructions] The next question is from Jyoti Singh from Arian Capital.
Next question is from the line of Brian Jan from HDFC Asset Management.
Just two questions. One is on what will be our share of -- I mean, the EV sales in our total revenue right now? And secondly, on the electric suspension -- electronic suspension side, what will be the kind of ASP increase if we go for the electronic suspension from the conventional one? What can be the ASP increase you can invest? And when do we expect that at least a couple of these models have been in 2-wheeler and 4-wheeler, we will start SOP?
So I mean as far as your EV share in our business right now, the sales is roughly -- it's growing, but it's roughly about 5%, which is pretty similar to the market penetration that you are seeing in India, it's 5%. I just yesterday's article I read was 5% penetration. So we are at pretty much at the same level. That is what we are seeing. And your second question was on the semi-active suspension?
Yes.
So there, yes, there is a significant bump up in terms of price. The price is almost -- it will go to almost 3x. Whatever is the price today, it will be almost 3x that price for the semi-active suspension, right? Now your last question about when would be the likely SOF. For TVS, it's right now, even they have to get continued the product in the concept.
And yes, also the price will have to be absorbed by the customer. So I don't think it will happen before at least under 2 years, not before '26.
Okay, okay. And when we talk about the new products, so one product which we have got the sunroof, which is we have gone through the joint venture route. So next 2 products, which I think you are actively looking at. So will it be like a similar joint venture kind of arrangement or it can be within the company as well, some product line, which you can develop on your own?
Yes, it could be a mix of both, yes, absolutely. And even if we do an acquisition, it might very likely be with a majority.
Next question is from Alicia from Envision.
Two questions. First, in terms of margin side, the aspiration is to go to double digits, so over the next 1 to 2 years, a large part of cost saves from Core 90 has already led to 150 basis points improvement from last year. Going forward, like you said, mix shifting to PV, they will be slightly opportunistic as it get negated by an incremental savings from Core 90. So what's the incremental levers you have for another 150 basis point expansion to move to double digit?
So the way I see this panning out is that the cost reduction drive also has to continue in order to maintain the inflationary pressures and the salary increases that we are expecting in the next year, that's one. Second is that there are still opportunities in terms of reducing the overhead by effective utilization of the operational efficiency. And in that journey, digitization should and will play a big role.
The third piece is with regards to the raw material cost and its stabilization there, including commodity indexation. So that's -- while that's an ongoing exercise, the endeavor here is also to start looking at more prongs in terms of make and buy if that will help us improve on the improvement. Fourth is with regards to the geographical trend that we have. So if -- given the endeavor that we have on exports and aftermarket, increase in the export is, we should be also getting some additional benefit in terms of profitability from that. So that's broadly what I envisage to a double digit.
Understood. Sure. And second question, if I just compare the second thing you expect 2-wheeler, 3-wheeler revenue on a basis, you should decline by more than 25%. Is this all because of slow down in a 2-wheeler EV sales and penetration?
You will have to repeat the question. So just take the speaker away a little from your mouth, there is lot of muffling noise.
Is it better now, Am I audible?
Yes.
On 9-month basis, the 2-wheeler, 3-wheeler revenue seems to be down by more than 25%. Is this largely because of slow down on the EV 2-wheeler side? Or has the contribution of that -- reduction in contribution of that led to this decline? And how well could I understand this?
No, the cyclicity of the quarter is what is driving the volume down.
I'm comparing 9 months.
The commodity induction cycle impacts the overall pricing, but in terms of volumes, we are higher than previous year.
Thank you very much. Due to time constraints, we'll have to take that as the last question. I would now like to hand the conference back to Mr. Manoj Kolhatkar for closing comments.
Thank you. Thank you for all your queries. I mean we -- as I said, hopefully, in the next quarter, we should be able to share, not hopefully, for sure, the numbers of the sunroof in terms of the volume that we did but it's going very well. And also some additional news on the exports.
If I said those discussions rectified. But now to that, we look forward to a very good year next year as well and continue to put our efforts in improving the including and sustaining the margin improvement that we have done. So thank you, and I look forward to the next call. Wish you all again, a very happy new year.
Thank you very much. On behalf of Gabriel India Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.