Samvardhana Motherson International Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Yeah, hi. Congrats on a great result. A few questions from my side. One is that if I look at your organic growth excluding acquired assets, the number which you provided, organic growth has been largely flat on Y-o-Y basis. Do you expect this trend to continue given the commentary of muted vehicle production growth or we should be continuing to grow ahead of the industry based on the greenfield plants which are coming?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Primarily, deducting of INR6,000 crores odd from the revenues and looking at the organic growth.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Great. Right. Content, obviously is one of the key drivers for us, but understandable. And second question is on the consumer electronic component business, where we are looking to invest about INR2,600 crores. So is this entirely for JV with BIEL Crystal or this is beyond that?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Okay. Okay. And by then, I mean, what is the timeline for this investment of INR2,600 crores? By then, it should be up and running.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Got it. Got it. And 18 greenfield plants which we are investing for, would they be largely operational by end of this financial year and ramp up by second half of 2026? Is that the right way to look at it?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Okay. Okay. And any sense on what would be the revenue potential of these greenfields?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Got it. Got it. And last question on this. Anything diminishing progressively only as we get any good inorganic opportunity or this will also became a -- manage our organic opportunities in some of our debt covenants?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Sure. Sure. Great. I have a few more questions. I'll fall back in queue. Thanks.

Question: Mumuksh Mandlesha - Anand Rathi Share and Stock Brokers Limited - Analyst : Yeah. Thank you, sir, for the opportunity and congratulation on the good results, sir. So firstly on consumer electronic business, can you comment on what business opportunity side is there with this investment? And also, I mean, what customers we have with us from this business?

Question: Mumuksh Mandlesha - Anand Rathi Share and Stock Brokers Limited - Analyst : Got it, sir. On this overall non-auto picture for us sir, what growth we see over the medium term or what revenue share we see for this non-auto side, sir?

Question: Mumuksh Mandlesha - Anand Rathi Share and Stock Brokers Limited - Analyst : Got it, sir. And sir, in the last previous question, you mentioned about this electronic assembly, sir. Can you share what spread are this, sir?

Question: Mumuksh Mandlesha - Anand Rathi Share and Stock Brokers Limited - Analyst : On the electronic assembly you mentioned in the previous question, sir. I'm just wondering what business or product basically you got in there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2024 / 12:45PM, SAMD.NS - Q1 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Mumuksh Mandlesha - Anand Rathi Share and Stock Brokers Limited - Analyst : Okay. Got it, sir. Thank you so much for the opportunity, sir.

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : Thank you, sir, for the opportunity. Congrats on stellar performance. Just firstly, in consolidated numbers, your raw material cost to revenue has significantly reduced by 290 bps YoY. What could be the main factors leading to this reduction? And the copper prices have gone up 15%. Can you can you also indicate on the input commodity side, which would be the main commodities aside from copper and plastic for us?

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : We've got it, sir. So integrated assemblies with higher margin, repricing some customers and commodity pass through with the main elements. Then, when I come to the standalone business, again here, if I look at raw material costs to revenue, it has reduced Y-o-Y and on a Q-o-Q basis. In presentation, you have also referred to in-sourcing activities leading to support for margins. If you can elaborate on the same, please?

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : Got it, sir. On the aerospace business, the revenue during the quarter was over INR300 crores. In one of the earlier press releases, the order book was indicated at $1.3 billion. How much would be the current order book? And over what period is it expected to be executed?

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : Thank you, Vaaman, for that. In one of the slides, you had mentioned about delaying launches in EVs, which has some impact on Vision System's integrated assemblies. How much would be the share of EV in these segments? And in overall revenue, how much would EV programs contribute?

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : And this will be EV plus hybrid or pure EV?

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : Thank you for your answer for this. That's all from my end. I'll fall back to the queue. Thanks, and all the best.

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : So ICE and hybrid both help our growth. I remember that EV was 20% of order book. What could be the share of hybrid if you remember off hand?

Question: Raghunandhan NL - Nuvama Wealth and Investment Limited - Analyst : Thank you, sir. That's all from my end.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Yeah, hi. My question is on the organic -- inorganic growth side. So in the past, we had been staying away from powertrain-related components. Do we still maintain that strategy? Or now, we are open to both ICE and EV-related powertrain companies?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Got it. That's quite impactful. Thanks, Vaaman, and all the best.

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : Hi. Good evening, and congrats on a great performance. I wanted to check when we've done these acquisitions recently, where are we in the synergies? And for these, how much of it according to you has been explored up to now? Or is it very early days and there's a lot further down to cover?

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : And on the consumer electronics division, I wanted to understand if this currency, the INR2,600 crores CapEx, is this one line of CapEx to the JV that you're doing? Or is there -- because you have deferred something to assembly as well? So I just want to be clear whether these are two separate lines of businesses, or currently, we are looking at just one opportunity.

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : Okay. So some of these will be outside the JV as well. Is that the right way to understand?

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : Okay. And in terms of the return profile, because it's a new division for us, so if you could give some color as we follow in the same guidelines, which are 40% ROCE. And how we see sometimes the greenfields, when they come up in automotive business, they are loss making initially, and then it takes some time to stabilize and improve the margins. So just if you could give some qualitative color on return profile as it stands and the expected time to turnaround or breakeven?

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : And if you could just refresh us on the CapEx plan for this year. And in light of this investment, is that included already or is there any change?

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : Sure. And just if you could share some of what visibility you have on doing further acquisitions, how's the pipeline looking? That will be my final question.

Question: Kapil Singh - Nomura Securities Co. Ltd. - Analyst : Sure. Best wishes.

