Suprajit Engineering Limited (SUPRAJIT) Q2 FY23 Earnings Concall Transcript

Suprajit Engineering Limited (NSE:SUPRAJIT) Q2 FY23 Earnings Concall dated Nov. 15, 2022

Corporate Participants:

Kula Ajith Kumar Rai — Founder and Chairman

N.S. Mohan — Managing Director & Group Chief Executive Officer

Akhilesh Rai — Chief Strategy Officer & Director

Medappa Gowda — Chief Financial Officer and Company Secretary

Analysts:

Vijay Sarthy — Analyst

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Aashin Modi — Equirus Securities — Analyst

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Abhishek Jain — Dolat Capital — Analyst

Ravi Purohit — Securities Investment Management Private Ltd. — Analyst

Falguni Dutta — Jet Age Securities Private Ltd. — Analyst

Rohit Balakrishnan — ithought PMS — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Welcome to the Suprajit Engineering Q2 FY ’23 Earnings Conference Call hosted by Anand Rathi Shares and Stock Brokers. [Operator Instructions]

I now hand the conference over to Mr. Vijay Sarthy, from Anand Rathi Shares and Stock Brokers. Thank you, and over to you, sir.

Vijay Sarthy — Analyst

Thanks, Lizann. Good morning, all. On behalf of Anand Rathi Shares and Stock Brokers, I welcome you all to the Q2 FY ’23 results of Suprajit Engineering.

On the management side, we have Mr. Ajit Kumar Rai, the Chairman; Mr. N. S. Mohan, MD and Group CEO; Mr. Akhilesh Rai, the Director and Chief Strategy Officer; and Mr. Medappa Gowda, the CFO. As always, we will have initial review about the results, then follow it up with Q&A.

Over to you, Mr. Ajit.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Thank you, Vijay, and good morning to you all for our — and welcome to you all for our Q2 and half year results call.

I would like to thank Anand Rathi and also Vijay Sarthy and his team for hosting us for this call. As usual, I would go around and ask our team to make a short brief on activities for the first half and the Q2. Following that, we’ll have also the question and answer.

I’ll first start with our Managing Director, Mohan. Mohan, go ahead.

N.S. Mohan — Managing Director & Group Chief Executive Officer

Yeah. Thank you. Very good morning, everybody.

What I’ll do is as usual, I’ll give you an update on what’s happened in the second quarter and then I’ll really take you by division. So before we start, I’ll just give you a general update on the industry, which I think, by and large, you are all aware of. But in India, the two-wheeler segment is fully not out of woods, as we all know. Last quarter was not great again for two-wheel industry. October, particularly, and the festival season has brought in some cheer into the market. Now the question is, is it a flash in the pan? Is the rural distress over? I think we’ll have to wait and see.

PVs and CVs continued to show growth, but the industry is still not out of this chip shortages, but definitely, the situation has eased a bit. In terms of commodity prices, the northward march has halted, that I can very clearly look at. But we are yet to see any kind of significant drop in the prices. It’s still holding on there. In Europe, if I move to Europe, the gas and fuel shortages caused by the war is looming large, and it looks like it is turning into a recession there.

Energy costs have shot up, and people in Europe are hoping for a benign and a mild winter. Waiting period for cars in Europe still continues, despite the fuel crisis that we are talking about. The shadow of chip shortage still continues for all the European OEMs and Tier 1s. As far as our business goes, Suprajit Europe and SAL put together, we have done well and to our expectations. However, the exchange rate impact on the Hungarian forint and euro/dollar portion poses a challenge for us for our LDC unit there in Hungary.

Now if I move to Americas, very specifically, U.S.A., it’s very clear, and now it’s into a recession. Interest rates are moving northwards, real estate, housing markets have slowed down. So what happens is the segment that we supply to, what we call as outdoor power equipment, OPE, has started showing some signs of slowing down. Having said that, Wescon, I would say, did well in Q2.

