- 2 years ago
- Key highlights from V-Guard's Q3 results
- What lead to MothersonSumiWiring's Stellar Q3?
Mahima Vachrajani and Tushar Deep Singh speak to the companies' management on 'Earnings Edge'. #NDTVProfitLive
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- What lead to MothersonSumiWiring's Stellar Q3?
Mahima Vachrajani and Tushar Deep Singh speak to the companies' management on 'Earnings Edge'. #NDTVProfitLive
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TVTranscript
00:00 quarter one of next year, you will see the run rates, you know,
00:03 trajecting in this range that, you know, what we had guided.
00:08 But annualized, I think, you know, there would have been some pressure
00:12 in quarter one and quarter two
00:14 because of the overall slowdown in the kitchen industry.
00:16 I think this you have seen across, you know, all major industry players.
00:21 Right, right. Also in your electrical segment, I think wire growth is
00:26 what is bringing down the electrical growth.
00:28 I mean, if you could just help us understand what percentage of the segment
00:32 is wires and what has been the year on year growth in wire segment
00:36 in this quarter or maybe the first half?
00:39 Well, I think the, you know, the wire business,
00:43 you know, this quarter has been under pressure.
00:46 And I see why this, you know, very, you know, the short term
00:50 the short term performance of wire business is very much linked with the copper
00:54 prices. Yeah.
00:55 So whenever there is a significant upside or downside,
00:59 you know, in copper prices, you will see that, you know,
01:03 the trade is up stocking or down stocking. Right.
01:06 And that's really what we are witnessing as far as wire is concerned.
01:11 You know, in the in the quarter that passed, you know,
01:14 for which we have declared result last year in that period.
01:17 I think through to the month of January, there were significant,
01:21 you know, increases in copper prices and that led to trade,
01:26 you know, aggressively up stocking.
01:28 So the base period numbers are significantly higher. Yeah.
01:31 Whereas, you know, the current period sales is more normalized.
01:37 And, you know, and that looks like, you know, very modest,
01:41 low single digit performance in wires.
01:44 So that's basically what you're witnessing.
01:46 But I think, you know, as you know, the period stretches
01:49 as the period stretches, typically an upside up stocking cycle, right.
01:53 These are followed by, you know,
01:55 what I would say lower than normal uptake.
01:59 And then and, you know, over a slightly longer period,
02:03 you know, the sales are normalized.
02:04 So it's basically a shift in trade inventory, you know,
02:08 and that reflects in the short term sales being up or down.
02:12 Right. So it's basically a shift in trade of inventory and both copper
02:16 the raw material, copper prices that are basically affecting.
02:19 OK, understood.
02:21 In terms of your manufacturing, what percentage of your manufacturing
02:25 is in-house?
02:26 Let's say if this if you compare this quarter versus the last quarter
02:30 in the same year Q3 FY23 and what are the plans going forward
02:35 with respect to expanding your in-house manufacturing capabilities?
02:39 Like, do you plan to become more and more self-sufficient?
02:43 I think we know we have over the last four years,
02:47 you know, particularly post the demon and GST
02:51 and in line with the make in India focus.
02:54 We have expanded our manufacturing capex and, you know,
03:00 the the share of manufacturing is progressively, you know, going up.
03:04 I don't have a top of mind, you know, precise numbers.
03:08 But, you know, what I would say is that, you know, as our capex cycle,
03:13 current capex cycle comes to an end, you know, by
03:17 by I would say, you know, the Q4, I mean, there is a
03:22 there is some nominal investment in our TPW plant,
03:25 which is going to happen in the next financial year.
03:28 But, you know, most of our investment is out of the way.
03:31 We should hit around two thirds of our business,
03:36 two thirds or maybe even closer to about 66, 67 percent of revenues
03:40 coming from our own manufacturing.
03:42 There are categories like pumps
03:45 and, you know, there are, you know, you know, there are
03:48 what I would say legacy arrangements which are there,
03:51 which is accounting for the remaining portion of our business.
03:56 But that's mostly domestic sourcing from domestic vendors.
04:00 Mainly, I think, you know, the current current financial year,
04:05 the capex deployment has been towards setting up of our battery plant,
04:09 which is expected to be, you know, to go commercial in February 24.
04:14 And the kitchen appliances plant at Vapi, which is supposed to also go commercial
04:19 by March of 2024.
04:22 The Pantanagar facility, you know, which went
04:27 commercial last financial year has, you know, has now fully,
04:34 you know, has has reached, you know, full scale.
04:38 And we are able to see the, you know, extent expected benefits
04:41 flowing through in our P&L.
