Macpower CNC Machines Ltd (NSE: MACPOWER) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Rupesh Mehta — Chairman and Managing Director
Analysts:
Khush Nahar — Analyst
Jaiveer Singh
Pranav
Samarth Nagpal
Deepak Pandey
C.A. Amit Kumar
Abhishek Garg
Presentation:
Operator
Ladies and gentlemen, I welcome you all to the Q2 and H1 FY ’25 Post-Earnings Conference Call of Macpower CNC Machines Limited. Today on the call from the management, we have with us Mr. Rupesh Mehta, Chairman and Managing Director. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risk and uncertainties. Also a reminder that this call is being recorded.
I would now request Mr. Rupesh Mehta to detail us about the business and performance highlights for the quarter that went by and his growth plans and visions for the coming year, post which, we will open the floor for Q&A. Over to you, sir.
Rupesh Mehta — Chairman and Managing Director
Good afternoon, everyone. First of all, I earnestly welcome you all to Q2 FY ’25 post-results conference call. Thank you very much for believing in your company. As an investor, I wanted to assure you that we are fully committed to maximize value for our shareholders, and we promise to deliver the best with your support and backing. We are confident to achieve even greater heights in the days and years to come.
We will have a brief about our overall performance of the Company for the quarter ended 30th September 2024, post which I will take your questions. The financial results and presentation have been posted on the Company’s website and hope you have had an opportunity to go through the same.
So I will start with the one-by-one highlights. I will give you quickly brief about the Q2 FY ’25. Revenue is increased by [Phonetic] INR71.10 crores, compared to — Q2 FY ’25 EBITDA margin is also increased by 41% on YoY. Q2 FY ’25 PAT is increased to INR8.30 crores, which is 35% on YoY.
As I announced that right now, our production capacity is 2,000 machines. A new 500 machine capacity capex and some of the machines and construction work is on progress. We hopefully completed these 500 machines, adding capacity. On new financial year, maybe in April, we’ll utilize these 500. And as I promised, on quarter-on-quarter, we’ll increase the capex also. So last year, capex — Q2, our capex margin, INR2.052 [Phonetic] crore. So averagely, we are increasing the capex also. Our 600-kilowatt solar is almost 60%, 70% work will be completed within a short time. We’ll utilize the solar power plant.
And I would like to announce that right now, we have 209 people in sales and service and which is almost double than last quarter. So, we are increasing our distribution network, and we are going to start the new office and tech centre. Right now, we have Shapar, Jamnagar, Ahmedabad, Mohali, Coimbatore. And new tech centers and office will be inaugurated in November and December, respectively, in Faridabad, Hyderabad, Mangalore and Pune. We are going to start the new tech centers and offices.
I would like to announce that in January, as in my last con call I announced that we are going to display the latest technology machines in the January IMTEX Exhibition in Bangalore, where we have successfully completed the trial of five-axis machines, and we are displaying these machines for our customers and the segment. Normally, this five-axis machine is used for the aeronautic industries and defense industries. Second machines, we are displaying that high speed 20,000 RPM drill tap centre. Normally, this kind of machine is used for the EMS sectors. So, we are displaying the double-digit machines in this exhibition, and we are participating in India’s largest exhibition IMTEX Bangalore with the double-digit higher-end new technology, where we’ll use the robotic and gantry also. And some of the new generations features we are adding in this exhibition is IOT 4.02, so where our customer can track the machines through their mobile. They can get the all kind of the programming, modifications, everything is through the mobile. So, we are entering into the world market.
And second update is that as slowly our production capacity is increasing, so slowly we are expanding our distribution network also. We are expanding some of the sector also. In Q2, we already started the export also. In Q2, we get the good significant growth on export also. So gradually, we’ll increase the export as our production capacity will increase. And world’s largest exhibition held at Germany, Hannover, it is called EMO. It is the Number 1 exhibition for the machine tools business. So, we are participating in that exhibition. It will be on September 2025. So, we are expanding our production, productivity. We are adding the new product basket. We are expanding our distribution network, and now slowly, we are entering into the world market also.
And as I announced in last press conference that we received the one order from the defense sector. The one machine’s cost is INR2.95 crore which is the second highest value in Macpower history for the one machine’s cost. So INR2.95 crore order also we received. And more detail is in presentation. Our order book is significantly increasing. So all the detailed data, it is in presentations.
And Vinayji, shall we start the question-and-answer?
Questions and Answers:
Operator
Sure, sir, sure. [Operator Instructions] We’ll take the first question from Khush Nahar. Khush, you can go ahead.
Khush Nahar
Hello, sir. Am I audible?
Rupesh Mehta
Yes, you are audible.
Operator
Can you be [Phonetic] a bit louder, Khush?
