Motherson Sumi Wiring India Ltd (NSE:MSUMI) Q4 FY23 Earnings Concall dated May. 19, 2023.
Corporate Participants:
Vivek Chaand Sehgal — Chairman
Pankaj Mital — Chief Operating Officer
Anwar Shaikh — General Manager
Anurag Gahlot — Whole Time Director
Analysts:
Raghunandan NL — Nuvama Institutional Research — Analyst
Siddhartha Bera — Nomura — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Joseph George — IIFL — Analyst
Unidentified Participant — — Analyst
Basudeb Banerjee — ICICI Securities — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Motherson Sumi Wiring India Limited Q4 FY ’23 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. V.C. Sehgal from Motherson Sumi Wiring India Limited. Thank you, and over to you, sir.
Vivek Chaand Sehgal — Chairman
Thank you. Good afternoon, ladies and gentlemen. We are very pleased announce the final results for quarter four and then for the year for MSWIS. We crossed a turnover of INR7,000 crores for the first time. This is the first [Indecipherable]. And the EBITDA is INR221 crores. Margin is approximately 11.9%, and the PAT is INR138 crores.
I trust you’ve all seen the presentation, and may I hand it back for question and answers. Make sure our team is here to answer. Thank you.
Operator
So, would you like to begin the question-and-answer session?
Vivek Chaand Sehgal — Chairman
Yes, please.
Questions and Answers:
Operator
Thank you. [Operator Instructions] We have the first question from the line of Raghunandan from Nuvama Institutional Research. Please go ahead.
Raghunandan NL — Nuvama Institutional Research — Analyst
Congratulations, sir, on good numbers. And thank you so much for the opportunity. Firstly, good to see customer additions and participation in new models in FY ’23 and company supplying two top players in electric vehicles. For the new high voltage wiring harness plants, can you provide some color on the ramp-up? By when do you expect to reach optimal utilizations there?
Pankaj Mital — Chief Operating Officer
Pankaj? Yeah. Thank you, Raghunandan ji, asking for the question. There are two part of this question actually. One is about utilization of the plant and second about the high voltage products you’re talking about. So, I’ll just come to the first part of the utilization. As we have a golden rule of wherever we are reaching to 80% of our utilization, we start looking for expanding our capacities. So in tune of that, as soon as we are seeing that this FY ’24, the orders in hand, we have already worked out, and there will be expansion plans accordingly. The second part is that about the EV. We are already into the segment across the industry, whether it’s PV, CV, two-wheelers and buses. We are already supplying in all. And these are the products which are going into the same premises where we are making the other parts also. So, we are already there. A lot of RFQs are already in pipeline on which we are working.
Raghunandan NL — Nuvama Institutional Research — Analyst
Thank you, sir. Three related questions. Firstly, on the high voltage wiring harness, it has been a decent start, and how do you see the ramp-up of utilization for the new lines? Secondly, considering your strong relationships and localized manufacturing, can you elaborate on customer additions on the EV side? Will that be a mix of marquee customers and startups? And generally, for the industry, what would be the share of imports in EVs for wiring harness?
Vivek Chaand Sehgal — Chairman
Anwar?
Anwar Shaikh — General Manager
Sure. [Indecipherable] announced the customers that — as both the established players are also in electric and there are some new-gen customers are also there. So we do with both type of customers. And in terms of the ramp-up and how the high voltage side of it, capacity utilization and ramp-ups, they’re in sync with the customers in general. So the volumes are still taking off and we are completely aligned with them.
In terms of the import content, initial import content were higher. But as we move forward, a lot of localization is also taking place and all the customers would want that at least 50% of the product to be localized. So that’s the direction in which everybody in the industry is moving forward. I hope that answers your question.
Raghunandan NL — Nuvama Institutional Research — Analyst
Yes, sir. Thank you so much. Sir, on the raw material cost side, there is some pressure, what has led to higher costs and do you see any relief going forward?
Vivek Chaand Sehgal — Chairman
Pankaj?
Pankaj Mital — Chief Operating Officer
So, it is — Raghunandan ji, supplied to so many different segments and so many different types of products to our customers. So when we look at overall raw material consumption, it’s in totality. If you look on Q1 to — quarter-by-quarter, of course, there will be impact as copper increases or currency fluctuations also, but it’s overall total mix in which we are supplying.