04:43 So so I think the progress on our manufacturing
04:46 you know, direction has been great.
04:49 Yeah. And, you know, we continue to seek opportunities
04:55 to improve our manufacturing footprint.
04:59 So that's going to continue to be the direction that we are going to play
05:03 going forward. Right.
05:05 So you you will continue to be on the path of being self-sufficient.
05:09 OK, my last question to you would be, can you give us an outlook
05:13 for FY24 and FY25 in terms of both
05:16 top line and bottom line that you're expecting?
05:19 So we are generally not giving a guideline, right?
05:24 But broadly, you know, we set our plans around,
05:28 you know, 15 percent top line growth and 20 percent bottom line growth.
05:32 This is typically what, you know, we've been attempting to do as a business,
05:35 you know, over the last decade.
05:38 Yeah, I think, you know, at this rate, you know, we are able to,
05:42 you know, well balance, you know, investments for future.
05:45 Yeah. So that we build our capability and we build our competitiveness
05:49 right hand in hand with the business growth. Right.
05:52 I think, you know, being more aggressive, you know, is affecting this balance.
05:57 And, you know, results,
06:01 you know, poorer than this are challenging our ability to sustain investment.
06:05 Right. But this is a sweet spot where we are able to, you know, grow,
06:10 you know, faster than the market and, you know, improve our shares,
06:14 even as we are able to sustain investments in our
06:18 capability and competitiveness.
06:21 Right. OK, so, I mean, that's that's a good thing
06:25 that you're able to sustain your investments as well as, you know,
06:28 maintain the market share that you have.
06:30 Well, that's all for today.
06:32 Thank you so much for taking our time and speaking with us at NDTV Profit.
06:36 Mr. Ramchandran, it was a pleasure speaking with you.
06:38 Thank you, Mehman. Thank you, Mehman.
06:41 Thank you.
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10:18 Welcome back, you're watching NDTV Profit.
10:20 Let's take a look at where the markets are right now.
10:22 And it's a thumbs up across the board.
10:25 Post the budget session, you have the Nifty 50 that's trading very close to the high
10:29 point of the day, gaining about 1.3% or thereabouts.
10:32 And within touching distance, just about 25 points away from that 22,000 mark.
10:36 Once again, the broader market's also doing well.
10:39 You have the mid cap index that's gaining about a percent or so.
10:41 And in fact, you have the small cap index that's up over a percent at this juncture.
10:46 All of the major sectoral indices, in fact, all of the sectoral indices in the green
10:51 right now, including the Nifty Bank, which is gaining about six tenths of a percent.
10:56 But the real pack that is doing well is the public sector enterprises.
10:59 And in fact, the Nifty PSU Bank building on gains from yesterday's session and
11:04 gaining about 2.6% in trade today.
11:07 Let's take a look at some of the key movers in trade as well.
11:11 You have the oil and gas companies that are doing particularly well.
11:15 And in fact, the oil marketing companies stand at the top of that list as well.
11:20 So the likes of BPCL gaining about 5.8% in trade today, as well as HPCL up over 5%
11:27 and they're leading the gains.
11:29 But you also have the likes of Reliance Industries that is doing particularly well
11:34 in trade today as well, 2.5%.
11:37 And it is supporting the benchmark Nifty 50.
11:40 But on the earnings front, we've been speaking to management through the day.
11:44 You have Madan Sunsoomi Wiring that reported quite a strong third quarter result.
11:50 And my colleague Tushar Deep Singh spoke with the management of the company
11:54 and tried to figure out why that is. Listen in.
11:57 The gentlemen are speaking to us a few hours after Madan Sunsoomi reported
12:03 some stellar numbers for the October-December period, where revenue jumped 25%
12:08 year on year and the EBITDA margin jumped 177, 76 basis points.
12:13 The EBITDA was up 46.4% and the net profit itself was up almost 16% year on year.
12:20 Gentlemen, first of all, welcome to NREB Profit.
12:23 Thank you very much and thanks for inviting us on the TV.
12:28 All our pleasure, sir. So my first question is actually open to you both.
12:32 You have clocked your highest ever quarterly revenue and EBITDA.
12:37 What explains this outperformance, sir?
12:39 What's working for you and what are the pain points that you're seeing at this point of time?
12:44 Okay. First of all, I just want to update you that during first nine months of this financial year,
12:51 we have already achieved 80% plus revenue and 90% plus fat compared to the last financial year.
12:59 And as far as these higher revenue numbers, I just want to inform you,
13:05 one is due to the volume, which is growing in the Indian OEMs.
