Concall notes from the past 2 quarters.
FY23Q1
- Past management of LDC didn’t go to customers for price increase which Suprajit management is now undertaking. Additionally, they gave price increases to their suppliers.
- Customers will also come back to ask for price reduction if commodity costs keeps softening
- Phoenix lamps division: Have made price increases in after-market in March 2022. Have also passed on price increase to a majority of OEMs except one. Not everything has kicked in numbers yet. Game remains to be the last man standing and it is still sometime away
FY23Q2
- Phoenix lamps division: Margin challenge continues with difficulty in passing price increase in after market segment
- Hungarian plant: facing high wage pressure, inflation and currency depreciation
- Expect profitability in Q3 in LDC and double digit margins by Q4FY24. Cut FY23 revenue guidance to $90mn
- LDC: 21% (Hungary) + 20% (China) + rest (Mexico)
Disclosure: Not invested (no transactions in last-30 days)
19th June23 : Suprajit Engineering —CNBC Interview with MD & CEO :
–Margins under pressure in FY23 which was at 11% Consolidated EBITDA Margins
–EBITDA margin will go up to 12-14% in FY24 but historically we have talked about 13/15% --that gap of 100Bps is due to our new acquisition LDC & that division will have one more year of consolidation this year which will be in single digits ,hence a drag on consolidated margins for this year. Next year we will be 13/15%
–Demand Trends— earlier Industry was growing at 5/10% and we were growing faster than that and now the trend for FY24 —Newspapers are saying MAY no.s are interesting but the trend for the year will be single digit growth , the PV will have a strong mkt , it will grow well & it will be historic high.
–2W is not out of the woods, there is structural shift here from aspirations & Point of EVs --that will continue to struggle. The aspiration is to buy higher CC and go away from 100/150/200 CC & go higher —so that is where strong growth is happening & if you look at internationally, China had 40Mn 2W biz which is now 25 Mn 2W biz --there PV is world’s largest. We have seen the shift starting in 10 yrs back and derisked our biz from what was 90% 2W is just 25% Biz & we are further derisking it by strong entry into electronics segment —we are protecting ourself pretty well
–Non-Auto has some weakness i.e global Biz
–EV --FAME subsidy issue the biz will be low but it will settle down after a few months and grow
–We will continue to outperform --we will have a double digit biz growth with Margin improvements
–LDC —We are tgting 100Mn$ biz for FY24 & margins which were 1% in FY23 will grow to mid-to-high single digits by FY24. Next yr will be double digit --that is the road map. We are winning new contracts in the controls division , LDC is getting merged as controls division and we are getting strong new biz , that will drive the margins in next few yrs.
–Non-Auto Biz outlook for FY24 —In our 4 segments like Auto / Non Auto , 2W and after market --the most challenging of them is the non-auto which is 20% of our biz . In NA and Europe mkts the non-Automotive products are discretionary products i.e lawn mower , sports vechicle , outdoor sports vehicles–these get hit by the economic slow-down & that is happening. Not seeing growth in this segment.
–Overall we see a double digit growth for FY24 although globally , the growth will be 0%
–Aftermkt cable division ? —We had 3/4 separate facilities which we have regrouped into one large facility --that is helping us streamline the segment , this will improve the margins of ops.
–Electronics Division --its our new segment, we have developed home grown products in our tech center which is being commercialized & growth will be like any start-up i.e very high growth on a small base. We are getting new contracts in 2W electric and 3W electric Vehicle space.
Dis: Not invested
Company came out with flattish results, their non-automotive business was very soft and is expected to be soft in Q2. Company appears very bullish on new product development front, with them getting into electromechanical actuators which have 8-10x value of normal cables. They also gave detailed disclosures around order book. Concall notes below.
FY24Q1
- Domestic: After-market cable division was flat, demand from 2-W has not recovered. 2-W EV market is slow due to FAME subsidy reduction. Passenger vehicle has shown good growth
- Non-automotive business saw decline due to lower demand. This will persist next quarter, hoping for recovery in H2FY24
- Secured order wins in cables and electromechanical actuators. These actuators have much higher value addition (8-10x value of a normal cable)
- Supply 1.5 mn+ actuators to major passenger vehicles. Starting supplying 2 actuators to a leading 2-W EV company in India, one for steering lock and another for seat opening actuator
- Seeing traction in actuator business in 4-W, from tier-1 seating manufacturers, who are looking at them as local suppliers
- Trifa winding down may impact sales temporarily, as existing customers need to be migrated to Luxlite. Also incurring some wind down charges
- Have introduced LED in India and in global market through Luxlite. Confident to deliver double digit margin in PLD division
- Couple of European suppliers are going out of business in lamps, they have started buying from Suprajit
- Other products apart from Digital clusters and actuators: braking-related systems
- Electronic division is seeing very good customer traction, won orders from India’s top EV 2-W. Content per vehicle is much higher in EVs. Confident of reaching 100-150 cr. with current order book
- Confident of double digit margin in Electronic division
- China: have identified a new location, hired a new general manager. Relocation should be done by January 2024
- Apart from Hilex, Suprajit is the only global cable maker to offer solutions and diverse capabilities, including global manufacturing footprint
- Engineering capabilities: Capable of supporting customers from conceptualization to commercialization in a very short lead time
- Maintain double digit growth for control division despite slow Q1
Disclosure: Not invested (no transactions in last-30 days)