SJS Enterprises Ltd (SJS) Q1 FY23 Earnings Concall Transcript

SJS Enterprises Ltd (NSE:SJS) Q1 FY23 Earnings Concall dated Aug. 05, 2022

Corporate Participants:

Nikhil Kale — Senior Vice President

Devanshi Dhruva — Investor Relations

Sanjay Thapar — Chief Executive Officer and Executive Director

Saumya Moganty — Vice President, Finance

Analysts:

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Mahesh Bendre — IDBI Capital — Analyst

Rahul Ranade — Goldman Sachs Asset Management — Analyst

Joseph George — IIFL — Analyst

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

Jeetu Panjabi — EM Capital Advisors — Analyst

Nikhil Kale — Axis Capital — Analyst

Ronak Vora — AUM Fund Advisors — Analyst

Anirudh Gangahar — Avendus Wealth Management — Analyst

Rajesh Jain — NB Investments — Analyst

Vijay Sarda — VL Finance — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q1 FY ’23 Earnings Conference Call of SJS Enterprises hosted by Axis Capital Limited. [Operator Instructions]

I now hand the conference over to Mr. Nikhil Kale from Axis Capital Limited. Thank you, and over to you, sir.

Nikhil Kale — Senior Vice President

Thank you, Rutuja. Good morning, everyone and welcome to Q1 FY ’23 post results conference call of SJS Enterprises. From the management team today, we have with us Mr. K.A. Joseph, Managing Director; Mr. Sanjay Thapar, Executive Director and CEO; Mr. Saumya Moganty, VP Finance; and Ms. Devanshi Dhruva, Head IR.

And I now hand it over to Devanshi for opening remarks. Over to you, Devanshi.

Devanshi Dhruva — Investor Relations

Thank you, Nikhil. Good morning ladies and gentlemen and thanks for being with us over the call today. We appreciate it. Also, on behalf of everybody at SJS, we hope and wish that all your friends and family members are keeping safe. Moving on, this is how we intend to take today’s conference call forward. I will pass on the dias to Sanjay Thapar, our CEO and Executive Director, who will take you all through some of the slides on the presentation, which I hope, all of you would have got a chance to go through. The presentation has been uploaded on our website as well. Sanjay will take you through the industry view, our business performance and financial highlights and also share the outlook and strategy ahead for the future growth, post which we will then open it for Q&A.

We also have Saumya Moganty, our VP Finance with us on this call today. The duration of this call is around 60 minutes and we will try to wrap up our comments in about 20 minutes, so we leave enough time for you guys to ask questions. If the time is not enough, please feel free to reach out to us through e-mail or write to us and I will try and answer all your questions to the best of my ability. Thank you once again and I will now hand it over to Sanjay to make his opening comments. Over to you, Sanjay.

Sanjay Thapar — Chief Executive Officer and Executive Director

Yeah. Thank you, Devanshi. Hello, and good morning, everyone. I hope everybody is doing well and keeping safe. I take this opportunity to introduce you to Mr. Mahendra Naredi who joined us as the CFO of the company. Mahendra comes from a very strong finance background with more than 20 years experience in banking finance function in the automotive industry both in India and at European locations. His last credit was as Associate Vice President Corporate Finance with Minda Corporation.

Now, coming to back SJS, you all know by now that SJS is one the leading players in the Indian aesthetics industry. It is a unique company dedicated who is serving and enhancing the growing aesthetic needs for the automobile, consumer appliances and other industries both in India and overseas.

SJS is a blend of strong design capability backed with the state of our manufacturing in an environment that few can match globally and I am proud of where SJS has reached today. We have some robust growth plans for this company to make it reach new heights and we are just getting started for this exciting journey ahead.

We had declared our results yesterday and I trust you would have had the chance to go through our investor presentation as well. I will use this as a reference point while I speak to you today. So SJS has been consistent in its performance and this quarter is no different, as we have yet again continued to outperform the industry on a Y-o-Y basis. Premiumization theme is accelerating every year and we are quite bullish on the premiumization within the automotive and consumer durable industry both in the medium and the long-term. However, there are some near-term challenges due to global uncertainties.

As you would observe in Slide 6 for the quarter ending June 2022, the two wheeler industry production volume grew by 38% Y-o-Y while SJS two-wheeler sales shot up by 75%. Passenger vehicle industry volume grew by 33% and SJS PV sales also grew around 30% Y-o-Y. Overall, automotive segment that is two-wheeler and passenger vehicles combined grew by 37% Y-o-Y while SJS automotive segments grew by about 54% Y-o-Y. Our consumer appliances segment also grew by about 10% Y-o-Y. Sequentially, SJS domestic sales are largely in line with the two-wheeler and passenger vehicle industry production. Quarter-on-quarter domestic sales have picked up and witnessed good performance while exports were largely impacted on account of various global uncertainties and challenges. Despite Q-o-Q impact on exports, SJS maintained its Q4 FY ’22 sales momentum.

Slide 8 further talks about the financial performance. I would like to highlight that SJS delivered a strong Q1 FY ’23 performance in a challenging environment, especially for the automotive industry, which continues to face headwinds of commodity price increases. Our consolidated revenue grew 39% Y-o-Y to INR1,031 million. We delivered a robust growth on EBITDA and PAT numbers, which jumped 50% and 71% Y-o-Y respectively. We continue to maintain strong EBITDA and PAT margins at 26.4% and 15.4% despite inflationary environment and raw material supply chain constraints. So strong focus on VAVE measures and operational efficiencies at our plants and the improvement initiatives we’ve taken have led to EBITDA and PAT margin expansion by 170 basis points and 280 basis points Y-o-Y respectively.

