Bosch Ltd (NSE: BOSCHLTD) Q2 2025 Earnings Call dated Nov. 12, 2024
Corporate Participants:
Guruprasad Mudlapur — Managing Director and Chief Technology Officer
Karin Gilges — Chief Financial Officer
Analysts:
Jinesh Gandhi — Analyst
Pramod Amthe — Analyst
Gokul Maheshwari — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Bosch Limited 2Q FY ’24-’25 Post-Results Conference Call hosted by B&K Securities. We have with us today from Bosch Management, Mr. Guruprasad Mudlapur, Managing Director and Chief Technology Officer; and Ms. Karin Gilges, Chief Financial Officer. [Operator Instructions]
Over to you, sir.
Guruprasad Mudlapur — Managing Director and Chief Technology Officer
Good evening, everyone, and thank you for joining us today. I’ll begin with an overview of the global and macroeconomic landscape, followed by financial and business highlights. Globally, the expectations for economic recovery are fading, especially in Europe where manufacturing is declining, services growth is slow and the GDP growth is very minimal, with Germany facing a very weak economy. Meanwhile, the U.S. economy is doing well with strong job growth and 3.2% rate [Phonetic] pickup.
Input costs, including shipping, raw materials and wages are constantly lower and stable. However, this trend is not expected to continue. Although the global inflation has remained stable, India remains — seems to have reported part of the inflationary pulses majorly contributed by food prices. India still remains one of the fastest — world’s fastest-growing large economies. Growth is likely to pick-up, driven by increasing consumer spending, especially in rural India as inflation subsides and agricultural output improves after a favorable monsoon conditions. Looking ahead, we anticipate 2025 to mirror 2024’s growth trajectory in India.
After hitting an all-time high in FY 2024, the automotive industry saw a slight 1% decline in Q2 FY ’25 compared to Q2 FY ’24. This is due to the high base effect coupled with connection slowdowns and unfavorable conditions. The Passenger Car segment struggled with high inventory levels around 70 days in this quarter. Weak consumer demand has slowed the growth despite moderate retail gains from our discounts. Economic factors like slower retail credit and shifting — shifts in spending impacted entry level models. The festive season is crucial for clearing excess inventory, though caution remains.
Heavy Commercial Vehicle segment remain declined due to — declined due to-high base efforts, slow infrastructure projects and decreased fleet utilization from heavy rates. Bus demand, however, remained strong, thanks to large orders from state transport entities. Light Commercial vehicles segment faced pressure, especially in lower tonnage categories from growing three-wheeler competition.
Two-wheelers recorded strong rural demand and new launches drove growth with electric two-wheelers boosted by favorable policies and subsidies. Growth is expected to continue through the festive season.
Three-wheelers experienced robust demand, especially for electric models in passenger and cargo applications, supported by loan and subsidies and rising last mile and urban connectivity fees. Factors showed slight growth due to favorable monsoons, strong domestic demand and higher minimum support price and is expected to sustain this growth.
But in this slide, we have illustrated the market trajectory from the peaks of FY 2019 through the challenges posed by COVID to the subsequent recovery. The automotive market ended FY 2024 on a positive note, reaching all-time highs in Car and LCV segments and maintaining momentum in other segments. Looking ahead, the election year high base effect and historic historical trends suggest moderate growth for the automotive industry. The recent inventory buildup in the Car segment remains a concern, but the underlying economic conditions are strong and India’s growth narrative remains positive.
Next slide, please. Sector-wise sales performance quarter-on-quarter, the Mobility business has seen growth — has grown by 6.7% in July, September 2024 as compared to July-September 2023, driven mainly due to Power Solutions business, which grew by 5.7%, mainly due to increase in sales to Passenger Car segment, increase mainly coming from diesel EV models, increase in sales for gen set applications with common rail systems and increase in export sales of electronic control body, inline pump and nozzle holders.
The mobility aftermarket business which grew by 8.8% on account of higher demand from lubricants and diesel systems. Two-wheeler business grew by 13.4%, mainly due to higher sales of fuel injectors and exhaust sensors, driven by increased demand from prominent domestic motorcycling manufacturers.
