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Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Pricol Limited hosted by Valorem Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, Mr. Sonpal.
Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Pricol Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the fourth quarter and financial year ended 2023.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.
Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements and make any investment decisions. The purpose of today's earnings call is totally to educate and bring awareness about the company's fundamental business and financial quarter under review.
Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Vikram Mohan, Managing Director; Mr. P. M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Director of Strategy; Mr. Priyadarsi Bastia, Chief Financial Officer.
Without any further delay, I request Mr. Vikram Mohan to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj, for that introduction. And a very good evening on behalf of my team participating today. And thank you all for your participation in this earnings call for Q4 FY '23 and also for the financial year ended FY '23. Without further ado, I will just go straight into the presentation. And we'll be able to take questions at the end of the presentation.
Can we have the presentation, please. The key financial highlights, consolidated of the company. Our revenue from operations, EBITDA and EBITDA margin of 12.23% for the quarter ended FY '23 are in the top left corner. And for the financial year '23, our revenue from operations has been INR 19,028 million, EBITDA of INR 2,358 million and an EBITDA margin of 12.39% with a PAT margin of 6.04%. This has -- this excludes exceptional items of INR 97.5 million. Without the exceptional items, we have had our highest ever annual and Quarter 4 sales in the history of our company.
Some of the business highlights in this quarter have been significant production capacity enhancements in our tool room, plastic component manufacturing shops and our PCB SMD lines by adding new state-of-the-art lines from top-notch manufacturers in Japan.
We have also been fortunate to receive 2 awards, one from CII as Trendsetters in Business Innovation for the Various Innovations Done on Driver Information and Connected Vehicle Solutions, which is helping us in the premiumization of our product range. We have also received an award from Honda motorcycle and scooter for Best Delivery Management at their Annual Supplier Conference.
Next slide, please. Our quarterly consolidated performance. Our revenue from operations have grown by 26.26% over the corresponding quarter in the previous financial year. Cash profit has increased by 33.65% EBITDA by 14.06% and profit after tax by a record 126.87%.
On a financial year FY '22 versus FY '23, our revenue from operations have grown by 26.85%, which is far in excess of the market growth. EBITDA growth has been 23.41%, cash profit, 45.5% and profit after tax by 125%.
Next slide, please. These are, again, figures in detail, which are already uploaded and I'm sure all of you had an opportunity to go through. The key point to note is our EPS has more than doubled in this -- and we have hit an EPS of INR 2.45.
On a historical statement, FY '20, '21, '22 and '23, we have the numbers. FY '22 has been restated because of the merger of our small wiping division, which was erstwhile consolidated as a subsidiary and now has merged as division of the company and hence, the need for the restatement. There was no significant impact on account of that, but these are the numbers. And FY '23, we have had an EPS of INR 10.23 per share.
Some of our balance sheet statements, you would notice that we are almost debt free and have a very favorable debt to equity ratio and also have very favorable financial ratios in our subsidy that we have achieved in this financial year. Just to give a synopsis of our stock performance, where we stand today versus the Sensex, you would realize that we have fairly outperformed the Sensex.
Thank you very much. And all other details are on the slides that has been uploaded, and we would be happy to ask some questions. Some housekeeping rules for the benefit of all the people in the call today, kindly restrict yourself to one question at a time and join back onto the call for your next question. Thank you very much.
[Operator Instructions] The first question is from the line of [ Yash Dantewadia ] from [ Dante ] Equity Research.
Congratulations on a good set of numbers. Am I audible?
Yes, Yash. Please go ahead.
So my question is regarding your target of top line of INR 4,000 crores, which you've given. So how do you plan on reaching there? And by when do you plan on reaching there?
Top line of -- sorry, can you repeat again, please?
Top line of INR 4,000 crores, you've given a target, right, in the next -- by FY '26, if I'm not mistaken?
That's right.
Yes. So how do you plan on reaching there? And by when do you plan to reach?