Sequentially, the two wheeler and consumer appliances segments grew by about 4%, 5% and 7% to 8% respectively. Our margins remain robust with EBITDA and PAT margins again improving by 106 basis points and 82 basis points quarter-on-quarter.

Our domestic sales witnessed around 58% Y-o-Y growth with strong sales growth in all our end segments. Exports were impacted on account of global uncertainties like the Russia-Ukraine war leading to lower demand, as well as supply chain constraints of raw materials for EMEA region manufacturers, rise in fuel prices globally and an inflationary environment. However, as we mentioned earlier, we are happy to see that despite this Q-o-Q impact on exports, SJS has maintained its Q4 sales momentum.

As mentioned earlier, exports is a large opportunity and continues to remain a strong lever of growth for the company over the medium and the long-term, due to the fact that at SJS, we are focused on improving our competitive edge by reducing waste and improving our margins, and we have demonstrated this every year, so year-on-year, our performance continues to be very strong.

SJS standalone has witnesses a strong 29.4% Y-o-Y sales growth, delivered an even stronger growth on the margin front. EBITDA and PAT grew by 40% and 51% respectively for SJS. Higher sales and operating leverage have led SJS to deliver consistent improvement in margins, so SJS standalone margins improved by 244 basis points and 283 basis points to 32.2% and 20.3% both for EBITDA and PAT respectively.

Q2 FY ’23 has started on a robust note for us. We’ve achieved revenue of around INR380 million in July ’22 on back of improvement in customer demand. Despite raw material supply chain constraints and inflation, we continue to maintain efforts to maintain our margins. We believe we are on the right path to meet our FY ’23 Y-o-Y growth rate of 25%, that I informed you in my last call. Going ahead, we believe that domestic two-wheeler and passenger vehicle industry outlook will be positive with improving chip availability and expectations of a pickup during the festive season. Export volumes too remain strong on a medium term, but near-term volumes could get impacted given the various macro issues in some key markets.

Coming to Slide 9, just last quarter, we laid out our FY ’23-’25 strategy and today we are very excited to share some of our key business updates, which will act as a stepping stone for us in achieving our goals. So we expanded our overseas footprint by adding two Whirlpool plants in North America as our customers. We entered a new country Argentina by winning business with Alladio, which is a Mabe Group company, who is a leading manufacturer of consumer appliances in Latin America. Additionally, Exotech has won first export business by cross-selling chrome plated parts to Whirlpool.

We also have a razor sharp focus on building mega counts with our global customers and winning new orders from customers like Continental, Marelli, Stellantis and Whirlpool among others. We have also won several projects for key customers like Mahindra, TVS, Samsung, Bajaj Auto and Maruti Suzuki. In fact, we would like to share that we are very proud to be associated as a supplier of chrome plated parts to Scorpio-N, that recently set the market update by announcing 1 lakh bookings in the first 30 minutes of its launch. So, the demand in the market remains very robust and SJS has the right products to grow.

SJS is also working along with EV manufacturer like Benling India, Navbharat Edison Motors, Gravton amongst others to fulfil EV companies demand and requirements. Our customers are recognizing our efforts on new product development as we bag more and more orders from our existing and new customers across new product categories. Honda Motorcycle, a scooter company recently awarded us for excellence in new product developments at their annual supplier meet held recently.

We have identified a large parcel of around 7.5 acres of land in Ranjangaon, Pune, where we will build a state-of-the-art facility to expand our chrome plating business. We expect this land transfer process and possession of the land to be completed by October ’22.

So at the end, I would like to mention that we are a company delivering strong financial performance and have a very strong revenue and margin growth trajectory ahead. As I mentioned to you last quarter, though the automotive industry has been going through its share of challenges for the past two years, SJS has consistently demonstrated its robust performance in these tough times and we are confident we will continue to do so in coming years as well.

Keeping that in mind, we stay firm on our FY ’23 outlook as well as on our medium-term guidance over FY ’23 to FY ’25. We believe we are moving in the right direction. We have high visibility of around 90% of our forecasted order book for the current year. Premiumization, new customer wins, expected exports recovery from H2 FY ’23 onwards and a positive outlook expected for the automotive and consumer durables will enable us to deliver higher sales growth for SJS and the industry.

Our strategy for Exotech capacity expansion to meet higher customer demand pipeline, continued thrust on exports to diversify our business, consistent efforts to develop new products and technologies to stay ahead of the curve and building mega accounts with key customers will give the much needed boost to our sales growth engine. Higher sales growth, strong margin profile and expected operating leverage will drive our PAT growth of about 30% Y-o-Y in FY ’23 and going ahead.

Simultaneously, we are actively evaluating opportunities and building M&A pipeline to achieve our revenue growth over and above our organic growth rate of 25%. We have laid foundations for a unique business to grab all organic and inorganic opportunities that will help us propel in our growth journey. SJS is poised to grow at a much faster rate than the underlying industry and through the financial year ’21-’26, so we are quite optimistic about the future.

So, thank you very much and we are now open to take any questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services Limited. Please go ahead.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Hi, sir, couple of questions from my side. Firstly when we are looking at about 25% growth in revenue terms for FY ’23, how much of this is dependent on two-wheeler recovery and what are we building in that 25% growth?

Sanjay Thapar — Chief Executive Officer and Executive Director

Sorry, your question was not very clear, so your question is regarding 25% growth in FY ’23?

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

How much of that will be dependent on the two-wheeler industry recovery?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, two wheelers contribute about 45% of our sales currently and we are winning new businesses, so our sales trajectory is grown on what is the current sale that we have and the growth based on what the industry grows, in addition to that, there are new businesses that we win which we are nominated for as I mentioned 90% of our sales for FY ’23 is already awarded to SJS, so we see very strong traction and confident of achieving this 25% number.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. So, even if two-wheeler industry doesn’t see a fully recovery, we still should be achieving close to 25% growth?