The consumer goods business grew by 10.1%, driven by high-demand for grinders, drills, cutters, spares and accessories on account of market growth. The building technologies business grew by 20.1% on account of execution of high number of orders for installation of video surveillance service and communication systems.
The mobility business has grown by 5.4% in April to September 2024 as compared to April to September ’23, driven mainly due to power solutions business, which grew by 4%, mainly due to increased sales in Passenger Car segment, mainly fuel, air and emission components, electronic component body and EGT components. The mobility aftermarket business grew by 8.4% on account of higher demand from diesel systems and rotating machines.
Two-wheeler business grew by 14% mainly due to higher sales of fuel injectors on account of increase in market demand for popular sports and commuter motorbikes. The Consumer Goods segment business grew by 7.6%, driven by higher demand for grinders, cutters, drills, spares and accessories on account of market growth. Building technologies business grew by 19.7% on account of execution of high number of orders for installation of video surveillance and communication systems.
Next slide, please. Quarter-on-quarter, revenue from operations in July to September ’24 stood at INR43,943 million, which is a growth of 6.4% over July, September 2023. The growth is driven by mobility aftermarket business, power solutions business and consumables business as seen in the previous slide. Likewise, revenue from operations in April-September ’24 stood at INR87,111 million, which is a growth of 5.1% over April-September 2023. The growth is driven by mobility aftermarket business, power solutions business and consumables business.
Quarter-on-quarter, EBITDA in July- September ’24 was INR5,605 million, which grew by 14.1% over the same quarter of previous year. EBITDA as a percentage of total revenue improved from 11.9% in July-September ’23 to 12.8% in July-September ’24. The improvement in the EBITDA margin is mainly attributable to growth in revenue and improvement in material cost. EBITDA in April-September ’24 was INR10,802 million, which grew by 12.6% over the same-period of previous year. EBITDA as a percentage of total revenue improved from 11.6% in April-September ’23 to 12.4% in April-September ’24. The improvement in the EBITDA margin is again on account of growth in revenue and improvement in the material cost.
The profit after tax stood at 12.2% of revenue from operations as compared to 24.2% over same quarter of previous year. Previous year had a one-time exceptional item of profit on sale of Project House Mobility Solutions, PJMS business of INR7,850 million. Likewise, in the current quarter, that’s July-September 2024, also has an exceptional item via sale of OE/OES diagnostics business of INR485 million. Likewise, profit after tax stood at 11.5% of revenue from operations as compared to 17% over same period of previous year. The difference is on account of exceptional item, that is profit on-sale of PJMS business, which was there in the previous year.
Next slide, please. Bosch [Indecipherable] power solutions division has played a major role in supporting a major OEM to applicate the Bosch engine management system for their first-ever gasoline direct injection system engine. The power solutions division also contributed towards advanced hardware, software and calibration solutions for the 1.2 liter gasoline engines.
Bosch has launched two connected solutions called vehicle load protection and driver analytics to the market which will aid commercial vehicle owners to monitor the vehicle’s usage and drive parameters more closely and enable optimal performance. At the fifth CIA National DigiTech Circle Competition 2024, Bosch’s Jaipur plant won the gold medal for digitalization in maintenance and energy management and silver for best case study of innovative business models for digitalization in manufacturing and service.
Coming to two-wheeler and powersports, it’s a moment of immense pride to have supported the launch of the world’s first CNG bike featuring the Bosch engine management system. With this successful release, Bosch is well-positioned to support two-wheeler industry for CNG as clear technology. The Bosch engine management system EMS is biofuel solution and can operate either on CNG mode or gasoline mode. The system has the capability to switch between fuel modes on demand, smoothly on-the-go with precise control on performance. Bosch EMS is developed to meet the latest emission norms for Indian market for two-wheelers, which is BS-VI, OBDII, Stage A. The solution offering is robust and the package protected for OBDII, Stage BII.