I have said this on the earlier investor call, but I would be happy to answer that again. We have a clear order pipeline for the next 3 years, number one. Number two, the area of concern is our exports, which we will not achieve our desired target. As of now, we have a visibility to hit about INR 3,600 crores. We have a CapEx spend of about INR 600 crores also that we have undertaken, which over the next 7 to 8 quarters, we will complete, INR 400 crores of which will be used for organic and INR 200 crores of which will be used for inorganic and we are fairly hopeful of with this inorganic spend reaching that INR 4,000 crore top line with a steady state EBITDA of about 13%.
The next question is from the line of Kaushal Kedia from [ Wallfort ] PMS.
Sir, I just wanted to know in DI CVS, what are we doing? Are you doing build to spec? Or are we doing build to print?
That's a good question. The product is core evolved with the customer. So it's not a build to print or a build-to-spec product. It is co-evolved with the customer as to what is going to be the positioning of the vehicle, and what will be required to attract ultimate end customer to the vehicle, and we co-evolve the product, which recalls proprietary solutions. Does that answer your question?
So you're saying -- you are doing something in the middle. You're doing more of value addition in build to print. Is that what you're saying?
Yes. So we co-evolve the product. We arrive at what would be the right pricing for that product. And in that, what should be the value of the driver information system, and what features can be offered on that. So it's co-evolved as a solution with the customer.
I don't think we are really building a product, but rather we are moving towards building a solution for the end customer based on market research of the OEM and then they work closely with us. I think gone are the days where like in our other division, ACFMS, where we built to spec -- build to print. Here, it is a solution that we are focusing on with the customer based on the market research done by the customer.
Okay. Can I ask 1 more question?
I request you to just join the queue again, please, if you don't mind.
We have the next question from the line of Rushabh from RBSA Investment Managers.
So just from a strategic perspective for the next 3, 4 years, the target that we have set for ourselves. Are we pivoting through a multi-segment as a multiproduct, multi-customer company where in the concentration of which segment could be say less than 1/3 or so as a total revenue price. Is that the direction that we're heading towards?
We are focusing on 3 product -- 3 vehicle segments, 2-wheeler being a large part of that, followed by commercial vehicles and off-road vehicles, all of these, which we already have lead positions. We have reentered the passenger vehicle 4-wheeler segment and today have a 70% market share in Tata Motors for the driver information system. And we are in the process of entering a few other 4-wheeler Indian-based OEMs.
Our plan is not to become a market leader in the personal passenger vehicle segment 4-wheeler in India but focus on 2-wheelers, off-road vehicle and commercial vehicles, not just in India, but globally.
In terms, second, is from an inorganic standpoint, in order to remove the dependence on auto, which is cyclical, we want to enter into instrumentation in the industrial segments where the margins are better and it is derisking our business model, and we are evaluating the same, how do we enter in using inorganic means.
The third vertical we are in today is ACFMS, which stands for actuators, controllers and fuel management systems. We anticipate between 60% to 65% revenue coming from driver information systems and connected vehicle solutions and about 35% to 40% coming from the ACFMS vertical. This is the -- where we hope to be in 2000 for FY '22. I hope I've been able to answer your question.
The next question is from the line of Romit Shah, an individual investor.
Sir, I just wanted to check with you. As a recent development actually in which Minda just 1 week before only have given the application to competition commission about raising their stake into our company. So as for our last con call and actually was your last press release, what is our current standpoint of the management on that, actually? So in the last check you had committed that we are the fully committed our pressure management is fully committed. So it could be with the company. So we are maintaining that trend?
Yes. I'd like to break up my answer into 2 parts. Minda Corporation has very clearly stated that their intent was to only acquire 15.57% as a financial investor in our company. Now on the 2nd of May, they have announced that they are applying to CCI to increase their stake to 24.5%. We will take all legal measures, whatever is required to propose that petition for the simple reason, they are competitors and they have not short prior permission from CCI, number one.
Number two, I would like to reiterate that the current management stands absolutely committed to running and growing this business in the coming years, and I have absolutely no intention of seizing control of our business at -- not just now, but any point in time in the near future. We will take whatever steps necessary legally and financially to maintain absolute control of management and Board of this company to continue to nurture value for all of our stakeholders.