Raghunandan NL — Nuvama Institutional Research — Analyst
Thank you, sir. I’ll come back in the queue.
Pankaj Mital — Chief Operating Officer
Thank you.
Operator
Thank you. [Operator Instructions] We have the next question is from the line of Siddhartha Bera from Nomura. Please go ahead.
Siddhartha Bera — Nomura — Analyst
Hi, sir. Thanks for the opportunity. Sir, first question is on the new model launches you are working on, so basically last time you had indicated about six new models which are planned to be launched in the coming year. Is there any change to that number, any further orders you have won? Any color on that?
Vivek Chaand Sehgal — Chairman
I think it’s been explained. We can’t go customer-wise that Pankaj, can you help how to — we’ve mentioned the new launches from [Indecipherable]. Pankaj?
Pankaj Mital — Chief Operating Officer
Yes, sir. So, basically, as Mr. Sehgal mentioned, we can’t be very specific on which models we are in, but you would see that in most of the new launches, which have been happening, you’ll see models, that’s what we see, we are very grateful to our customers to have — to make us part of their new program. And that’s what we have — I mentioned in this release also that there have been so many new launches and facelifts which have taken place across. And if you see we are amongst most of the top sellers in the country that the company has the privilege to be a supplier to the car makers and other [Indecipherable].
Siddhartha Bera — Nomura — Analyst
Okay. On this — coming back to this question on loss margins, I mean, we have seen commodity prices much higher in the past and, I mean, this is, I mean, the lowest ever gross margins we have reported in this quarter for MSUMI. So, just wanted some more color, I mean, whether it is more to do with some new launches, are EV share going up, can help us understand why it is lower and, I mean, what’s the changes — are any price hikes you are expecting from customers?
Vivek Chaand Sehgal — Chairman
Yeah. Gahlot?
Anurag Gahlot — Whole Time Director
Thank you, sir. Siddhartha, I think when you look at the results on a sequential basis, we have improved our EBITDA margin. While EBITDA is not something which we talk about, we target on return on capital employed, inflationary pressure continues to be there and the customer negotiation or those things will — is always work-in-progress, but at the same time there has been a significant improvement in the cost side of it. So you can see our EBITDA margin improving on a sequential basis. If there is anything, we can take it offline which makes you feel differently. At the same point of time, you have seen a lot of new models which are under ramp-up or where the efficiencies are under improvement. So we had earlier also said, quarter one subjective customer on that spending [Phonetic] stable, we should see all the volumes ramping-up, and you have also heard [Indecipherable] talking about probably it not be completely over. Definitely our teams have done a good job in cost management, and you see sequentially there is a marked improvement in the margins.
Siddhartha Bera — Nomura — Analyst
The last question on the working capital side. I mean, if I look at for the whole year, it has remained high. So, do we expect these levels in terms of number of days to continue, or will it stand normalized to some extent in the coming years?
Vivek Chaand Sehgal — Chairman
There is definitely scope for improvement and the teams are working hard. At the same point of time, in absolute amount, the working capital will go up because we had a growth [Technical Issues]. We have achieved the highest-ever turnover in the last quarter and on a yearly basis from credit score of last year. So, at a particular point of time, because working capital will be [Technical Issues] would be the sales in the large cities. So, of course, the inventory levels are really higher, because of [Technical Issues] some times it happen, as well as the shipping time and all that has not been completely come to the pre-COVID level. So definitely, we do see things getting better and we’ll be able to improve on the efficiencies on the inventory side as well as the ramp-up of the new models. We will also ensure that our inventory levels become far more [Technical Issues]. Because sometimes you have to carry inventories which are kind of the unbalanced inventory, but once the volume are stabilized, then you have more uniform and balanced inventory. So, scope for improvement is surely there, and we are working on that.
Siddhartha Bera — Nomura — Analyst
Got it, sir. Thanks a lot, and I’ll come back.
