Pricol Limited (NSE: PRICOLLTD) Q2 2025 Earnings Call dated Nov. 07, 2024
Corporate Participants:
Vikram Mohan — Managing Director
Priyadarsi Bastia — Chief Financial Officer
Analysts:
Purvangi Jain — Assistant Vice President
Omkar Chitnis — Analyst
M.N. Kumar — Analyst
Khush Nahar — Analyst
Vijay Pandey — Analyst
Mann Ashar — Analyst
Madhav Agarwal — Analyst
Jaimin Desai — Analyst
Sahil Sanghvi — Analyst
Chandragupta — Analyst
Vignesh SBK — Analyst
Smit Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY ’25 Conference Call of Pricol Limited. [Operator Instructions]
At this time, I would like to hand over the conference over to Mrs. Purvangi Jain from Valorem Advisors. Thank you, and over to you.
Purvangi Jain — Assistant Vice President
Good evening, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Pricol Limited. On behalf of the Company, I would like to thank you all for participating in the Company’s earnings call for the second quarter and the first-half of the financial year 2025.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s con-call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the Company’s fundamental business and financial quarter under review.
Let me now introduce you to the management participating with us in today’s earnings call, and hand it over to them for opening remarks. We have with us Mr. Vikram Mohan, Managing Director; Mr. P.M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Director of Strategy; and Mr. Priyadarsi Bastia, Chief Financial Officer.
Without any delay, I request Mr. Vikram Mohan to start with his opening remarks, followed by financial and operational highlights of the Company. Thank you, and over to you, sir.
Vikram Mohan — Managing Director
Good evening to all participating in this call today to go over the H1 financial performance of our Company. We thank you for your presence. The presentation has already been uploaded, and I hope all of you have had a chance to look at the presentation. [Operator Instructions]
I’m pleased to announce that we have had higher than market growth for the quarter two of financial year 2025, quarter ending 30 September. Our revenue from operations stands at INR6,500 million with an EBITDA of INR871 million, resulting in an EBITDA margin of 13.4% with a PAT of about INR450 million and a PAT margin of 6.93%, resulting in a basic EPS of INR3.70 per equity share. This is on a consolidated basis. For the half year ending 30 September, for Q1 and Q2 put together, we have had sales of close to INR12,530 million, EBITDA of INR1,677 million, an EBITDA margin of 13.39%, profit after tax of INR906 million, profit after tax margin of 7.23% and a basic EPS earning per share of — equity share of INR7.44. I’m also happy to inform you that at a consolidated level, our long-term borrowings are nil and we have comfortable cash reserves in the Company as of 30 September.
Next, please. Our revenue from operations on a quarter-to-quarter basis between FY ’24 and FY ’25, we have grown at around 15.54% in spite of having muted sales in the automotive industry in Q2. Our EBITDA has grown by 24.7% for the same period, and for the half yearly results, we have grown pretty similarly at 15.51% and EBITDA has grown at 23%.
Since all the other details of the financial performance are loaded on the website, we will go straight away to the question-and-answer session. [Operator Instructions] Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
We’ll take our first question from the line of Omkar Chitnis from Trade Brains Private Limited. Please go ahead.
Omkar Chitnis
Sir, my first question is, with the increase in Indian defense budget and growing…
Operator
I’m sorry. Can you use your handset mode please, Mr. Chitnis? Your voice is not clear.
Omkar Chitnis
Okay. With the — my first question is, with the increase in India’s defense budget and growing demand for defense equipment, how does companies plan to capitalize on opportunities in defense equipment region? Are there any specific planned initiatives to benefit from focus on domestic defense production?
Vikram Mohan
Mr. Chitnis, while the Company currently has no business in the defense segment, as a management, we are exploring some inorganic opportunities to enter into the railway and defense segment in India, which will give us higher margins and impetus for growth. It’s very early stages right now, but rest assured, we are evaluating opportunities and, hopefully, in the coming quarters, we may have some good news for the Company.
Omkar Chitnis
Okay, sir. Thank you.
Vikram Mohan
Thank you, Mr. Chitnis.
Operator
Thank you. We’ll take our next question from the line of M.N. Kumar, an individual investor. Please go ahead.
M.N. Kumar
Sir, looks like the working capital, trade receivables have gone higher this year, this six months. Is there — can you explain the reason, what is happening there?