This was really helpful for us actually because as stated earlier, actually, the Minda Corporation intention does not look like just the financial investment. As their moves clearly suggests that their intention is something else, which you stated correctly. And we are taking word of commitment from your side that you are fully with the company. So that is a great -- this will be taken as a great activity for the market as well actually.
Mr. Shah, I would like to further reiterate. This is a statement that I have made in person to the leadership at an MD and CEO level to each one of our key customers, number one. I have publicly made it to each and every employee of us and each and every significant supplier of us. So I have made the statement publicly to all of our stakeholders, and I will do whatever it takes legally and financially to ensure that I uphold this promise that I have made.
The next question is from the line of Chirag Singhal from First Water Capital.
Congrats on good set of numbers. So there's 2 questions. First, on the INR 4,000 crores target that you have set -- so is this based on some commitments under the existing contracts with your clients or we are factoring in some growth based on the outlook that you have over the next 3 years?
Chirag, I will answer this in 3 parts. Number one, we have assumed that the India growth story is going to be muted in the next 3 years. So in all of our assumptions, we have taken very muted growth because we believe that whatever economically is happening in the rest of the world will have some resultant impact on India. So we have factored that into our growth projections, point number one.
Point number two, we are working on many of our products, our solutions and not like a casting or a wiring harness, which are just built against the specification and delivered to our customer. So many of our products from being given the LOI confirmed commitment from the customer to start a production is anywhere between 18 to 24 months. So we know what our top line and what our capacity utilization is going to look like for the next 24 to 30 months. It is against that, that we are creating capacity for investments and we are projecting what our turnover is likely to be.
And as I mentioned earlier to Mr. Dantewadia when he had asked this question, is we have failed to grow in certain areas, whereas we have grown better in certain areas. So we have put all of these probabilities into projecting that number.
Lastly, we are also looking at product premiumization where we see a mechanical driver information system moving into electromechanical and electromechanical moving into an LCD and an LCD moving into TST, which means even if vehicle production remains fairly flat, the value for product is going up, which is going to give us top line and bottom line growth. I hope I've been able to answer your question.
Yes. That definitely answers. So what I understand is that the -- most of the growth in the top line that you are targeting to achieve in the next 3 years will mainly come from the existing commitments that you have because you mentioned that you already have a visibility of the next 24 months based on the orders that you get from the clients.
That's right, Chirag.
Right. Sir, coming to my next question. So you mentioned...
Can I just request you to follow the housekeeping rule and come back into the queue. I think many of the other people have come back on to the queue for their next set of questions.
We have the follow-up question from the line of [ Yash Dantewadia ] from [ Dante ] Equity Research.
So my next question is regarding EV. What percentage of your sales goes towards EVs for information systems as of today? And how do you see this shaping up?
We are completely EV ready, and we are engaging with multiple players on multiple EV platforms. As a percentage of our driver information system and connected vehicle solution vertical, our sales to EV is just about 7% to 8% now, but which will keep growing in the years to come because I just like to explain to you, in a driver information system, whatever be the form of propulsion, the driver information system will have to work.
So whether it is built with fuel or hydrogen or electricity or fuel, the driver information system continues to do his job of showing speed, left, right navigation, bluetooth connectivity, fuel level, whatever form of fuel and other indicators. And currently, we are working with almost 22 EV vehicle makers in the country, small and big.
So right now, your percentage of sale is only 78%. In the next 2 years, how do you see this shaping up? And is it a higher margin business compared to the rest of the business?
No. The margins of a driver information system will continue to remain the same because I don't see any reason. Whatever is the form of propulsion, the product is going to remain the same. So there is going to be no impact on the margin, okay? And this will keep growing as the sector keeps growing. Whatever is the sectoral growth of EV penetration, we will be maintaining the same thing because we are working with all the key EV makers.
The next question is from the line of Kaushal Kedia from [ Wallfort ] PMS.
Sir, how much of a market share do you have in TVS IQ?
100%.
So if TVS, as per their monthly update they sold 1 lakh units till now since inception, you have supplied 1 lakh BIS to them in their electric vehicles. Is that a fair assumption?
Yes. Not a fair assumption, it's a fact.