China is a mixed bag. There are passing clouds of COVID restrictions. You know that in Q1, we came out of a COVID restriction at our Lonestar plant. The economy has slowed down. Political stability has, I would say, reinforced the sense of continuity. So overall, I would say it is the place to watch from both economical and geopolitical sense and its impact on the world economy. Our Lonestar operations did well in Q2.

Now having talked a bit about the industry, let me go by individual divisions. As usual, I’ll start with our, what we call as Domestic Cable Division or DCD. At DCD, both on the OEM front and the aftermarket front, we have had a strong performance. We have been able to pass on the material costs, however, as usual with some time lag.

Operational efficiencies are being kept a close watch through the TPA metrics at all the plants. Our efforts to go in for semi-automation or autonomation as I call it, is in good progress. And our one-stop facility for our aftermarket needs, which we call as the Unit 8 in Bommasandra, we expect it to be ready by this — end of this fiscal and ready to serve the market early next fiscal.

Moving onto Suprajit Europe and SAL, or the European cable operations. Here the key update is that we got a successful price increase and this was from all the major customers, including all the OEMs. As we anticipated, it took some time, but I think our perseverance and patience has paid. We have also successfully launched a few cables with the new customers on the new programs and we continue our winning business — new businesses in Europe.

At Wescon, the operational metrics and efficiencies are improving. Fundamentally, the hands-on approach, both by Jim Ryan, the President of what we call as the Suprajit Controls Division and also our CEO at Wescon, Steve, has been good — been seen on the shop floor. We have seen a good sales and EBITDA growth at all our SENA plants, that is Wichita, Juarez and in India.

At Phoenix, the challenge continues. Our ability to pass on the cost increases is being tested in the market. We have been successful in the OEM segment, to a certain extent in our other label manufacturers or the OLM segment and also in the aftermarket. In terms of restructuring at PLD, it is on and we are progressing as per our plan.

Now with respect to the LDC portion and the integration portion, I would want Akhilesh Rai to take you through each of the key plants. Akhilesh, over to you.

Akhilesh Rai — Chief Strategy Officer & Director

Thank you, Mohan, and good morning everyone.

LDC has shown good improvement in performance despite worsening conditions in Europe and the U.S. The plant management teams have worked hard to deliver operational improvements, along with our Max team integration effort that has successfully found and started delivering on various synergies and improvements and cost savings across LDC, SENA and SAL plants.

At China, the Lonestar operations came out of the COVID lockdown issues and delivered well in Q2, both on revenue and EBITDA front. Some dollars lost in translation. But in yuan terms, Lonestar is doing well. The woes at Siofok, our Hungarian plant continues. As Mohan said, the euro and Hungarian forint depreciation, also high inflation and continuously increasing energy costs are a cause for worry and have been a larger drag in this quarter. But on the positive front, we got the new plant head in Hungary who is working well under the leadership of Jim to ensure that we bring the plant back to black zero in terms of EBITDA, and then improve it further in the coming months.

We’re working on various actions, including price increases, supplier consolidation, — moving some parts to India and for manufacturing, etc., which are all already underway. The Matamoros plant in Mexico has faced some uphill task in terms of the demand in the U.S. market, due to chip shortages at some customers. However, the sales remained stable and more importantly, EBITDA has moved from negative to breakeven levels, mainly due to operational improvements that we’ve been managed to instill in the operations.

While we have been able to get some price increases mainly in the non-automotive customers, it proves to be a challenge in the automotive world. However, we continue to impress upon our customers the need for a fair price in these territories. As you know, this plant at Matamoros contributes close to 60% of the business of LDC. We are lowering our full-year estimated revenues from LDC from the earlier 95 million to [Technical Issues] and in the range of 5% to 7%. This is primarily due to some of the currency effects that we’re seeing globally.

As you know, our foray into automotive electronics has started to pick up, our new manufacturing facility for electronic products was inaugurated by Mr. Sudarshan Venu, MD of TVS Motors. We have put up an SMT line there, where we do instrument clusters, rotary sensors, actuators for charging flaps and electronic throttle control.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you, Akhilesh. Medappa?