Sanjay Thapar — Chief Executive Officer and Executive Director

As I said, we are sufficiently nearest in terms of the product that we do, but two wheelers, our dependence is 45% and at the moment, we see that demand shaping up very well.

Devanshi Dhruva — Investor Relations

So, Jinesh as we had mentioned earlier, that the time when we had set out our targets in terms of growing at a CAGR of 25%, the underlying assumption was that the auto industry and consumer durables industry would be growing at 10% to 12% and we will be outperforming them. Obviously, if the auto industry instead of 10% to 12%, if it grows at say, for an example, say 4% to 5%, there is bound to be some kind of impact because, yes, we have de-risked the business, but still to a certain extent, we are linked to auto industry as well, right.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. This is very clear that way. Secondly, can you talk about the Exotech’s performance in this quarter, how were the revenue trajectory, how did the margin behave in this quarter, is it on track to achieve what we — is the turnaround which we are looking to achieve?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, growth at Exotech continues very strongly, so on a Y-o-Y basis they grew 70% from FY ’22, Q1 FY ’23 was 70% — 70.9% higher than Q1 ’22. And on a quarter-to-quarter basis — yeah, sorry, here the EBITDA margin I have that number here with me, the EBITDA margins in Q1 were 12.4%, so that is how. So demand is shaping up well and we are winning a lot of new business at Exotech.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. And last —

Sanjay Thapar — Chief Executive Officer and Executive Director

And we also won export business with Exotech, so our theme really was to leverage or cross-sell our products to our existing customers at SJS and we have done that successfully for a very large global customer, Whirlpool.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. And sir, my last question pertains to the export opportunity at chrome plating, I mean, how big that opportunity can be given the nature of chrome plating as a process? Can that be a very large opportunity for the developed markets where the chrome plating might be difficult to scale up in terms of local manufacturing, can this be a very large opportunity for us?

Sanjay Thapar — Chief Executive Officer and Executive Director

It is indeed a very large opportunity amongst the aesthetic industry, chrome plating is a large chunk of the aesthetics pool that we have. And this is estimated to be —

Devanshi Dhruva — Investor Relations

So the PV industry as it is a $2.8 billion market that we said in North America and European countries. So if you will actually see largely it is PV industry and for passenger vehicles you require a lot of lot chrome plated parts as well and especially with premiumization, the demand for products like 3D dials, chrome plating and all is increasing. So definitely the market for us is huge, but to quantify in terms of a number, we may not have a current number to give it right now.

Sanjay Thapar — Chief Executive Officer and Executive Director

So let me just substantiate what Devanshi said, so we are right at the cusp of — chrome plating for us is relatively new business. We acquired this company, we grew it 50%, Exotech sales grew 50% last year and the order book traction that we see is exceedingly strong. That is why we informed the investor community that we would be investing into a new plant and building capacity and the part that we are looking at for exporting are relatively small parts, badges, logos, emblems which we have no real disadvantage in terms of shipping out of India.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. And just to clarify this $2.10 million number which Devanshi mentioned, is the chroming market — chrome plating market for U.S. and Europe for the passenger vehicle industry?

Devanshi Dhruva — Investor Relations

No, that is the entire PV industry for aesthetics — global aesthetics industry for PV.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay, got it. Thanks and all the best. I will come back in queue for further questions.

Operator

Thank you. The next question is from the line of Mahesh Bendre from IDBI Capital. Please go ahead.

Mahesh Bendre — IDBI Capital — Analyst

Hi, sir, thank you for the opportunity. Sir, could it possible to share the breakup from this quarterly revenue in terms of two-wheeler, four-wheeler consumer durable even for domestic and export?

Devanshi Dhruva — Investor Relations

The domestic sales would be somewhere around 85% to 90% and exports would be around another 10% to 12%. And exports, this is largely because our experts have been impacted because of the Ukraine-Russia war which is going on, that has impacted the EMEA demand as well as a lot of EMEA auto manufacturers are also getting impacted because they are facing issues of supply chain constraints in terms of raw materials.

Sanjay Thapar — Chief Executive Officer and Executive Director

Yeah. So, Mahesh, in terms of India versus exports, so last quarter, our India sales were INR965.8 million and exports were at INR65.9 million, so that just to give you a break up.

Mahesh Bendre — IDBI Capital — Analyst

Sure. Ad sir, in terms of two-wheeler, four-wheeler and consumer durable?

Sanjay Thapar — Chief Executive Officer and Executive Director

Okay. So on a consolidated basis, our two wheeler sales were INR464 million, passenger vehicle sales were 311.9% — INR311.9 million, consumer goods were INR193.2 million, farm equipment was INR53.1 million and others INR9.5 million.

Mahesh Bendre — IDBI Capital — Analyst

Sure. And sir, in absolute term, what was the contribution from chrome business?

Sanjay Thapar — Chief Executive Officer and Executive Director

Chrome was —

Devanshi Dhruva — Investor Relations

Exotech is entirely chrome plating business, right, so if you take your consolidated minus standalone, you will get your chrome plating business.

Mahesh Bendre — IDBI Capital — Analyst

Sure. That’s okay. Sure, sir. And sir, another question is that, in the month of July we — in the presentation you have mentioned that in the month of July, we attained the sales of around INR38 crores in the month of July, so if I just make it for — similar for next three months, it’s like INR114 crores, which is like a 10% sequential growth, which seems to be very strong in this kind of environment, so do you think this momentum will be sustainable going forward?