Bosch has also partnered with premium two-wheeler brand, integrating our engine management systems and safety systems. The Bosch MSC technology will further open the market for advanced safety systems to the Indian market under the umbrella of Bosch MSC for all campaign. It’s a moment of pride to be of recipients special jury commendation at the 6th edition of FICCI and Road Safety Awards Conclave 2024 for exceptional interventions in promoting road safety through the embassy for All Initiative across the nation. The award presented by Shri Nitin Gadkari, Minister for Road Transport and Highways of India, acknowledges Bosch’s significant contributions towards enhancing road safety nationwide.
In the mobility aftermarket division, we faced some challenges in the independent aftermarket or IAM, due to lower demand in diesel space category. On a positive note, several key business product lines have shown remarkable performance with diesel rotating machines, battery and wipers, all experiencing significant double-digit growth in the Indian market. In addition to financial performance, I’m thrilled to announce the inauguration of our 100th Bosch service two-wheeler workshop. This milestone marks a significant step in expanding our service network, ensuring that we continue to provide optimal service solutions to our customers.
Next slide, please. And beyond mobility. Power tools, our global power tools division has launched the impact screwdriver range, or ISR, and impact brake system, or IBS, enhancing full back coverage to meet industrial demands. In measurement tools, we’ve introduced new line lasers and wall lasers for greater precision in construction and design. Our market campaigns are also gaining traction with cordless campaign f 2.0, promoting the power of cordless tools under this [Indecipherable] cordless power [Indecipherable] and hard work made easier campaign showcasing how our innovation simplified trough task for professionals.
The building technologies division for Bosch Limited launched the FLEXIDOME IP starlight 5000i camera, our first Made in India product from the business unit video systems. This milestone enhances our domestic production capabilities and underscores our commitment to local manufacturing and innovation. Additionally, we are expanding our professional Sound segment with new products under the Electro-Voice brand and Dynacord, and enriching our audio solutions portfolio. Furthermore, Bosch Limited has received the FIST Award 2024 for the safe and secure office campus category awarded by Fire and Security Association of India, highlighting our dedication to a safe and secure working environment.
Next slide, please. With these updates, I conclude my speech. Thank you all for listening patiently. We will now address your queries. Please feel free to ask your questions.
Questions and Answers:
Operator
Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] Yeah, the first question is from Mr. Jinesh Gandhi. Please unmute and ask your question, Jinesh. Jinesh, you are not audible.
Jinesh Gandhi
Am I audible now?
Operator
Yeah, yeah, audible now. Yeah, yeah.
Jinesh Gandhi
Yeah. Yeah. Hi, sir. A couple of questions from my side. One is, given that the TREM V norms as of now are to be implemented from April 2026, can you talk about how do we plan to localize the components for TREM V norms? Would it be in sync with what we have done in the past as volume ramps up, we localize that or are we thinking differently this time?
Guruprasad Mudlapur
So thank you, Jinesh, for the question. We are quite well prepared to handle TREM V localization and we can expect a much higher-level of localization for TREM V starting from the beginning itself. We are really hoping that the — there is no further postponement or change in the dates of TREM V rollout. But assuming everything goes on perfect, we are from our side ready to meet the demands of the industry.
Jinesh Gandhi
Got it, got it. And secondly, in this quarter we have seen a good decline in share of traded goods. Is it because of the full benefit of localization is now reflecting in 2Q numbers or it’s also to do with lower contribution of CVs in this quarter because of volume decline which CV industry saw?
Karin Gilges
Yeah. I’ll take this question. Of course, it’s a mix. It depends primely on product mix we have. This month we had a favorable product mix on the one-side, but of course, we are going ahead with the organization and step-by-step we see what we implement here in India. So I would not say that why its a mix. And yes, we had therefore a quite favorable mix, but see also that we’re going in sort of a recession.
Jinesh Gandhi
Okay. But would it be fair to say that the ramp-up of localization is now totally done or there’ll be some more benefit coming as volumes go up as well?
Karin Gilges
Yes. So not only volumes going up, but of course, products coming in, new generations coming in. We have, for example, three years ago we have implemented our injector line for the commercial vehicles and then we are on a good track already for the components, but this is not finished up to now. So actually it is an ongoing process. We are looking all the time into our portfolio, where can we localize, what can be localized. So it is not finished as done, its an ongoing process.