Vikram Mohan
I’ll request Priyad Bastia [Phonetic], our CFO, to answer that, please.
Priyadarsi Bastia
Good evening. See, the receivables have gone up marginally because the sales have gone up, 15% growth in sales is there. And last quarter, when you compare it with March, the amount of factoring which we have used is higher than comparing to September. So, receivable is looking higher.
M.N. Kumar
Oh, so that 46 days to 55 days, 46 days is a little lower and remain…
Priyadarsi Bastia
Number of — yeah, number of days is maintained.
M.N. Kumar
No, the — March end, it was 46 days, and September, it appears to be 55 days.
Vikram Mohan
Yes, sir. [Speech Overlap] Look, March — like, Mr. Bastia explained, Priyad explained, A, we had higher factoring in March. We have reduced our factoring because of our financial position, good financial position. So, obviously, the receivable shows marginally higher, and please also see that the sales has increased by 15%. So, this represents the same. So, the number of days of receivables is well under control.
M.N. Kumar
Okay. Typically, what is the receivable days? Is it 55 days or 50 days, which is it approximately?
Priyadarsi Bastia
We operate with all domestic customers 30 days to 45 days, which extends up to 60 days in terms of import — exports.
M.N. Kumar
Exports. Okay. Thank you.
Operator
Thank you. [Operator Instructions]
Next question is from the line of Khush Nahar from Electrum PMS. Please go ahead.
Khush Nahar
Hi, sir. Thank you for the opportunity. Sir…
Operator
I’m sorry. Can you use your handset mode please? Your voice is not clear.
Khush Nahar
Hello, am I audible now?
Operator
A little better. Please go ahead.
Khush Nahar
Yeah. Sir, my question was regarding the new products.
Operator
I’m sorry, you’re sounding muffled now.
Khush Nahar
Hello?
Vikram Mohan
Nahar, can you be a little clear? We are — your — we are not able to hear you clearly at all.
Khush Nahar
Hello? Now, is it better?
Operator
I think your network signal is not too strong. Your sounding muffled. Just try once again, please.
Khush Nahar
Yeah. Now, is it better?
Operator
Yes, please…
Vikram Mohan
Yes.
Khush Nahar
Yeah. Sir, I just wanted an update on the new products, which are the E-cockpit, Telematics and the BMS. So, at what stages they are in and if — from when they can start contributing some revenue?
Vikram Mohan
Revenue is at least 18 months to 24 months away. The product has been completely got ready and has also been submitted to customers for testing.
Khush Nahar
And sir, they are included — and we are on track with the target of INR3,200 crores of revenue in FY ’26 as a guidance, organic?
Vikram Mohan
Are we?
Khush Nahar
Are we on track on achieving INR3,200 crores of revenue as guided before in FY ’26?
Vikram Mohan
We are pretty much on track to meet our numbers as a combination of organic and inorganic, we are very much on track to meet our numbers.
Khush Nahar
Okay, sir. Thank you.
Operator
Thank you. We’ll take our next question from the line of Vijay Pandey from Nuvama. Please go ahead.
Vijay Pandey
Hi. Thanks for taking my question. Am I audible?
Operator
Yes, please…
Vikram Mohan
Yes, Mr. Pandey, please go ahead.
Vijay Pandey
So, I wanted to check if you can give some light on the margin profile of the business, like between the products. So, like, my thinking was that the BMS margin profile will be somewhat margin diluted. I might be wrong here, but I just wanted to check if you can…
Vikram Mohan
Margins for which would be diluted? Sorry, you were not very clear.
Vijay Pandey
The battery management, BMS and brakes.
Vikram Mohan
BMS, okay. Battery management system, we have still not made a commercial foray. It is still under testing with the customers, so we have not made a foray. So, whatever numbers represented here do not represent any BMS revenue whatsoever.
Vijay Pandey
Okay. And anything about the disc brakes?
Vikram Mohan
Disc brakes has already started commercial production and we have started supplies to about six manufacturers, and next financial year will be the ramp up phase when volumes will reach some degree of maturity.
Vijay Pandey
Okay. Next financial year, FY ’26. Thank you.
Vikram Mohan
Yes, that’s right, because we have just gone into production.
Vijay Pandey
Yeah. Okay. Thanks.