Sanjay Thapar — Chief Executive Officer and Executive Director

Absolutely. So we have a very strong order book and already we see an uptake. In fact, what our internal targets within this year were, so we have more than offset this loss of sale in exports by increased domestic traction and we see the consumer demand very, very strong both across two-wheeler and four-wheeler requirements in India. So we are quite bullish that we will achieve our target.

Mahesh Bendre — IDBI Capital — Analyst

Sure. Sir, last question from my end is that, last quarter we mentioned that we have received orders from Continental, Marelli, Stellantis and even Whirlpool. This quarter we are talking about Alladio, then electric vehicle Gravton and so on. So, I mean, just how this will translate into a revenue, what is the potential for the cumulative revenue out of these orders whenever they achieve a steady state, any ballpark number?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, I would not like to give a number on the potential, but these are very large opportunities. So EV market of course is an evolving market in India, so we are trying to supply to all the people who are there, so most of customers we are talking to, so that of course will have its own trajectory. But in terms of Alladio, Alladio is the part of the Mabe Group, which was earlier owned by GE Appliances, so they are a $4 billion company and they have plants across the world. So fundamentally they have 13 plants in Latin America and produce a large number of domestic appliance products. So we’ve entered this market and how fast can we grow, it depends on how this business grows, but the potential is huge.

Mahesh Bendre — IDBI Capital — Analyst

So, when these orders that we bagged will achieve, I mean, they will peak in the — will they peak in the 2026 or 2025, any timeline for this?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, this is like a mine, okay. So peaking, we are far away from peak. As I said they do — they make about 9 million cooking products, they make about 2 million washing machines every year, they make about 2 million refrigerators per year, they have 13 factories across Mexico, Argentina, Colombia, Ecuador supplying to different parts of the world. So it is a very large business,. So we have just started our entry position. So I am not in a position to answer at the moment that what is the maximum sales that we can do, but the outlook seems to be exceedingly promising. So we would like to work with large customers, that’s our strategy, that’s what our strategy has been, that we would like to operate or work with mega customers, so that we can build mega accounts with these people. So Alladio is a strong player in the Latin American market and that is the reason why we targeted them as a customer.

Mahesh Bendre — IDBI Capital — Analyst

Sure. And sir, last question from my end is that, we have received two orders from Whirlpool’s two new plants. So I just wanted to know how many plans we are currently supplying for Whirlpool and what is the potential going forward?

Sanjay Thapar — Chief Executive Officer and Executive Director

Whirlpool is a $25 billion company globally, okay, so we are supplying to — I do not have the number here with me, as to how many plants that we, I don’t have it absolutely ready with me at the moment. But we supply to plants in Asia, we supply to plants in EMEA and U.S. we were just supplying to one plant, as I said during our IPO before the pandemic. And now that the pandemic has opened, we’ve opened doors to two new plants Clyde and Marion. So these two plants are large plants for Whirlpool in Ohio and we will continue to enter more and more plants in North America and that is our target.

Mahesh Bendre — IDBI Capital — Analyst

Sure. Thank you so much, sir.

Sanjay Thapar — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line Rahul Ranade from GSAM. Please go ahead.

Rahul Ranade — Goldman Sachs Asset Management — Analyst

Yeah, hi, sir. Thanks for the opportunity. Just a couple of questions from my side, so starting with the chrome plating subsidiary where at least on a sequential basis there is some bit of margin contraction. I can see it’s largely coming from the RM percentage of sales going down. So just over a year, is there any under recovery in terms of delayed pass-through from customers side or is it just kind of claim the denominator effect, which is impacting the margin?

Sanjay Thapar — Chief Executive Officer and Executive Director

No, so I would say that looking at it quarterly is not the right way to look at it, because any — so we see — there is a strong pass-through mechanism that we have and we are able to get price increases from our customers, we’ve been able to do that. But, there is a lag obviously, so let’s say for the current quarter if some raw material prices have increased, so the customer also observes it for a few months and then we approach them. So this understanding is clear, they understand that this is a business where they need to be cognizant of the increase in input cost and then we recover it, so this is just a marginal blip in the first quarter, which will — we should get recovered. As I said, we should look at it annually rather than quarterly.

Rahul Ranade — Goldman Sachs Asset Management — Analyst

Sir, is there some kind of seasonality also in terms of the product profile which is a kind of in some quarters margins would be lower than thick quarters, is that also one way to think about it?

Sanjay Thapar — Chief Executive Officer and Executive Director

Not really, not more than what the industry per se is. So supply — we are very fairly diversified and we are diversifying this chrome plating business also. So we supply to the sanitaryware industries, which is not seasonal at all, so houses get build all the while, people replace what they want. Also, in the consumer appliance and the automotive industry, pretty much the demand is in line with the industry, so it peaks around festival season time and so I would say not very significant seasonality to the sale at Exotech.

Rahul Ranade — Goldman Sachs Asset Management — Analyst

Okay, understood. And just one more question in terms of your comment where four-wheelers — in terms of two wheelers you said that sequentially it has grown to the tune of 4% to 5% in terms of revenue. So if I look at underlying in, two-wheeler data sequential growth is anywhere in the range of 10%, 11% as the two-wheeler industry as a whole. But probably in the let’s say 150cc above there is some de-growth because of the chip shortage, etc, which is OEMs and that. So would it be fair for us to see our two-wheeler growth in line with more premium motorcycle growth rather than the overall industry?

Sanjay Thapar — Chief Executive Officer and Executive Director

No, our products are quite secular, so we supply to entry level bikes, we supply to top end bikes as well, so it is — but depending on the specific model, the content per vehicle as we explained earlier during the calls, varies because the designer has different aesthetic requirements for each vehicle. So it depends on the number of products that are made because we make a lot of SKUs and lot of models. So we are present across the segment right from the top end to the entry level bikes and typically some models tend to do well, some don’t do well, but overall I think we still maintain that growth. And as I said the theme driving growth here is premiumization where there is added content on these vehicles, so that is what we look at when we forecast our sales.