Operator
Thank you. [Operator Instructions] We have the next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Thanks. Couple of questions from my side. One is, on the two-wheeler segment under IC side, it was relatively more fragmented market. Are we seeing the increase in complexity because with electric two-wheelers, are financial position getting stronger there? Hello?
Vivek Chaand Sehgal — Chairman
Sorry, in between we were having [Technical Issues]. Can you repeat your question?
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Should I repeat? Okay, sure. So my question was on the two-wheeler segment, given that IC two-wheelers barring harness market, it’s more segmented than other segments. And now with EVs, barring harness getting with more complexion in nature. Obviously, implementing our competitive positioning in electric two-wheeler barring harness?
Vivek Chaand Sehgal — Chairman
Generally, I mean, we have been with the makers, and there are some established players who have electric and new-generation players who have come in, we are with both and subsegment. So, to say that how is the competitiveness or is it improving? Of course, our competitiveness, always has been there and will continue to improve, that is the endeavor of the company.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. I mean, if you compare vis-a-vis ICE and EVs, on the premier side, will we be having higher market share? That’s basically my question.
Pankaj Mital — Chief Operating Officer
I mean, as you know that the company has never focused on forcing itself towards the market share. We have always focused in terms of creating solutions for our customers and also ensuring that we provide good results to all our stakeholders. And that’s also — we always work together very closely with our customers. And that’s the way we continue to progress. And you would have seen over a period of time that different segments, whether it is PV side or commercial vehicles or — has market share evolved and good products are acquired based on the new requirement, your company has done well. So that’s our endeavor.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. Got it. And second question is on the PLI incentive, given that we are one of the beneficiaries of PLI incentive. With the recent investment in the PV plant qualify for the investment criteria or that has to be on the one-product only?
Vivek Chaand Sehgal — Chairman
Jinesh, we have registered for PLI, and of course the scheme which is there is in public domain as per the Government of India, which also — which has both the criteria or new investment in the new site. I think, that’s a Government of India PLI scheme.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Yeah. The question of the investments which you’ve done — which you’ve done in FY ’23, would that be qualifying under the PLI requirement or we need to invest on the advanced product side only?
Vivek Chaand Sehgal — Chairman
I mean, [Indecipherable] specific information, I may not like.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay, sure. And lastly, any guidance on capex for FY ’24, have we had in the period, and how it will be a typically efficiency for Q4? [Phonetic]
Vivek Chaand Sehgal — Chairman
This year, ’23-’24, we’ll see a capex of INR125 crores, which does not include land and building. This is mainly for the customer increased demand on that. As you know, land and building have taken on the entrance from Summit [Phonetic] and the future investment depending upon the availability and that will be done by that.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. Thanks a lot.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Joseph George from IIFL. Please go ahead.
Joseph George — IIFL — Analyst
Thank you. Just one question. So, when you reported 4Q FY ’22 results, you had given us a split of your revenues into PV, CV, two-wheelers, etc. And in subsequent quarters, you had mentioned that you will report this on an annual basis. Would it be possible to share it now with the — for maybe the full-year FY ’23 numbers?
Vivek Chaand Sehgal — Chairman
Yes, this is something in the annual report. So we will certainly share, but there is no significant change, but surely we will be sharing that.
Joseph George — IIFL — Analyst
So, you said that will be reported in the annual report.
Vivek Chaand Sehgal — Chairman
I think what we think is the next opportunity to report that.
Joseph George — IIFL — Analyst
Okay. Thank you.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Kiran from Infomist [Phonetic]. Please go ahead.
Unidentified Participant — — Analyst
Can you give us a bit more clarity on…
Operator
I’m sorry to interrupt. Mr. Kiran, you’ll have to speak a little louder. We can’t hear you.
Unidentified Participant — — Analyst
Hello, am I audible?
Operator
Yes. Please go ahead. Thank you.
Unidentified Participant — — Analyst
Yeah. So, can you give us a bit more clarity on the kind of cost increase that you have seen in Q4 on a year-on year basis?
Vivek Chaand Sehgal — Chairman
Cost increase in?
Unidentified Participant — — Analyst
I mean, cost increase in the fourth quarter on a year-on-year basis?
Vivek Chaand Sehgal — Chairman
Gahlot, can you answer? For some reason, I don’t have clarity.