It's a fact. Okay. And so we can assume -- so if TVS iQube keeps growing, I think it's a proxy to -- maybe our product is a proxy to it. So that's great. So okay, I'll get back to the question queue.
Yes. Many of the platforms, we are single vendor. So whatever is the growth of that platform, we will also be growing at that level, not just in TVS, but with other customers also. Which I will not be at liberty to discuss because it would be a conflict of interest with the customer.
The next question, which is a follow-up question is from the line of Rushabh from RBSA Investment Managers.
So just want to understand what's the Pricol's pricing strategy across the product segments. Is there a range that you can share versus the competitors?
We do -- are you talking of strategy? Or are you talking of market share? Can you be clear, Rushabh, please?
I'm just asking in terms of pricing versus competition, is there a -- are you starting at par with the competitors? Is it slightly premium or discount? So can you just give a range across the product range. Wherever we are not a single vendor.
[indiscernible] commodity, okay? So it is based on the hardware and the software that goes into the product. But let me also reiterate I will not be paid a huge premium over the competition because end of the day, the vehicle maker also has to maintain his EBITDA and his profitability. So that is how, in fact, very recently, I had someone asking, there is so much of software going into your BIS compared to 3 years ago. The software companies enjoy an EBITDA of 35% is why is Pricol not having an EBITDA of 30%, 35% in its product, especially in the BIS?
And my answer to that is I have to be in line with what my customers are enjoying in terms of profitability. I can't have a 30% profitability when my customer has an average EBITDA of 11% to 12%.
If my customer has a profitability of 11% to 12%, at most in some of my solutions, I can go up to 15%, which is why to improve our profitability, we are looking at nonautomotive industrial instrumentation, which in terms of technology is at least a decade behind automotive instrumentation, where the profitability is much higher. And that will help overall from our instrumentation business, improve the profitability.
Okay. So is that -- I have 1 more question you can ask or should I come back?
So please come back to you, if you don't mind.
We have the next question from the line of Himanshu Singh from Prabhudas Liladher.
So I just wanted to understand what are your growth forecast or your growth assumptions from the 2-wheeler industry over the next 3 years?
Himanshu, I think I'd answered it in an earlier question or a context of an earlier question. We are assuming fairly muted growth for the next 2 to 3 financial years because of various global incidences and global economic meltdowns, while we still believe in the India story, we believe that the India story will be a slightly muted story.
So at least in our internal cash flow assumptions, we have assumed very -- 7%, 8% growth of the 2-wheelers or 5% to 6% 2-wheeler growth in India, and we have based our assumptions on that. In fact, I told our CFO, please assume 0% growth and work on your cash flows.
So where our growth will come from a premiumization of the product, as I mentioned earlier, which will keep growing our top line to achieve our desired level of INR 3,600 crores to INR 4,000 crores based on the current order pipeline and share of business and LOIs that we have.
Okay. So most of the growth should come from electric vehicles and ICE should be flattish or decline? Is that...
Will not be declining. ICE -- we now see a lot of entry-level ICE launches also like the Honda Shine et cetera, which is going to see some growth. EV will grow at a much faster rate than ICE vehicles. And talking as to whether segment as a whole, I believe, we will grow at around 5% to 8% average over the next 3 years.
The next question is from the line of [indiscernible] Trivedi from DJT Investments.
I just had a question on the debt. How are we -- sorry, on the CapEx, how are we planning to fund this CapEx of INR 600 crores over the next 2 years? Are we looking to any kind of take on debt? Or is it all through internal approvals?
That's a good question. I think I've answered it in an earlier investor call, and I would like to -- I'm happy to answer it again for the benefit of participants in today's call. We are anticipating about INR 600 crores of CapEx over the next 24 months, most of which is going to be funded by internal accruals or rather all of it is going to be pointed by internal accruals.
The timing of investment versus the cash inflow is the company could have a mismatch. So I had mentioned in an earlier call that about INR 200 crores of debt, we will be taking on. But it's not going to be long-term debt. It is going to be bridge capital that we will be taking up because of the timing of the cash flows.
There is a follow-up question from the line of Kaushal Kedia from [ Wallfort ] PMS.