Devanshi Dhruva — Investor Relations

Rahul, that is why the best thing would be, because since we are supplying across different models which are whether in mass segment or premium segment, the best is that’s why to see in terms of quarterly there could be some up and down movements, best is to look at yearly annual trend how it moves, because that trajectory moves in the direction — it will move in the direction that we have guided for.

Sanjay Thapar — Chief Executive Officer and Executive Director

So, like you saw the last year performance, the industry grew by 38% and we grew by 75% right, so we outperformed that, so on a quarter-to-quarter I would say just look at it for a larger range and that scene plays out.

Rahul Ranade — Goldman Sachs Asset Management — Analyst

Sure. And just for my understanding to in terms of production, let’s say, to the two-wheelers because the product size is so small, does it work on a just in time principle for the OEMs or do they kind of procure like some days worth of stock and use it and then procure it more in terms of batches rather than just in time. Just to understand if that is the case then probably then maybe I am wrong in correlating quarter-to-quarter like you are saying I should look at it more from a longer term perspective?

Sanjay Thapar — Chief Executive Officer and Executive Director

No, so there are — the OEMs maintain some stock, they ask us to maintain some stock in some cases where the OEM has a constraint, they would like to have just in time supplies, we do that also, but most of them is through stocks. So there is a little variation as I said and you rightly understood that one should look at a larger frame, so year-on-year is the better number to look at than to look at immediate quarterly inwarding because sometimes the OEM have some stock for a particular model which they don’t want to lift the material at the moment. So depending on the situation in the supply chain, so absolutely, quarterly to look at it may not give the right picture completely.

Devanshi Dhruva — Investor Relations

Also sometimes, Rahul, what happens is that maybe the OEM would have planned a particular launch in say a particular quarter, but due to certain constraints or maybe some other reason, they also delay the launches. So accordingly in cases, we are giving them just in time product then probably that will move to another quarter and in some cases like exports, we do have to send it in like prior advance.

Rahul Ranade — Goldman Sachs Asset Management — Analyst

Understood. This is very helpful. Thank you.

Sanjay Thapar — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Joseph George from IIFL. Please go ahead.

Joseph George — IIFL — Analyst

Thank you for the opportunity. I have a couple of questions, one is, you mentioned about the new plant that is setting up in Exotech. In that light, actually two questions, one is, what is the return expectations that you have maybe in terms of ROCE on this incremental capital? And second is for FY ’23 and FY ’24, at a consolidated level, what kind of capex including maintenance capex should we build into our models?

Devanshi Dhruva — Investor Relations

So, the capacity expansion first, if you use it as a full capacity, that returns we expect it somewhere around 20% ROCE for Exotech. And capex for the full year would be, because we are incurring our capacity expansion, so that would be somewhere around INR60 crores.

Joseph George — IIFL — Analyst

Sorry. This is the capex for the plant or are you guiding for INR60 crores of consolidated capex for this year?

Devanshi Dhruva — Investor Relations

Consolidated capex including capacity expansion at Exotech as well as for —

Saumya Moganty — Vice President, Finance

One minute I will answer this, if we see the overall capex for the new plant is INR100 crores, yes, for this year, it will be around INR50 crores.

Joseph George — IIFL — Analyst

Yeah. So, including the capex that we incurred for the Pune plant — the new Pune plant, you will have a total capex at the consolidated level of about INR60 crores this year, should we take a similar number for next year?

Sanjay Thapar — Chief Executive Officer and Executive Director

Yes, largely so.

Devanshi Dhruva — Investor Relations

Largely so.

Joseph George — IIFL — Analyst

Sure, thank you.

Operator

Thank you. The next question is from the line of Dhiral from Phillip Capital. Please go ahead.

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

Yeah, good morning, sir, and thank you for the opportunity. Sir, if I look at your presentation and particularly on the passenger vehicle side, so our growth is lower than the industry growth, so is it due to some model impact?

Sanjay Thapar — Chief Executive Officer and Executive Director

Our passenger vehicle sales are primarily on two accounts, one is chrome plated parts that Exotech supplies, in addition to that we supply dials out of SJS. So we — our passenger vehicle sales has increased last year, thanks to this in large measure due to Exotech. That increase we are doing, we are opening up the market to other customers so at the moment, we are not participating in the secular growth of the four-wheeler industry, but moving forward, we will increase our footprint and then you would see the traction of growth much stronger.

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

Okay. And sir, we are also in the process of acquiring 7.5 acres land in Pune, so is it — is this over and above the existing capex plan of chrome plating or this includes — this is for the chrome plating incremental capex plan?

Sanjay Thapar — Chief Executive Officer and Executive Director

Yes, this includes the capex for the capacity expansion.

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

Okay. And sir, what is the contribution from the new product technology or advanced product?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, our contributions basically are fairly steady across whatever products we make. So typically the margins what we said are about 26% EBITDA margins we earn on the current business, the new businesses are a little higher for a reason that the competition intensity in those segments is much lower, so maybe about 10% to 12% higher.

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

But sir, what is the contribution?

Devanshi Dhruva — Investor Relations

10% to 12% is the contribution.

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

Okay. And sir, lastly have you started supplying the products to the new clients like Stellantis and Continental?

Sanjay Thapar — Chief Executive Officer and Executive Director

Yes, so we have won the orders, they are under product development and we will start supplies. So at the moment, these are under development, so these businesses are won, we will start supplies as and when the SOP for those unit happens.

Dhiral Shah — Phillip Capital India Pvt. Ltd — Analyst

Okay. Thank you so much, sir.