13:11 Another part which is very important is that the customer is choosing the feature-rich models
13:17 or the top-of-the-line models. And hence, upgrade is happening.
13:21 And this means more content of wiring harness in the car, which is good for us.
13:25 So MSWheel is always getting benefited as costs of the sales are dependent on the models.
13:30 And hence, the higher the model, the higher the sales for MSWheel.
13:34 So these are the two combinations because of beating our last quarter revenue numbers.
13:40 As far as challenges are concerned, we are not seeing as far as any abnormality.
13:46 We are very much aligned with the customer on their requirement for the next financial years
13:51 and the year after also. And we are doing our plans accordingly.
13:56 Okay. So essentially, if I have to say the whole semiconductor chip shortage factor
14:03 is a thing of the past? Yes, up to an extent, yes.
14:07 We are not seeing so much of information on that at this point in time.
14:12 But you know, you can't predict the future. So, but we are very much aligned with whatever,
14:18 you know, because what happened due to these shortages, sometimes customer has to change the plans.
14:22 So we are keeping very much flexibility with us to cater these requirements in case there is something happens in the future as well.
14:29 Okay. Coming to you, Mr. Chhabra, just want to know how the revenue mix is for you.
14:35 As far as the traditional internal combustion engines are concerned, as well as electric and hybrid.
14:41 So where is the push coming from in terms of where power chain is concerned?
14:46 Yeah, so as far as revenue is concerned, like it's a mix of both ICE as well as the EBs.
14:51 And we know the EB market. So our sales are also kind of growing in line with the market demand for EBs.
14:57 So it's a combination of the market growth that we see in our segment EB contribution as well.
15:03 Okay. So can you just maybe quantify the amounts? So are we seeing accelerated adoption of EV and that is that reflecting in your revenues?
15:13 Yeah, I mean, it's in line with the market and it's reflected in our revenues.
15:17 Okay. So I will also, Mr. Chhabra, I will stick with you right now.
15:21 I was also going through your financial statement. Your cost of materials has gone up as has the employee cost as well.
15:28 So can you give us some color on these added expenses that you saw in the third quarter?
15:33 Yeah. So as far as cost of material is concerned, it's a combination of various product.
15:38 It's a combination of the product mix that we produce and we sell.
15:41 Now, the cost of wiring harness would be different for different customers, for different models.
15:46 And hence, comparison of raw material cost quarter on quarter or from a specific period to another specific period might not be very relevant.
15:54 It might not be a very true comparison. It all depends on the product mix, which product we are selling more and hence the cost would kind of differ accordingly.
16:03 Okay. As far as employee cost is concerned, sir?
16:06 Yeah, as far as employee cost is concerned, if you look at as a percentage of revenue, our employee cost has rather come down compared to the previous period.
16:14 We see a good amount of productivity improvements, which are leading to a better cost in terms of manpower.
16:20 Okay. Also, I'll still stick with you. I'll just keep on, I'll keep asking you again.
16:26 So you also mentioned about some pass through of the raw material costs in Q3. How has that impacted your EBITDA margins?
16:33 Yeah. So one of the components of our raw material is the copper for which we have got pass through arrangement with our customers.
16:41 So whatever is the fluctuation in the price of copper, we pass it on to our customers.
16:45 There could be a bit of time lag, but in terms of impact on the profitability, the copper prices fluctuation doesn't impact our profitability as such.
16:53 Okay. Coming to you, Mr. Gallowt, you talked a little bit about the premiumization that we are seeing in the Indian car market.
17:02 Top end models are selling a lot more than the base models, but we are also seeing a lot of waiting period.
17:08 So is there any gap in the supply that you are seeing in the supply chain?
17:13 Because at least I have heard from friends even that there is some amount of waiting period for the top end models.
17:21 You know, you might be hearing this in some particular model, but as far as, you know, capacity is concerned,
17:30 I think we are very much aligned with the customer. What customer is asking us to supply, we are very much on that.
17:37 So there is no gap as such into that. We are not seeing anything into that at this moment.
17:44 Okay. Since you mentioned about capacity, you also mentioned that you have also have expansion plans.
17:51 Talk to us about the expansion plans. Talk to us about maybe if there are any new clients that you may have on boarded in the quarter.
17:59 See, we are already catering to all the major OEMs in the country, to all the customers.
18:07 Except there are two types of customers. There are first is which are very established customers.
18:12 We are already with them from last many, many years. And there are new next generation customers also.