Khush Nahar
Yes. Thank you for the opportunity, sir. Two [Indecipherable] questions I had. One, sir, any particular reason why our sales in this quarter was only 12% compared to our previous three quarters, where we have grown around 24% and 30% [Phonetic]? Second, our EBITDA margins are 18% in this quarter. So what kind of EBITDA margins can we close the year in?
Rupesh Mehta
Now, first question, we have a good order book. And as I told you last meeting that we are increasing the production, productivity. So definitely we delivered some of the machines very quickly from our order book, where we are getting the good three to four-month delivery time. So we increased the manpower. We increased the productivity. So according to the order books and according to our capability and capacity, we — as we promised that will increase by 20% to 30% gradually. Second, margin is improved with the two, three things. The top line [Foreign Speech] margins will definitely improve and because of the high-valued machines, some of the high-valued machines. And third thing is some of the major components, which we are buying from the market, almost more than 50% of that component, we are manufacturing in-house. So, our margin is improved by the top line. Our fixed cost is almost the same. Second, some of the export we completed in this Q2. And third is some of the component, we manufacture in-house. So that’s why our margin — and as we — promise is that this margin will gradually improve by quarter-on-quarter and year-on-year. So, it may be once — in this financial year, it may be — 17% to 20% will finish in this financial year.
Operator
Sir, [Foreign Speech] at INR71 crores versus [Foreign Speech]. In Q1, we had grown at a higher pace.
Rupesh Mehta
13%, yes.
Operator
So why is it lesser in terms of 12%?
Rupesh Mehta
[Foreign Speech]
Khush Nahar
So, do we see this as a temporary problem? And you’re confident that we’ll close the year with 25% top line growth in FY ’25?
Rupesh Mehta
Yes, definitely. We’ll grow — get the 25% growth as [Foreign Speech]. So, yes, you can say, 25% year-on-year growth target [Foreign Speech].
Khush Nahar
Thank you for those answers. Sir, just two last questions. Export, can you tell us the segment, the export product, where was it used in which segment?
Rupesh Mehta
[Foreign Speech] then, he will distribute the local network, through local network. [Foreign Speech]
Khush Nahar
And sir, margins will be better in export compared to domestic sales?
Rupesh Mehta
Yes, it is better than domestic sales, and we can get the DEPB also [Foreign Speech] so margin definitely — that is the reason.
Khush Nahar
Right. Sir, just one last question. So [Indecipherable] capex we are planning in Gujarat, once the land is allotted, so are we hiring any senior management level people so that to — do we have the appetite to digest such a big expansion or do we need more manpower, more senior management personnel going ahead?
Rupesh Mehta
Yes. We have right now very good senior people in our team. [Foreign Speech] definitely, we’ll hire these kind of people also.
Khush Nahar
Okay. Thank you so much for the answers.
Operator
Thanks, Khush. We will take the next question from Jaiveer Singh [Phonetic].
Jaiveer Singh
Hi, hello, sir. Good evening, sir.
Rupesh Mehta
Good evening.
Jaiveer Singh
Congratulations for the good set of, sir. And I have few questions, sir. Sir, what is the status of the defense MOU we have signed with the Gujarat government? Can you provide a timeline for this project, sir?
Rupesh Mehta
It is the government of Gujarat. So there’s steps, almost — I can say that there’s six steps to start up this new land and new factory. Almost halfway, we completed through the primary approval from the Ministry of Industries. After that, they send this to the local level body, and after that, it will be in collector. So almost half-level journey is already done. So we hope that we’ll get this new project land before March or April.
Jaiveer Singh
Sir, any finish timeline, sir, that it can — the project can be completed by till FY ’26, ’27, like that only?
Rupesh Mehta
After receiving, we will work phase [Technical Issues]
Jaiveer Singh
Phase-wise, yes, okay.
Rupesh Mehta
We have a huge land. We are — we demanded, but we’ll add the capacity by 2,000 machines in first phase with the foundry and some of the backward integrations for the — some components. So, we’ll add the 2,000 machines in Phase 1. Simultaneously, we will add the foundry for more than 5,000 machines. Approximately, our casting capacity would be more than 2,000 tonnes. So, we will add the backward integration unit and the foundry and 2,000-machine extra capacity. It will require us to complete by 15 months to 16 months for Phase 1. After that, according to the market, according to the need, we’ll add more and more capacity.
Jaiveer Singh
Sir, you have mentioned about backward integration, sir, my next question sir. Can you shed some light on the backward integration and what value it will bring to our company, sir?
Rupesh Mehta
Backward integration means, right now, we are buying the castings from the vendors. And last year, we were buying the telescopic from the vendors. So almost 50% telescopic, we are manufacturing right now in-house; 50% spindle we are manufacturing in-house. So, some of the components we are buying from the import or buying from some vendors, that component will manufacture in our existing plant or in new plant. It gives us the opportunity to increase the quality, delivery and are cost-effective also.