Operator
Thank you. We’ll take our next question from the line of Mann Ashar from GrowthSphere Ventures. Please go ahead.
Mann Ashar
Hello, am I audible?
Operator
Yes.
Vikram Mohan
Yes, Mr. Ashar.
Mann Ashar
Hi, sir. Thank you for providing opportunity. Sir, I just wanted to confirm about the industry. So, there were figures as — that the inventory pile-up has begun at the dealership network and the inventory were 80 days, 85 days last month. This month was pretty good for two-wheelers due to festivities. How do you see the demand for two-wheelers shaping up, say, for a year or — from a year now?
Vikram Mohan
Demand is very muted in the industry. My industry peers also tell me that their performance is also very muted. And as usual, the Q3 quarter, which traditionally is the very — the lowest quarter in the automotive industry, will remain very muted, but a little more muted than normal.
In terms of exports, because of the elections in the U.S., and the policies of the Republican government that have come in, exports have been extremely muted for us, much, much lower than demand that was initially projected by our customers. We are hoping in the next quarter or two, exports demand will go back to normal level, which will also help us in terms of top-line and bottom line, but domestic demand will continue to remain muted, and Q3 is expected to be a very weak quarter for the industry.
Mann Ashar
Okay, sir. Got it. That’s it from my side. Thank you.
Vikram Mohan
Thank you.
Operator
Thank you. We’ll take our next question from the line of Madhav Agarwal from SG Investments. Please go ahead.
Madhav Agarwal
Hi. My question was already answered.
Operator
Thank you.
Vikram Mohan
Thank you.
Operator
We’ll take our next question from the line of M.N. Kumar, an individual investor. Please go ahead.
M.N. Kumar
Sir, this is related to the balance sheet. When we look at ROE and ROCE related aspects, one line item that comes through is intangible assets of almost INR54 crores. It looks everything is related to software. Is there any way in which we can expense them out rather than capitalize it, and then after that write off as the product matures or otherwise?
Vikram Mohan
I’ll request our CFO, Mr. Priyad to answer that.
Priyadarsi Bastia
See, this intangible asset was capitalized in the year ’17-’18, and IndAS does not allow us to charge it off to P&L. So, it will be there in the balance sheet.
M.N. Kumar
Okay. So, similarly, this deferred tax liability would also be staying like that only, because they seem to be permanent in nature?
Priyadarsi Bastia
No. Deferred tax liability is like it is only recognition of the tax which you are coming. It is just a timing difference. So, the treatment of that in IndAS is different, and for the intangible assets is different.
M.N. Kumar
Yeah. When I looked at the annual report, it talks about the permanent and temporary. If it is a timing difference, it should be temporary, right? But a substantial part of it seems to be permanent.
Priyadarsi Bastia
Exactly. So, permanent difference is — it is coming. Only timing difference, you are creating a deferred tax liability, which when the time arrives, the original tax liability comes, you reverse that tax liability and deferred tax liability, and the actual provision you make in your books.
M.N. Kumar
Sir, what I mean to say is that the magnitude of the ones which are permanent in nature seems to be much higher than the temporary. Therefore, I was asking this question.
Priyadarsi Bastia
No. I understand that. In our case, it is this only.
M.N. Kumar
Oh, it’s only timing difference only. Okay.
Priyadarsi Bastia
Yeah.
M.N. Kumar
Okay. Thank you.
Operator
Thank you. [Operator Instructions]
Next question is from the line of Jaimin Desai from Emkay Global. Please go ahead.
Jaimin Desai
Good evening, team, and thank you for the opportunity. So, my question was related to the margin performance in the quarter. It seems that there has been some softening at the gross margin level when I compare Q2 versus Q1 for consolidated operations. Can you call out a reason for this? Was it due to some commodity impact or maybe mix impact?
Vikram Mohan
Mr. Desai, this was just based on product mix. This marginal difference in margins, which you will keep seeing from quarter to quarter, plus from the 1 of July, there has been a wage increase for our permanent workers and also for the staff, which has seen some impact of the margins, which will come back to normal with the productivity increase. This is an annual phenomenon that we see.
Jaimin Desai
Understood, sir. And if you could also provide an outlook on margins going forward?