Sir, in what products do we compete with Minda?
In the driver information system is the common product. Of course, they are significantly smaller than us. We have a very large market share with the Minda.
But isn't our product half-half superior like it's not even like comparable. Would that be a fair statement to make?
I would not like to answer this question, Kaushal, because I think it's not typical on my part to comment about the competitors' product. But the fact that we have a significant market share and have grown significantly is probably a testament to our product and its product quality.
But sir the market share is more because its iQube has a larger market share, right? Is that again a fair statement to make?
You're only talking about 1 platform iQube. There are 40 vehicle platforms in India that we supply to. You can't just base it on 1 platform iQube from TVS that is not ruling the market or having a very large market share in the market.
In terms of value terms, we have about 50% plus of the 2-wheeler market in India of the driver information system. But I think it's unfair on your part to or my part to say how good the competitor's product is or not. But obviously, my product is good. I can attest to that because my market share has grown over the last 3 years significantly.
Okay. Without being [indiscernible], I was asking that. So sorry if I hurt any sentiments..
The next question is from the line of Shreyansh Agrawal, a Retail Investor.
Am I audible?
Yes, Shreyansh. Go ahead.
So just following up from the earlier answer where you had mentioned about premiumization. Just wanted to understand that are we also looking to enter into a market segment of bike like BMW [indiscernible]? Or are we satisfied with the likes of previous or Hero Honda, any plans around for that regarding...
Very actively working, Shreyansh, with BMW. We are not just working on products but supplying products to BMW. And not just to BMW, we are supplying to Harley Davidson. We are supplying to Triumph. We are supplying to Ducati. We are supplying to KTM. And just for your information, we are the world's second largest driver information system manufacturer for 2 wheelers.
There is a follow-up question from the line of Rushabh from RBSA Investment Managers.
So some time back, there was a news article, a news interview wherein we are looking to split the Pricol entity into 2, 3 entities. So is there an update on that, sir, we are trying to appoint a strategic partner with us. So I'm not sure if there's an update.
We have prepared the company from a manufacturing footprint and from a management organization to be split into multiple companies if and when the need arises. We have not appointed any one of strategic consultant to do that.
Now let me elaborate a little bit more on that. This is primarily to unlock better value for the shareholders. Today, we have 2 completely different product verticals under 1 company, right? If there is a need to align with some other company, let us say, a multinational, that will help us increase our global footprint or give us access to technology that will be very, very difficult for us to develop in the short to medium term, then we will look at this.
So which is why we have launched for DI CVS, which is our driver information and connected vehicle solutions vertical in the south, in the west and in the north, for each of the auto hubs. We similarly have plans for the ACFMS vertical in each of these hubs. We have segregated the engineering also to have engineering ecosystems for each of these verticals and supply chain and manufacturing ecosystem for each of these verticals.
What is common is corporate finance, secretarial, IT, HR and business development. So if and when an opportunity arises, and there is a need, which will help us catapult to each of these businesses to other geographies and other technologies that will help us significantly increase our footprint and value to our shareholders. We want to be prepared for that. And that is what I had mentioned in an interview some time ago.
Okay. We might look into it, whenever it's required.
Were required or an opportunity arises that will add tremendous value to our shareholders and the organization, either or. So we wanted to be ready when an opportunity arises or when a need arises, we want to prepare the organization, which is what my management team and I have worked on over the last 2 to 3 years and created that.
Do you see it happening over the next 1 year?
Highly unlikely over the next 1 year.
[Operator Instructions]
Ma'am, as there are no more questions, can we perhaps close the call?
Yes, sir, sure. So there is nobody in the queue now.
Please go ahead, ma'am.
Yes, sir. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.
Thank you, ma'am. Thank you, Valorem, for organizing and hosting this call. Thank you to all the participants, and thank you all for the valuable questions and your patient sharing. On behalf of my able CEO, Mr. Ganesh, CFO Priyad; Siddharth, Director of Strategy; and myself, I thank you all for participating in this call and look forward to connecting with you all for the H2 call of FY '24. Thank you. Good evening.
Thank you, sir. On behalf of Valorem Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.