Operator

Thank you. The next question is from the line of Jeetu Panjabi from EM Capital Advisors. Please go ahead.

Jeetu Panjabi — EM Capital Advisors — Analyst

Hi, thanks for the opportunity. I have two questions, one, can you give us some color on what is the activity level in new product development and both for the domestic side and the export side and are you seeing that accelerating or is it just running at a normative phase like in the previous year –?

Sanjay Thapar — Chief Executive Officer and Executive Director

We see very rapid acceleration in our new development activity, because we are mining a lot of new customers, a lot of new models are coming to us, so our people are very, very busy. So while Honda Motorcycles scooter company awarded us for excellence in new product development, it is a reigning business if I may use the word, so we are very, very busy.

Jeetu Panjabi — EM Capital Advisors — Analyst

And do you have enough capacity there or you are adding capacity under development side?

Sanjay Thapar — Chief Executive Officer and Executive Director

I mean, we have a factory within the factory concept, and the same thing for the product development teams, so the multiple product category that we deliver, we have separate teams within the new product development department who focus on this. So that is what allows us to churn out new development product at a much faster pace and customers are very happy with our output. So at the moment, we don’t see, but typically as we do resource planning and of course we regularly augment our capacities in line with what is the order outlook.

Jeetu Panjabi — EM Capital Advisors — Analyst

Okay. The second question is, the raw material prices we saw them going up and then softening a bit, do you think you navigate all this with stable margins or do you see some pressure at some point in time?

Sanjay Thapar — Chief Executive Officer and Executive Director

No, as we already said, we’ve expanded margin, so while the world over the talk is of commodity headwinds and supply chain constraints leading to rise in shipping costs and container costs and getting raw materials, we’ve actually expanded margins both on a quarter-on-quarter basis and on a year-on-year basis, so I think that is the key strength of the company that no matter what the external environment is, we are very conscious on driving margin improvement within the company.

Jeetu Panjabi — EM Capital Advisors — Analyst

Okay, excellent. And the last question is, as your stated objective of increasing exports faster than domestic business, is that directionally moving in the right direction?

Sanjay Thapar — Chief Executive Officer and Executive Director

It is, because we set ourselves a very strong lever for growth in the export markets, that is primarily our cost competitiveness. So as you see, as I mentioned in my earlier calls, the people we compete with in export markets are manufacturers in Europe, North America. This is a batch mode operation business where it is very difficult for those guys to compete with us and we are further improving our competitive edge by constantly looking at ways to reduce cost and improve margins. So we are very, very strong contenders for the export market. Due to the two years of pandemic, we were not really able to meet our customers, as we would have liked, but now that it is opened up, you can already see that we have some good order wins.

Jeetu Panjabi — EM Capital Advisors — Analyst

Okay, excellent. Good wishes sir. Thank you for that.

Sanjay Thapar — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Nikhil Kale from Axis Capital. Please go ahead.

Nikhil Kale — Senior Vice President

Yeah. Thank you. My first question was on the Exotech export orders that you have talked about, what would be the margin profile for these products, would it be higher than a current kind of domestic supplies?

Sanjay Thapar — Chief Executive Officer and Executive Director

Largely. it would be, this is the first order that we won, it is chrome plating and painting, so this is in line with the margin that we have. So we’ve not really pushed the envelope in terms of what margins we can command. The idea really was to enter a large global customer, which we’ve done successfully. I think the margins are in line with what we have for other products. And moving forward, of course, we expect these margins to be higher.

Nikhil Kale — Axis Capital — Analyst

Okay. Got it. And just on the business wins that you have talked about which is with Whirlpool and Alladio, so can you just talk about what are the parts that you will be supplying here and then I’ll just follow it up with another question on the global space?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, we will be supplying to the washing machine business which are overlays, so we have a lot of experience in the overlays. So that is what we will be supplying to Alladio to begin with. They make a lot of appliances, so there are opportunities to sell other products as well.

Nikhil Kale — Axis Capital — Analyst

And Whirlpool is also overlays or is it the badges that you are doing?

Sanjay Thapar — Chief Executive Officer and Executive Director

Whirlpool is a chrome plated painted badge so that is that business that we won.

Nikhil Kale — Axis Capital — Analyst

Okay. And then just related to this part, just wanted to understand who are we replacing for these orders, right? I am sure Alladio would have been sourcing from some of the other suppliers. So who are we replacing and globally are we seeing, so I understand that globally this is quite a fragmented space, there are quite a lot of smaller suppliers, regional suppliers. So are we kind of seeing consolidation happening in this space gradually, because of other global issues that are kind of playing out?

Sanjay Thapar — Chief Executive Officer and Executive Director

No. What’s happened really is that people are taken good — due to post-pandemic, everybody is very cognizant of how stable are these supply chains, so we are benefiting from this China Plus One policy where a lot of exports happened out of China, so they are looking at alternatives and supplier like SJS, which have global presence, already supplies to large global marquee customers, is a natural choice for them because we are supplying to the who’s who of the industry, both in consumer as well as automotive space.

So that is a natural advantage that we have at SJS. Plus as you rightly said, it is a fragmented market, most of the suppliers in even North America or in Europe or in Latin America are relatively small and OEMs are looking at very strong companies which have a strong financial profile, and are stable, so that they can guarantee delivery to them. So we have an impeccable track record of exporting to 20 countries and we supply parts without ever a customer line stopping, so that is a very powerful statement to make and that is exactly what the customers are looking for.

Nikhil Kale — Axis Capital — Analyst

Okay. And just lastly, Sanjay, if we look at this space, while it is fragmented, I think profitability is also quite high, now from our inorganic kind of targets, are we seeing that globally there are companies which are coming under stress, which can provide us maybe with an opportunity to acquire these companies?