Vikram Mohan
It will be pretty similar to where we are. I have always maintained in many quarters that our 13.0% to 13.5% EBITDA is what we intend to maintain and what looks reasonable for our set of products. Margins will be a little better when exports resume. Exports, this was probably the weakest quarter in many quarters. So, when exports resume or comes back, margins will go up about 50 basis points.
Jaimin Desai
Understood, sir. Very helpful. Thank you.
Operator
Thank you. We’ll take our next question from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.
Sahil Sanghvi
Yeah. Hi. Thank you for the opportunity, sir, and congratulations for beating the industry. Just one follow-up question from the previous participant. In terms of product mix, can you give some bit more details as to how the adverse product mix affected the margins?
And the second question would be on capex. I think we have deployed something like INR100 crores in the first half. So, full year, what we’ll deploy, and next year, and — what will be the numbers?
Vikram Mohan
In terms of margin mix, it’s very, very different to — difficult to explain because when a mechanical cluster suddenly demand goes up by a couple of — 10,000 units, the margin gets muted because the margins in a mechanical cluster is low. In an electronic cluster, the margin is much higher, the rupee profit. So, it’s very difficult because we are a diverse product company even in the driver information system. Our export margins are higher, significantly higher than domestic margins. So, when exports become muted, the margins go for a toss, anywhere between about 50 basis points to 80 basis points.
Coming to the capex, I have always maintained that we are looking at around INR600 crores of capex over three years. And we are on track on the INR600 crores of capex and we are continuing to maintain the same outlook. And we will — this year would again be about INR200 crores. Correct me if I’m wrong. I’m requesting my CFO to correct my statement, and next year will be about INR150 crores to INR180 crores.
Sahil Sanghvi
Where all, sir, will this be deployed? If you can give some bit details.
Vikram Mohan
I suggest that you can get in touch with our CFO who can throw light on this. I can give it to you, but many a time I have repeated in many of our calls. Because we are creating a new plant in Pune. We are expanding our plant in Manesar. We are buying land to create two new plants for the future. We are upgrading our lines to the tune of about INR150 crores. We are investing in a new plastic component molding shop. We are upgrading our tool room. We are buying 14 new PCB lines to make PCBs. So, it’s a whole host of things. So, if I just bring out the whole list, it will not make sense on a call.
Sahil Sanghvi
Very helpful, sir. Very helpful. Thank you so much, sir. Thank you.
Vikram Mohan
Thank you.
Operator
Thank you. [Operator Instructions]
Next question is from the line of Chandragupta, an individual investor. Please go ahead.
Chandragupta
Hello, am I audible?
Operator
Yes, please go ahead.
Chandragupta
Yeah. Thanks. Thanks for this opportunity. Sir, just one question. You mentioned about inorganic opportunities in railway and defense equipment sector. And in the past also, you have mentioned about an acquisition. So, just wanted to know roughly what size this acquisition will be, any ballpark figure that you have in mind and how it will be funded?
Vikram Mohan
It will be a two-digit figure. We are a debt-free company. We have cash reserves. But depending on the size of the acquisition, we are not only looking at this. We are looking at other inorganic play also, safe inorganic play in allied areas. And as I have maintained in my earlier calls, up to about INR300 crores of debt, we are looking at probably raising based on the kind of acquisition.
Chandragupta
Okay. INR300 crores is the maximum that you will raise?
Vikram Mohan
We are anticipating it. When — it’s still — when we are evaluating the opportunities, we are looking at about four or five different opportunities, and one or two of them are moving very fast. So, it could be somewhere around INR300 crores that we are looking at debt for an acquisition. Not necessarily in the defense and railway space, but in the auto space.
Chandragupta
Okay. Thanks a lot. Got it.
Operator
Thank you. We’ll take our next question from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.
Sahil Sanghvi
Thank you for the opportunity again. Just wanted to understand what was the proportion of exports in our revenue this quarter and versus same quarter last year?
Vikram Mohan
Can I request you to be a little louder, Mr. Sanghvi. You were not very clear this time around.
Sahil Sanghvi
Yeah. Is this better, sir?
Vikram Mohan
Yes, please.
Sahil Sanghvi
Yes. I wanted to understand the proportion of exports in our revenue this quarter versus same quarter last year, sir?
Vikram Mohan
Same quarter last year was about 9% and this year is about 6.5%.
Sahil Sanghvi
Got it, sir. Thank you so much, sir.