Unidentified Participant — — Analyst
Sir, I asked, kind of cost increase that you have seen in the fourth quarter on a year-on year basis.
Vivek Chaand Sehgal — Chairman
Actually the wiring harness is a one product which undergoes significant amount of changes. And also, you have seen a lot of models. So, for us to compare on a like-to-like basis, which component is a very [Indecipherable]. So, I have not clearly understood will we gain from that. Surely we know how the inflationary pressure has been in terms of certain amount of cost, or certain shipping cost or certain components or the copper price compared to, say, last year, it may have been lower sequentially. So I think it is a combination of a huge factor and — including currency, and like-to-like comparison is possible, because we are not selling the identical product or the same product what we were doing last year.
Unidentified Participant — — Analyst
Got it, sir.
Operator
Mr. Kiran, does that answer your questions?
Unidentified Participant — — Analyst
Yeah, got it. Thanks.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Basudeb Banerjee from ICICI Securities. Please go ahead.
Basudeb Banerjee — ICICI Securities — Analyst
Just one question.
Operator
Mr. Banerjee, sorry to interrupt. Please be a little louder, sir.
Basudeb Banerjee — ICICI Securities — Analyst
Yeah, am I audible?
Operator
Yes, please go ahead.
Basudeb Banerjee — ICICI Securities — Analyst
Yeah, just wanted to know the new facility in which quarter. So, the staff cost expense, which is there in the P&L for the last couple of quarters. So, is that building in — staff cost of the new facilities. [Indecipherable] other than annual expiration?
Vivek Chaand Sehgal — Chairman
I think, absolute number, we’re still with respect to the revenues of third quarter. As I said in another question, we have improved our cost parameter on a sequential outcome. So, in December ’22 also, our cost was INR300 crores. This quarter, with the earnings up from INR1,665 crores to INR1,844, our employee cost is INR291 crores. I remember in September it was INR300 crores plus. So, that’s clearly the annual inflation in terms of performance review. And so, there are mandatory wage increases, which come on the minimum wages, which consequentially increases basic toward salary [Indecipherable]. But I think it is to be compared with respect to our revenues, which we generate for that particular period rather than fixing it in absolute amount. If I have understood your question correctly, also like three con-calls back when you think that the new capacities are adding 40% to the revenue potential — maximum revenue potential. So, on a pro-rated basis, the staff cost potential can also be increasing with the incremental facilities being added.
Basudeb Banerjee — ICICI Securities — Analyst
So, just wanted to know that the full cost was for those new facilities are already in this number or that is getting cost, or it is linked to revenue. And as the revenue picks up, accordingly you will add [Indecipherable] can do that?
Vivek Chaand Sehgal — Chairman
Yeah. Let me address the question in two ways. Number one, these facilities which have been created, we have remained [Technical Issues]. At the same point of time, when we said 40% was the new model, so what we were saying that there have been a complete change in the new model as well as the full. So, the revenues which will get contributed in future, 40% will come from the new products which are developed and which were not in production earlier. So that is how we had. So, we added three facilities as we have said, and these three facilities have been [Indecipherable]. At the same point of time, as per the capacity utilization of these companion tools, as the volume — customers demand for volume factor increases, we may have additional direct manpower to some extent indirect manpower. So that is what I am requesting that it is to be seen in relation to the customer orders as well as the revenues which are to be generated.
Basudeb Banerjee — ICICI Securities — Analyst
Sure. Thanks.
Operator
Mr. Banerjee, does that answer your questions?
Basudeb Banerjee — ICICI Securities — Analyst
Yeah.
Operator
Thank you. [Operator Instructions] As there are no further questions from participants, I now hand the conference back to Mr. V.C. Sehgal for closing comments. Please go ahead, sir.
Vivek Chaand Sehgal — Chairman
Thank you. Ladies and gentlemen, good thing, the first year. So, the results are there. We are very optimistic. on the orders and the kind of conditions at present. We believe that there is still some supply chain problems on semiconductors. Now that those things are being there, and we think the future belongs to this company. Thank you very much, and wish you all a safe and healthy week. Thank you.
Operator
[Operator Closing Remarks]