Sanjay Thapar — Chief Executive Officer and Executive Director

More certainly, so that is what we are doing at the moment. We are looking at pipeline of — creating a companies which are making products similar to what we do. So this is a high margin business, so those companies also have a margin, but their fixed costs are too high. So as I said earlier in our calls, we have a very strong development capability here at India. We would look at acquiring companies doing the development work and backend work in India and having the customer facing interface as it is in those companies and extract more margins. So our focus very clearly is on profitability and we hope that with this strategy, we will be able to make those companies even more profitable and a good addition to our company.

Nikhil Kale — Axis Capital — Analyst

Okay, thank you. Thanks.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ronak Vora from AUM Advisors. Please go ahead.

Ronak Vora — AUM Fund Advisors — Analyst

Sir, with the current capex of INR100 crores that you —

Operator

I’m sorry to interrupt you Mr. Ronak. May we request you to please speak little louder?

Ronak Vora — AUM Fund Advisors — Analyst

Hello?

Operator

Yes. Please go ahead, sir.

Ronak Vora — AUM Fund Advisors — Analyst

Yeah, sir. The current capex of that you outlined for the chrome plating business of INR100 crores and you said that the sales will ramp up from INR130 crores to INR300 crores, so basically our asset turnover will just be 1.7 times, correct?

Devanshi Dhruva — Investor Relations

No. So the thing is that in this case, we are buying an entire land as well as constructing the building also, so it’s not just the cost of the equipment and setup but it is also because we are building capacity, the entire building acquiring land, all that cost is going into this entire capex of INR100 crores.

Ronak Vora — AUM Fund Advisors — Analyst

And once the capex is — when do we expect the capex to complete and how do we plan to ramp up the whole capex?

Sanjay Thapar — Chief Executive Officer and Executive Director

Yeah. So, we expect that we should be able to build this plant in about a year and a half, so 18 months is what we look at,. So — and at the same time, we are building a strong order pipeline, so we imagine that we would be able to double our sales at Exotech in the next three years, so that is the target that we have.

Ronak Vora — AUM Fund Advisors — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Anirudh Gangahar from Avendus Wealth Management. Please go ahead.

Anirudh Gangahar — Avendus Wealth Management — Analyst

Thank you and good morning. Two, three questions from my side. Firstly on the Slide number 16, you’ve given the FY ’23 industry domestic volume growth for two-wheelers and passenger vehicles at about 16% and 19% and you mentioned that your underlying growth targets of 25% top line growth is based at about a 10% to 12% growth. Could you help me reconcile that our profits are still based on 10% to 12% and if that is the case and this 16% and 19% is it something of an optimistic scenario or how should I look at this? That’s the first question.

And the second question is more strategic in nature, last quarter you mentioned that we are looking for CEO to run the business while you are looking more at the business development in planning and the pipeline for the M&As, could you help us understand where we are in that process? Thank you.

Sanjay Thapar — Chief Executive Officer and Executive Director

So first things first, so this outlook or expectation of two wheelers growing at 15% and the passenger vehicles growing by 19%, so I think this is coming out of all-time low slide in the volumes that they were, so these are essentially broker reports and market research reports on what is the outlook for the current financial year for these companies. So our outlook of 25% growth was based on 10%, 12% growth of the underlying industry, so that is good enough for us. So all the slides signified is that while the industry is bullish about this growth, we feel that we are in the right segment close to about 70% of our sales is coming from these two industries, which are likely to grow much beyond that 10%, 12% target that we had originally, so we are quite bullish and optimistic that our overall 25% growth target would remain.

Anirudh Gangahar — Avendus Wealth Management — Analyst

Understood. Thank you.

Sanjay Thapar — Chief Executive Officer and Executive Director

Okay. And you had another question on the strategic piece, so could you repeat that question again, please?

Anirudh Gangahar — Avendus Wealth Management — Analyst

Yes, in your last earnings call you had mentioned that you would be moving out of the CEO role and you’ll be looking to hire somebody for that —

Sanjay Thapar — Chief Executive Officer and Executive Director

So, what we — so we’ve setup a stable company. Joe and I have run this company and we’ve created this infrastructure both in terms of the human resources and the [Indecipherable] system that we have. Now what we are looking at is that what would be the next level for the company, more futuristic products. So we are — the search for the CEO is on and we are in the process of finalizing this candidature, so in the next few months we hope to have a CEO on board.

Anirudh Gangahar — Avendus Wealth Management — Analyst

All right. May I just ask one other question, you mentioned that 90% of your targeted sales in FY ’23 the orders are already in the bag. Do you have any assessment about the next year? How much of the lead time would you know that how much of let’s say FY ’24 to previous as you mentioned which is 25% CAGR, so we are looking at a 25% top line growth in FY ’24 as well. Do we have any assessment or it is too early to know how much of those orders are in — would probably be, may not be in the bag, but we got fairly good visibility because it is all model based?

Sanjay Thapar — Chief Executive Officer and Executive Director

So our outlook really is that next year also we should grow at 25%, but we don’t give out the forecast specifically for the year because the lead time that we have for development varies from two weeks to six months. So many times while we are in discussions with customers, the nomination is not done till much later, so that is the reason why we don’t give a forecast. So we talk every first of April, every year, where we stand and that is what we looked that, so 80% has grown to 90% in the first quarter for the current year, so similarly we expect next year also to shape up.

Anirudh Gangahar — Avendus Wealth Management — Analyst

Right. Thank you very much for the answers.

Operator

Thank you. The next question is from the line of Rajesh Jain from NB Investments. Please go ahead.

