Release Date: February 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The company's EBITDA operational profit improved to 23.3% in this quarter compared to 20.5% in the same quarter in the previous year.
- Aftermarket revenue saw a significant increase of 20.6% quarter-on-quarter, indicating strong performance in this segment.
- Export sales delivered robust performance with INR 290.6 crores, driven by strategic expansion into new business segments.
- The digital business income grew by 39% quarter-on-quarter, supported by additional business acquisition in connected Advanced Driver Assistance Systems (ADAS).
- The company received notable recognition, including the ZF DNA of Quality Excellence Awards, highlighting its commitment to superior quality standards.
Negative Points
- OE sales for the quarter declined by 15.3% compared to the corresponding period in the previous fiscal year, primarily due to a reduction in vehicle production.
- The domestic market experienced a 9.5% decline in the commercial vehicle industry on a quarter-on-quarter basis due to broader economic slowdown.
- The company's sales to state transport undertakings remained stagnant due to replacement of aging buses and slower-than-expected reduction of electric buses.
- There was a negative impact from foreign exchange losses, with INR 9.3 crores of FX losses reported in the last quarter.
- The mix of vehicle production was unfavorable, with a shift towards buses and Intermediate Commercial Vehicle (ICV) segments, resulting in lower content per vehicle.
Q & A Highlights
Q: Are there any one-offs in the margin side this quarter, and what contributed to the improvement in gross margin?
A: Sweta Agarwal, CFO, explained that there was a minor one-time impact from quality cost reductions due to winning the DNA of Quality awards, which resulted in fewer claims and warranties. This impact is sustainable. P. Kaniappan, Managing Director, added that the improvement in gross margin was also due to better aftermarket and OE mix, and continuous efforts in cost reduction and product profitability.
Q: Can you provide an outlook on exports, particularly regarding the Daimler order and BMW EV order?
A: P. Kaniappan noted that export growth is driven by new product launches, such as high-end compressors and actuators. The Daimler order is ramping up well, with volumes exceeding expectations. However, there is no immediate recovery in the BMW EV order. The company is focusing on expanding capacity to meet demand.
Q: What is the impact of foreign exchange on the financials, and how does it affect margins?
A: Sweta Agarwal stated that the negative impact of foreign exchange is accounted for in other expenses. Last year, there was a positive impact of INR 15 crore, while this quarter saw a loss of INR 9.3 crore. Despite this, the mix of aftermarket and export growth has helped sustain margins.
Q: How do you see the domestic OEM market growing, and what is the contribution of buses to overall revenue?
A: P. Kaniappan mentioned that the domestic OEM market is showing growth, particularly in the heavy-duty vehicle segment. Bus production accounts for about 24% of the overall vehicle production, but the revenue contribution is not separately tracked. The company expects growth in electric buses due to new tenders.
Q: What are the plans for the Oragadam plant, and how will it contribute to future growth?
A: P. Kaniappan explained that the Oragadam plant is focused on ramping up production of electric compressors and cartridges. The plant is expected to support increased demand from electric bus production and stabilize production for other products, contributing to future growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