Operator
Thank you. We’ll take our next question from the line of Madhav Agarwal from SG Investments. Please go ahead.
Madhav Agarwal
I hope I’m audible?
Operator
Can you use your handset mode, please? It is not very clear.
Madhav Agarwal
Yeah. Can you hear me now?
Vikram Mohan
Yes, Mr. Agarwal, please go ahead.
Madhav Agarwal
Hi, sir. Thank you for the opportunity. Just wanted to understand how do we see the EV market playing out for us? How big of an opportunity do we see there?
Vikram Mohan
We really don’t — we are not affected by EV, number one, because we are — our products are agnostic to propulsion, as I have maintained in many earlier calls and we are working with almost 20 EV players for our products. But the EV adoption I have always maintained is going to be slow and other people have been saying it’s going to be very fast, and I think, I’m not a prophet, but my prophecy of very slow adoption is what is happening today and it is going to take until 2030 to reach certain maturity and size before it’s probably 50% of the market. And we are propulsion agnostic, so whether it’s an ICE vehicle or an EV vehicle, it’s of no consequence to us.
Madhav Agarwal
Okay. Can I ask another question if I’m allowed?
Vikram Mohan
Maybe you can just join the queue again, because there are a few other people in the queue.
Madhav Agarwal
Sure. I will rejoin. Thank you.
Operator
Thank you. [Operator Instructions]
We’ll take our next question from the line of Vignesh from Ksema Wealth. Please go ahead.
Vignesh SBK
Hi, sir. Am I audible?
Operator
Yes, please go ahead.
Vikram Mohan
Yes, please, Mr. Vignesh, go ahead.
Vignesh SBK
Sir, just want to understand the opportunity size for our BMS products.
Vikram Mohan
I would not like to comment on it, because it’s so fragmented, the market. Everyone is jumping into it. Vehicle makers are not very clear what they intend to do with it. So, BMS is something that even I am not very, very bullish about, and all our projections are taken into account without a significant amount of BMS revenue.
Vignesh SBK
Okay, sir. Any other products apart from disc brakes we are planning to enter into it, sir?
Vikram Mohan
So, the smart cockpits and the connected vehicle solutions, which already we are starting to see traction and growth.
Vignesh SBK
Okay, sir. Thank you. That was helpful.
Vikram Mohan
This in itself is a very large opportunity is what I am talking about.
Vignesh SBK
Sure, sir. Yeah. Understood. Thank you.
Operator
Thank you. We’ll take our next question from the line of Smit Shah from Monarch Networth Capital Limited. Please go ahead.
Smit Shah
Thank you for the opportunity. Sir, my question is regarding the split of mechanical, digital, and TFT for the quarter and some bit of color on the premiumization trend. How much has it played out according to you, and what is the outlook ahead?
Vikram Mohan
For the quarter, it’s very difficult because it keeps changing the product mix, but approximately, by — are you asking by volume or value, Mr. Shah?
Smit Shah
Value, sir.
Vikram Mohan
By value, mechanical would be about 30%, and TFT would be about 30%, and the rest would be somewhere in between.
Smit Shah
Okay. Sir, and what is your outlook in terms of the new launches that are happening?
Vikram Mohan
So, mechanical is going to stop, slowly fade out, moving into LCDs, and whatever is LCD will move towards TFT. That’s the way the market is growing. And I’ve mentioned in earlier calls that we saw our average product value move from INR300 10, 15 — 10, 12 years ago to INR1,200, and we see it jumping to about INR2,500 in next two years to three years for a two-wheeler.
Smit Shah
Okay, sir. Sir, and what was our contribution from the PV clusters this time?
Vikram Mohan
From which clusters?
Smit Shah
PV side, PV, passenger vehicle.
Vikram Mohan
It’s about 9% to 10%.
Smit Shah
Okay. Thank you. Thank you for this.
Operator
Thank you. We’ll take our — that was the last question for today. I now hand the conference…
Vikram Mohan
Thank you very much. Since there are no more questions, I’d like to take this opportunity for your active participation in today’s call. As is the practice in our Company, the Managing Director participates in H1 and H2 calls, and the CEO handles Q3 and Q1 calls. So, I look forward to connecting with all of you at the end of the financial year. Thank you very much. Have a good evening. Jai Hind.
Operator
[Operator Closing Remarks]