Rajesh Jain — NB Investments — Analyst

Good morning, congratulations on good set of numbers. So, I have two questions, the first one is regarding the receipt of orders, as and when we receive the orders from our customers, the new orders, how much time would it take to supply or first is to start the order and as well as to reach the peak level of that order?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, as I said to the previous question, our lead time, so we can actually deliver parts within two weeks, so dependent on the product category, so we have 11 product categories that we manufacture, so the lead time varies for each. Now while we can do the production within two weeks or one month or six months, depending on what the product is, the peak is reached based on what is the nominated business, when is the customer going to peak in terms of his volume requirements, so that varies based on customer demand. Normally the first year the customers ramp up and ramp up happens roughly about nine months to one year depending on the plan of the OEM, I cannot really comment on that, so we focus on making sure that we win the businesses, which are large volumes and we also make sure that we deliver very quickly so that we can start sales as quickly as possible.

Rajesh Jain — NB Investments — Analyst

Sir, is it fair to assume that if it is for the existing models the ramp up would be very fast since the customer would be having that demand ongoing?

Sanjay Thapar — Chief Executive Officer and Executive Director

Absolutely right.

Rajesh Jain — NB Investments — Analyst

Okay. Sir, my second question is, you talked about getting more and more export orders. So — and you also mentioned about the advantages that the company would be offering to export customers. So my question to you is other than the timely supplies, the quality and the financial strength of the company, the pricing would be the more important criteria while deciding for themselves. So just wanted to know what would be the price difference between the SJS and whichever the customers — whichever the competitors we would be replacing?

Sanjay Thapar — Chief Executive Officer and Executive Director

So, in the export market, OEMs look at a 10% advantage ballpark, so they would look at if they are buying from a European supplier, SJS price should be about 10% lower because they want to do some validation expenses, etc., they want to figure that out within the pricing. But our idea is that we are at the same quality level and better than your existing supplier, so ballpark number is about 10% lower is what their expectation is. At SJS as I said earlier, we are focused on improving and expanding that margin, so our manufacturing costs are far lower than that 10%, so I am much more competitive than a supplier in North America or in Europe supplying to that customer and that is the reason why we are very bullish on exports.

Rajesh Jain — NB Investments — Analyst

Okay. Sir, as and when you do any mergers outside India, you talked of shifting the design and development to India, but is there a possibility to shift the manufacturing also to India?

Sanjay Thapar — Chief Executive Officer and Executive Director

Yes, depends on case-to-case basis, so typically ideally what I would like to do is that the customer facing interface remains the same, there could be manufacturing done out of India, supply is there, so there are all these possibilities exist.

Rajesh Jain — NB Investments — Analyst

Okay. Thank you very much sir, and wish you all the best.

Sanjay Thapar — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Mahesh Bendre from IDBI Capital. Please go ahead.

Mahesh Bendre — IDBI Capital — Analyst

Sir, thank you again for the opportunity. Sir, you mentioned that you bagged the business for Mahindra’s new Scorpio-N, so is the content very similar to what we are offering for XUV 700 as of now?

Sanjay Thapar — Chief Executive Officer and Executive Director

Yes, largely in line, we do not want to give you exact numbers, but it is a very lucrative business.

Mahesh Bendre — IDBI Capital — Analyst

Okay, sure. Thank you so much, sir.

Sanjay Thapar — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Vijay Sarda from VL Finance. Please go ahead.

Vijay Sarda — VL Finance — Analyst

Good morning, Sir. Congratulations on very good set of numbers. Sir, my question is two pronged, one how we see our non-auto business developing over next three to five years as we already started working with Whirlpool and other, so how we see that business growing? That is the first. And second when we are talking about 30% kind of growth for over next two to three year, do we need to do additional capex more than what we stated of INR100 crores in order to get that growth?

Sanjay Thapar — Chief Executive Officer and Executive Director

So as I said — okay, let me answer the second part of the question first. So at Bangalore, which is our main facility, we are — our capacity utilization is still quite low, we just about 55% utilization, so we have enough headroom to grow further, so no significant capex required at Bangalore. At the chrome plating plant, we’ve already said, we expect to spend about INR100 crores to increase the capacity at that location, so that is what we foresee to do at the moment.

Coming back to the other question that how will our consumer business, what is the outlook for the consumer business? So we are extremely bullish, because we supply to virtually who’s who of the industry in India. We have not really been able to venture out for the last two years because of the pandemic, but we are winning large businesses. And as I said earlier, cost competitiveness is key to us, we already delivered the global levels of quality that these people require, so there is no doubt in my mind that competitively given that the strong trajectory — the strong profile that we have within the company for new product development, timely supplies, quick response to customers, we should be able to grow this very, very significantly. So 25% growth year-on-year is what looks absolutely possible and we intend to do that.

Vijay Sarda — VL Finance — Analyst

Thanks, sir. Just last question, this Pune capacity of this chrome plating, what kind of margin we can inch up to in the next two to three years once we do with the capex and all that, so currently we are around 12.8% is what has been said, so how much potential there we have?

Sanjay Thapar — Chief Executive Officer and Executive Director

So our strategy — okay, we do not like to give out very optimistic numbers, but we have a strategy in mind, the primary strategy is that we will change our customer focus from the domestic to the export market, now export market margins are higher and that is what will drive growth, moving forward, what I can guide is that our margins on a steady state basis at Exotech would be between 13% to 15%.

Vijay Sarda — VL Finance — Analyst

Okay. Great, sir. Thanks a lot, sir. Thank you very much.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Ms. Devanshi for closing comments.

Devanshi Dhruva — Investor Relations

Thank you everyone for joining us on this call. If anyone’s questions have remained unanswered, you can please reach out to me, and we will answer responses to the best of our ability. Thank you.

Operator

[Operator Closing Remarks]