Question: Amit Shah - Shine Capital - Analyst : Hello. Am I audible?

Question: Amit Shah - Shine Capital - Analyst : I just want to congratulate the company for crossing the INR1 lakh crore revenue mark. It's probably one of very few companies in India which has got this milestones, so congratulations for that. And coming back to the quarter, Q1 FY2025, I hear reporters report revenue growth of 29%. I just wanted to have a better clarity for the numbers would look like for FY25 and probably FY26. Because this year is going to be a year where we're going to see a ramp up of a lot of the acquisitions and the revenues coming to picture. And a lot of these acquisitions actually have EBITDA. Their EBITDA margins are actually better than our company level margins. So according to you, what should be the revenue and the PAT estimate by FY25? Some brokerages that I was seeing in India, some of the brokers who are looking at INR5,000 crores PAT number, or other brokers thinks looking at a INR4,000 crores PAT number. So you think this number is a reasonable number according to you? Or this numbers can be a little more aggresive going ahead? So what is your sense on that?

Question: Amit Shah - Shine Capital - Analyst : Got it. This is probably the last year of this five-year plan. So what do you aspire for the next five-year plan? Is it goign to be in terms of profitability? Is it going to be in terms of revenues? Because in terms of ROCE, we're still at around 18% of our target of close to 40%. Probably this year, we will probably adjust 340 basis points in terms of ROCE. But do you see in the next five-year plan, are you or targeting a $1 billion profit in your next five-year plan? Is that a possibility that you were thinking when you are looking for acquisitions in other business? Is there a thing that you can build it in the organic business as well? $1 billion of profitability maybe for the next five-year plan, is that a number that you will be okay to work with?

Question: Amit Shah - Shine Capital - Analyst : Sure. And just one last question. I'm was just looking to your slide number 7, where you have given the production volumes of global light vehicles and build the commission and fees. In the Q2 numbers, estimated numbers are on the lower end as for customers like. So how are seeing the Q2 numbers? Are there representative this numbers for the company? Or you'll be doing a lot less, and then more is given away?

Question: Amit Shah - Shine Capital - Analyst : Got it. Thank you. Thank you so much. Best of luck.

Question: Gunjan Prithyani - BofA Securities - Analyst : Yeah. Hi. Tthanks, team, for taking my questions. I just had a few clarifications of firstly on the acquisitions that have been concluded, is there anything pending to be paid out still for those transactions? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2024 / 12:45PM, SAMD.NS - Q1 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Gunjan Prithyani - BofA Securities - Analyst : While maybe Kunal joins back, maybe I can go to the other question, if that's okay?

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. So the other question was in this non-auto business, the emerging business, as you call it. You all had laid out this aspiration to get to 25%, and we're roughly now at about 9% or so. Now that you have visibility on at least two or three of these businesses like electronics and aerospace with the AD Industries' transaction, could you be -- if you could you just give us a sense of how should we think about this 25% now? Is it in the next two, three years? This seems like a very viable outcome. I'm just trying to think about how to build this extremely new segment in Motherson, where now, there is a better handle. I mean, completely, the electronics business sounds quite optimistic. Aerospace with AD Industries sounds quite exciting. So how should we think about the revenue growth over the next three, four years?

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay, got it. And if I can just get the confirmation on that no pending payment.

Question: Gunjan Prithyani - BofA Securities - Analyst : Yeah. I just wanted to check, Kunal, if there is any pending payment for the acquisitions concluded?

Question: Gunjan Prithyani - BofA Securities - Analyst : So it's fair to assume that if there were to be nothing -- not assessing any incremental acquisitions. But in the next two, three quarters, the debt should significantly come down because of the reversal of working capital and the cash flow generation in the business?

Question: Gunjan Prithyani - BofA Securities - Analyst : How much is that, Kunal?

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. And just last one from a capital point of view perspective. That this enabling resolution that we have, is this keeping in mind that we don't want to really breach 1.5 net debt to EBITDA when we come across a large transaction? Should we keep 1.5 as a threshold in mind? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 13, 2024 / 12:45PM, SAMD.NS - Q1 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. Got it. Thank you so much.

Question: Joseph George - IIFL Securities Limited - Analyst : Yeah. Hi. Thank you for the opportunity. Just couple of questions and one clarification. The first one is when I look at your depreciation line, despite the addition of three acquisitions in the June quarter, sequentially, the depletion amount has come down. So is that a good starting point on upcoming quarters or is there any one-off in the quarter?

Question: Joseph George - IIFL Securities Limited - Analyst : Understood. Thanks. The second question was for the accounting with respect to the JV with BIEL. Will it be a line-by-line consolidation or will it be accounted for a share of profits? Because we call it a JV (inaudible).

Question: Joseph George - IIFL Securities Limited - Analyst : Perfect. Thanks. And the last question was with respect to the commencement of the operation. So just a clarification there. I thought you mentioned that the manufacturing with the JV will be able to start in September, October. Did I hear you right?

Question: Joseph George - IIFL Securities Limited - Analyst : Okay. And lastly, the assembly operations, when is that expected to start?

Question: Joseph George - IIFL Securities Limited - Analyst : Okay, understood. Thank you.

Question: Avish Bhansali - Chanakya Capital Services Pvt. Ltd. - Analyst : Thank you, and congratulations on good set of numbers. Can you just little bit talk about the slowdown that is currently going on in Europe and America? Also, the slow reduction of EVs. How do you see this impacting us in near term?

Question: Avish Bhansali - Chanakya Capital Services Pvt. Ltd. - Analyst : Yeah. Thank you. That's all from my side.