18:17 And we are already working with them. And a few of them, we are at the development stage of the product also,
18:23 where you are seeing the EV two wheelers are coming. So we are engaged with them.
18:27 So there are expansion plans for those products, but they are already aligned with the customer requirements.
18:34 Some of the established customers have already announced their volumes for the next year.
18:38 And we are very much aligned to that and putting up our capex accordingly.
18:45 Okay. Finally, again, a question to both of you. Where do you expect to end this fiscal act,
18:51 both in terms of revenue as well as your margins? And, you know, as I explained to you,
18:57 that first nine months is already covering more than 80 percent of revenue and 90 percent of PACT compared to the last fiscal year.
19:05 But yes, we are looking at a very promising quarter and we are very much aligned to the customer requirements.
19:12 And I think it will be, as you know, that Q3 remains weak, but Q4 is always stronger than Q3 in the past.
19:20 So we are also working on the same. And let's see how it goes in Q4.
19:26 All right. Thank you so much, gentlemen, for talking to us and all the best for what comes next.
19:31 Thank you, viewers, for tuning in. This is Tushar for NTU Profit.
19:36 All right. So that was Madhusan Sumi wiring. The stock is up about half a percent in a very strong market.
19:43 Now, we've been speaking to market veterans about what they think of the government's interim budget.
19:50 And Madhusan Sudhan Kela was of the opinion that the government is putting in considerable efforts to uplift people
19:57 that are currently below the poverty line. And he also spoke about how divestment by the government
20:03 can fuel the growth of the economy going forward. Listen in.
20:08 The direction is very clear even for the lowest craters of the society.
20:14 The way this Pradhan Mantri Awas is getting built, they are very clear that they have to uplift a lot of people from the poverty.
20:23 People who are being uplifted from the poverty, they have to go to middle class. The middle class has to go to higher class.
20:29 I think housing is a very big need. It's being a very latent need. And atmosphere is just fantastic needed
20:36 to do all of this. Government has so much animation right now. Right, you know, because if you see when it was,
20:43 when they inherited and that time, you know, there was some food subsidy with FCI, there was some oil bonds with BPCL, IOC.
20:51 It is all being cleaned up. And in a clean manner we are talking of four and a half percent fiscal deficit.
20:57 And I want to tell you one thing. Government of India has become very rich.
21:04 People are not realizing that India is a country, we have a fabulous balance sheet.
21:11 We may have a poor P&L, but we have a fabulous balance sheet. 13 lakh crore rupees was the value of all PSU
21:20 companies put together three and a half years back. Today it is 51 lakh crores.
21:25 Got it. тАУ So, government value has increased by more than 25 lakh crores in last three and a half years.
21:34 What emanation does it give them? You divest, you know, if 50 lakh crore is the market cap, you divest even one or two percent,
21:43 you can raise 50,000, 1 lakh crore rupees. It can just change all the numbers on the fiscal side.
21:49 And none of it is being taken. And if there is a really fabulous majority government, what stops them from selling
21:58 one or two or three companies on a strategic basis and really get this divestment numbers really kicking in
22:05 and take that money and invest into housing, invest into uplifting people.
22:11 Yeah, so, why is that not happening? Why do you think on the divestment sideтАж
22:15 I don't think it was right to take that assumptions today because again it was interim budget.
22:20 No, but even the divestment targets for FY24, we are far away fromтАж
22:25 Maybe I don't know, maybe it is by design because they have understood that there is far much value in all these public sector companies.
22:33 So, why just sell them for a song? тАУ Got it. Okay. Okay. тАУ Right. And now you see yourself, you know,
22:40 today if you want to sell 10% of Hindustan Aromatics, you can get 20,000 crores.
22:45 That's true. That's true. You have been very constructive on PSU banks, yes, but PSUs as well. тАУ PSU as a whole.
22:51 You continue to remain constructive. тАУ Absolutely. Absolutely. Absolutely. тАУ Okay. The other aspect is this whole rally in the CapExтАж
22:58 However, I must warn you that railway stocks to my opinion are, are, I am not comfortable with particular few stocks
23:06 and valuation in the railway segment. So, I think either they pause or they decline. I don't know what happens or they pass some time.
23:13 But there the valuations are stressed according to me. тАУ All right. That was Madhusudhan Kela.
23:19 By the way, if you want to catch any of those interviews in, as a whole, you will find all of them on the website
23:26 NDTVprofit.com or in fact on any one of our social media platforms. That brings us to the end of this particular edition of Earnings Edge.
23:32 Do stay tuned. Lots more coming up over the course of the day. This is NDTV Profit.
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