Jinesh Gandhi
Got it. And last question from my side is on capex. So first-half capex was roughly about INR100 crores. Any guidance for full-year of capex? Usually we spend between INR500 crore to INR600 crores. So just wanted to clarify what it will be for FY ’25.
Karin Gilges
Yes. So we have — we have also this year a decent amount and roughly INR4,000 million, and it is a little bit lower compared to last year because the Adugod campus is now finished. And this is mainly plants and machinery. And traditionally in the first-half year we are starting to implement machines that are coming, but until we really go into the SOPs and that we are capitalizing this capex, it’s then in the third and fourth quarter.
Jinesh Gandhi
Got it. Thanks. I’ll fall back in queue.
Operator
Thanks, Jinesh. Next in the line will be Mr. Atman. Please unmute and ask your question. Atman Shah?. Okay. He has logged out. Next in the line is Mr. Pramod Amthe. Please unmute and ask your question. Pramod?
Pramod Amthe
Yeah. So the first question is with regard to the tractor supplies. I wanted to know your preparedness as the industry on a high base looking for a double-digit growth in the second-half. And also looking at if the pre-buying comes through, again, there can be a sustenance of double-digit. How are you prepared to handle this on a high base, the double-digit volumes? One.
Second, at the end of it, again you have to transition to the TREM V, then the volatility of volumes, how will you be prepared to handle in the short-term, can the CVs be — capacity be fungible to tractors or how does it actually play out?
Guruprasad Mudlapur
Yeah. So if I understand your question right, you are hinting that there will be some pre-buy effect before ’25, and are we prepared to handle those additional volumes. And post TREM V comes in how are we able handle those volumes. That’s the question, right?
Pramod Amthe
Correct, correct.
Guruprasad Mudlapur
Okay. So I mean, we are certainly equipped very well to handle the pre-buy effects. We’ve had — we always have discussions on topics like this together with our OEMs. And we anticipate — if they anticipate any pre-buy, which has happened in several occasions in the past, like for example, BS4 to BS6 and other norm transitions, we work with them very closely and ensure that we are fully prepared and we are ready to support on any capacity increase that we need to cater to these demands. So on pre-buy effects, we certainly can handle it.
On TREM V, I think I’ve already answered it. We are well prepared to handle the transition and we look forward.
Pramod Amthe
Sure. The second question is with regard to the Car segment. There seems to be a some policy favorism for hybrids. Wanted to know how does Bosch play a role in terms of content per vehicle when the existing ICGs go for hybrid? What parts you really supply and how you handle the customer, any case studies for India already happening or how are you seeing this business shaping up?
Guruprasad Mudlapur
Yeah. So we are in discussion with several OEMs on hybrids, and while some are quite active and have a couple of models already in the market, others are still in early time space. There is no confirmed policy support that we see other than one or two states doing something independently. But we’ll have to wait and watch how this develops, but we certainly have capabilities to support OEMs best.
Pramod Amthe
Sure. Thanks, and all the best.
Karin Gilges
Thank you.
Operator
Thanks, Pramod. Next in the line will be Ms. Gokul. You can unmute and ask your question, and anybody who has a question please raise your hands.
Gokul Maheshwari
Sir, two questions. At the start of the year you had sort of indicated that the growth would mirror the growth which we’ve seen in FY ’24, given Q1 being a more transient quarter because of the elections. Given that first-half has gone and there have been some changes in the underlying automotive market, would you want to just revisit your growth expectation for FY ’25?
Guruprasad Mudlapur
So your question is would we like to revisit growth estimates for ’25? Is that what you’re saying, or…
Operator
I think that’s the question sir. I think he has gone to mute. That is the question, sir.
Guruprasad Mudlapur
Okay. So, I mean we — our business plan cycle constantly looks at what’s happening in the market. We take feedback not just for the market, the inventory positions in the market, what our OEMs tell us and what we need to plan for the year. Of course, we have complex internal tooling, which also helps us fine-tune the possibilities under various scenarios in terms of what is the possible, GDP growth rates and how our different sectors performing and based on that what should we plan for in terms of our different segment level growth opportunities. So this is the thing we constantly do. So as we see today, the indicators are that ’25 is likely to mirror 2024 growth rates. There can be ups and downs and we are well-prepared to handle that. And if there is a change, we evaluate this at very regular at very regular intervals within our business planning cycles and we will adapt.