Jaiveer Singh
Sir, one more question, sir, and it will be my last, sir. Sir, in previous con-calls, you have guided that we will achieve 20% to 25% in EBITDA. But we have achieved 18% till now, sir. Sir, any further — can you tell me that by which quarter or by which year, we can achieve that?
Rupesh Mehta
Normally, Jai Bhai, in capital goods industries, as I always told you, many of our — in our con call that quarter one business is 15% to 20%. Quarter two is 20% to 25%. So capital goods business is increased by quarter-on-quarter. Quarter one is average slightly down; quarter two, little bit high; quarter three — and quarter four, if you go through all the companies’ balance sheet on quarter four. So year-on-year, definitely, we will achieve 20% to 30% top line, 20% to 30% on EBITDA margin, and 20% to 30% on the PAT margin. So definitely, we’ll achieve that.
Jaiveer Singh
Sir, if you permit me, sir, one last question, sir, regarding R&D center Bangalore. Can you tell me what value addition will be after the R&D center Bangalore?
Rupesh Mehta
Now, we will get some of the new generations machines technology, and that R&D center, we’ll utilize for the two, three aspects. One is for the service center. One is for the sales. One is for the R&D center. So we’ll utilize these premises for three different aspects, but definitely, we’ll get some of the new generations technology through this Bangalore R&D center. And some of the new things we learned, we achieved a good result from the Bangalore R&D center. That’s why we’ll display the new generations machine on January 2025 Bangalore exhibition, where we are going to display the new-generation five-axis machines and high-speed EMS segment machines. So backward integration for the turret, ATC or rotary table, so some kind of the component we’ll develop over there in Bangalore R&D center, and new generations machines we’ll develop in Bangalore.
Jaiveer Singh
Sir, thank you. Thanks a lot, sir, and congratulations, sir.
Rupesh Mehta
Thank you.
Operator
Thanks Jaiveer. We’ll take the next question from Pranav. Pranav, please unmute.
Pranav
Hi, sir. Congratulations on good sets of number.
Rupesh Mehta
Thank you very much, Pranav Bhai.
Pranav
Yes. So, Rupesh Bhai, my question was what is the demand scenario currently looks like overall with the capex cycle going on?
Rupesh Mehta
Overall industries by market cap growth is — compared to Indian machine tools data and some of the FANUC, Siemens and Mitsubishi jointly, if we calculate it, the growth is 15% to 20% in India compared to last year. But I think for us, if we require the more growth, then we have to expand our distribution network. Almost our distribution network is double than compared to last year. So our market share is just 2% and 2.5%. So yes, I think still we have lots of areas is vacant. So market scenario is almost — if you go through the order book, is the highest ever order book right now we have. We are facing the challenges of Diwali holidays and Navratri, Dussehra, so lots of holidays. So we’ll ramp up this production on this quarter because of this 8 to 10 days holidays we have in last October month, but demand-wise, there is 15% to 20% according to my personal data from the various aspects [Phonetic] is increased.
Pranav
That is quite a rising sector. And I also remember once you told that if Apple has to do manufacturing in India, it needs around 50,000 to 55,000 CNC machines. So our peer who is present is setting up a lot of assembly lines for manufacturing for EMS services. Do we also have plans to enter this segment? [Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Pranav
[Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Operator
Pranav, can you speak a little louder please?
Pranav
Yes, Rupesh Bhai. So, I was asking what are the margin difference [Foreign Speech] going forward.
Rupesh Mehta
[Foreign Speech]
Pranav
Okay. Yes. Thank you, Rupesh Bhai.
Operator
Thanks, Pranav. [Operator Instructions] We will take the next question from Samarth Nagpal [Phonetic]. Please go ahead.
Samarth Nagpal
Good afternoon, sir. [Foreign Speech] Sir, congratulations for a great set of numbers. [Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Samarth Nagpal
[Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Samarth Nagpal
[Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Samarth Nagpal
Thank you, sir. I will come back in the queue. Thank you.
Operator
We’ll take the next question from Deepak Pandey [Phonetic].
Deepak Pandey
Hi, sir. Congratulations on a good set…
Rupesh Mehta
Thank you.
Deepak Pandey
Rupesh Ji, just three to four short questions from my side. First question, sir [Foreign Speech] which we are selling in advance only. Is that somehow impacting the sales growth? [Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Deepak Pandey
Understood. [Foreign Speech] realization for the quarter was INR18.7 lakh per machine. [Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Deepak Pandey
Sir, where I was coming from is, one of the peers that is also listed, they are actually targeting INR50 lakhs per machine. [Foreign Speech] visibility, when can we get to that level, where we are manufacturing higher-end machines and hitting that run rate?