Gokul Maheshwari
Yeah. Thank you. Two more questions. So one is, if you could just comment on the underlying CV industry, because first-half has been fairly weak for the — both the major OEMs. What are you seeing on the trends and interactions with your customers on the outlook for the industry for second-half and going forward?
Guruprasad Mudlapur
CV industry, we expect it to remain mutant of where things are out. I think that’s the current expectation so far?
Gokul Maheshwari
Okay. Great. Lastly, just on exports front, while the external environment has been very muted due to the geopolitical conditions, are you seeing things pick -up over there and what’s the outlook for the near-term over the next six to 12 months for the exports business?
Guruprasad Mudlapur
Okay. So we don’t look at exports on a very short-term basis, but it’s not — we are planning our exports as well. We consider exports as a longer-term opportunity, while there are some really short-term gains based on some capacities or some changes in the market abroad. That’s one way of looking at it, and we will certainly cater to that as it comes. But for us, growing our export business is a much more of a longer-term opportunity over, let’s say, in the next five years or so. So we are preparing ourselves to [Technical Issues] as we go forward.
Gokul Maheshwari
Okay, what would be the export growth in H1 versus last year’s H1?
Karin Gilges
We have — this quarter we had slightly increase in the exports, but as already mentioned, it hardly depends on the demands where we have in the international global network, production network some demands. And so overall we see a growth of roughly 10% if we compare the previous year to this year. But again, for us the long-term perspective is much more interesting and this was what we had predicted and yes, of course we are all the time appreciate if we can support our international products network.
Gokul Maheshwari
Great. Thank you so much and all the best.
Operator
Thanks, Gokul. [Operator Instructions] In the meantime, I’ll read-out the questions from the cat box, sir. First question is, we have indicated about good growth in the PV segment despite underlying industry being weak, what will drive this growth?
Guruprasad Mudlapur
Yeah, the previous [Indecipherable] is connected to quite a lot — connected to what happens in our cities, disposable incomes, trend towards premiumization for affordability and GDP growth in general. So — and how well people are able to drive in cities and further penetration in our Tier-2 and Tier-3 towns. So these would be the broad trends. And yeah, we track these trends and we expect steady growth in our PV segment.
Operator
Okay, sir. The next question is, we indicated safety systems for two-wheelers. What will be the components on two-wheeler systems safety are in the listed entity? Hello?
Guruprasad Mudlapur
Yeah. So our — yeah, I mean, we have our two-wheeler division which offers some operance into this market. While majority of the safety systems go from our sister company RBIC, but from the listed entity, our two-wheeler segment also caters to some set.
Operator
And some person from the chat box sir. So whether any restructuring under progress — or listing for in the — all the other listed companies in the Bosch table in India?
Guruprasad Mudlapur
Sorry, what basically is the question, sorry?
Operator
Basically, the question is — see whether — see we have lot of unlisted companies in auto space in India where any chance of restructuring or any whether products?
Guruprasad Mudlapur
So I think I’ve spoken about this time in the past. We are constantly looking at our product portfolio, our business activities in the listed company and also business activities outside the listed company in the Indian context. We are very open to look at these things. These are discussions that are going on in the [Technical Issues] As and when we have information to share, we certainly use that opportunity to share it with all of you. So all I can say is that these discussions are ongoing in terms of multiple elements and we will share it share as appropriate.
Operator
[Operator Instructions] I think that’s all, sir. There is no more questions, sir. Any closing comments you want to make, sir?
Guruprasad Mudlapur
So say thank you to everybody who joined the call and shown interest. We’re doing our best to ensure that excellent business performance under difficult — currently slightly difficult market conditions, and we hope to continue to keep this trajectory going, and you will hear more from us in the coming months. Thank you.
Operator
[Operator Closing Remarks]