Rupesh Mehta
[Foreign Speech]
Deepak Pandey
Last question from my side. Any updates on the JV or partnership that we were planning? And how could that impact us in the next three to five years?
Rupesh Mehta
[Foreign Speech]
Deepak Pandey
Thank you, sir. I wish you all the best. Thank you.
Operator
Thank you, Deepak. We will take the next question from C.A. Amit Kumar [Phonetic]. Please go ahead.
C.A. Amit Kumar
Thank you for the opportunity, sir.
Operator
Thank you very much, Amit.
C.A. Amit Kumar
Sir, I would like to know what is the market size of CNC machine in India and in the world in terms of volume and value, and what is our market share? This is my first question.
Rupesh Mehta
Market size, consumption-wise, I think it’s INR16,000 crores to INR18,000 crore, and manufacturing-wise, INR8,000 crores to INR9,000 crore. Rest is import. And our — compared to consumption, our market share is less than 2%, and compared to manufactured in India, our market share is 3.5% to 4%.
C.A. Amit Kumar
Okay. I just started following this company. If you could give some idea like this turning center, vertical machining center, tuning lathe, what — where these machines are used and for what purposes?
Rupesh Mehta
Machine tools, Amit Kumar Ji, is the backbone for any of the manufacturing segments. Machine tools, I think we are contributing to more than 3,000 segments, just say, for example, aeronautics, railway, defense, pump valve, general engineering, plastic injection molding, pharma, textile. So everywhere, machine is the basics for the — any kind of the manufacturing segment, automobiles, EMS, so many segments we are capturing [Phonetic]. And the use for this machine is for plastic industry also. So, I think [Foreign Speech] machine tools is must. [Foreign Speech]
C.A. Amit Kumar
Okay. Thank you. And we have bids of INR765 crore. So how much we can expect to convert it into orders?
Rupesh Mehta
[Foreign Speech] Generally, whatever order we are receiving, say, for example, per day we are dispatching four to five machines and we are receiving six to seven, our target is that we’ll receive at least 15% to 20% minimum extra order, so we can have a plan out [Foreign Speech].
C.A. Amit Kumar
Thank you very much.
Rupesh Mehta
Thank you.
Operator
Thank you, Amit. We’ll take the next question from Abhishek Garg [Phonetic]. Abhishek, please unmute.
Abhishek Garg
Thank you for the opportunity. Rupesh Ji, thank you for very good result, sir. [Foreign Speech]
Rupesh Mehta
[Foreign Speech] So definitely, I’m confident that we’ll achieve more than that in Q3, Q4.
Abhishek Garg
Thank you, sir. Thank You
Rupesh Mehta
Thank you, Abhishek.
Operator
Thank you, Abhishek. Thank you, Abhishek. We’ll take a follow-up question from Samarth Nagpal. Samarth, you can go ahead.
Samarth Nagpal
[Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Samarth Nagpal
[Foreign Speech]
Rupesh Mehta
[Foreign Speech]
Samarth Nagpal
Thank you, sir. Thank you for answering all the questions, and all the best for the remaining two quarters. I hope [Foreign Speech] Thanks for answering the question, sir. All the best.
Operator
There is a question on the chat from Mr. Gaurav Chandra [Phonetic]. Can we expect the international tie-up in Q4? And do we plan to build a the factory together with them? Or can we expect all of this to be completed before 31st March 2024 [Phonetic]?
Rupesh Mehta
Gaurav Ji, we have three major JV partners meeting at Bangalore exhibitions. They are especially coming to discuss about this JV and they wanted to see our product also, and they wanted to see the exhibition also. So definitely, our objective is to complete the JV in this financial year. But without JV also, we are ready to gear up our new expansion plan in next financial year.
Operator
The second question is, can we run the factory 24 hours a day if needed to get velocity in sales?
Rupesh Mehta
Yes. But we can run the 24 hours factory, but to assemble the machine in two shifts, three shifts, it’s not that much good idea. In India, nobody has assembled the machine on two shifts or three shifts. We assemble the machine on 12 hours to 14 hours. But our costly machine, costly powder coating plant, costly sheet metal plant is working on 24 hours.
Operator
Sure, sir. So, sir, that was the last question for the day. Would you like to give any closing comments?
Rupesh Mehta
As we discussed in all the quarters that machine tools business first quarter is slow. Second quarter is little bit 20%, 25%. Third quarter is 25% to 30%. Fourth is, whatever, last [Foreign Speech] INR90 crore, INR100 crore. [Foreign Speech] Within this financial year, we will definitely announce about this new land. [Foreign Speech] Market is supporting us with this significant growth in our order book also. [Foreign Speech] Thank you very much.
Operator
[Operator Closing Remarks]
Rupesh Mehta
Thank you very much.