Akhilesh Rai — Chief Strategy Officer & Director

Sorry, I have not…

Kula Ajith Kumar Rai — Founder and Chairman

Sorry. Okay. Go ahead, Akhilesh.

Akhilesh Rai — Chief Strategy Officer & Director

So, we have a good number of launches at STC coming up in the next few months and most of them are focused on the EV space. We continue to be focused on to bring out solutions to the industry with a clear focus on two-wheeler and non-automotive segment and both in the mechanical and electromechanical [Phonetic] areas. These products will be made available to customers both in India and globally and have been received well.

Thank you. And over to you, Chairman.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you, Akhilesh. Medappa?

Medappa Gowda — Chief Financial Officer and Company Secretary

Yeah. Thank you, sir. Good morning, everyone.

We announced the financial results yesterday. The consolidated revenue, including LDC for the half year ended September 30, 2022, was INR1,361 crores as against INR855 crores for the corresponding previous year, recording a growth of 59%. The consolidated operational EBITDA for the half year ended September 30, 2022 was INR136 crores as against INR129 crores for the corresponding period last year, with a growth of 5%.

The consolidated revenue, excluding LDC, for the half year ended September 30, 2022, was INR1,033 crores against INR855 crores previous year, with a growth of 21%. The consolidated operational EBITDA for the half year ended 30 September, 2022 was INR144 crores as against INR129 crores, with a growth of 12%.

The standalone revenue for the half year ended 30 September, 2022 was INR723 crores, against INR564 crores previous year, recording a growth of 28%. The standalone operational EBITDA for the half year ended September 30 September, 2022, was INR118 crores against INR104 crores previous year, recording a growth of 13%. [Speech Overlap] September 2022 was INR567 crores. This is with the acquisition funding for LDC acquisition. And we have a cash balance of INR285 crores invested in the mutual funds as on September 30, 2022. For any queries further, you can approach me anytime after the call also.

Thank you very much.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you. Thank you, Medappa.

Just to sum up the con — the briefs from all our team, the LDC performance has been in line — generally it’s been in line with the plan that we had brought out in the month of July 25 as a brief. Phoenix Lamps, we are actually seeing a change of trend in terms of margin performance. Wescon, domestic cable division, SAL, SEU, they all had very strong quarter and half year. I think the new initiative of STC in terms of an electronics division has taken off. We’re getting some really new interesting exciting new businesses. And I think electronics division would start scaling up the operations soon.

With this brief from our team, I now open the floor for questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Viraj from SiMPL. Please go ahead.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah. Hi. Thanks for the opportunity. Just have couple of questions. First is on the LDC. So if we just have to understand H1 and generally going forward as well, if you can just give some color in terms of if we’ve taken any write-offs in H1? And going forward, do we see any need for any further write-offs or provisions for that operation?

And a related question is when you acquired, we were looking at aspiration of close to double-digit EBITDA margin or even higher over next two years, three years. So what I understand in the call, you talked about somewhere around 5% to 7% operating margin. So is that only for FY ’23 or even in the long term, you are expecting that kind of a margin? So that is part one.

Kula Ajith Kumar Rai — Founder and Chairman

Okay. In terms of writing off or taking something, it’s an ongoing process in the first year. So, I would like you to sort of review our 25th July update where we have given this background. So as and when we see something, if it needs to be provided for, we provide for it. So it will be an ongoing process at least during the course of this year. So whatever we have found or we need to do, we have done and if there is anything more to be done, it will be done as we go forward. So that’s on that.

In terms of margins, again, I would like to address all of you from the point of view of our last brief on the 25th July. We did say that the first two quarters will be negative. And as you have seen — and that it will become progressively improving. You would have noticed that in the first quarter, we had a 5% negative EBITDA, whereas this quarter it’s only a minus, I think, 1% or whatever. And I expect it to be in the black this quarter. So, I think that’s how the whole movement will be there. And we also said that over the period of two years, or end of the next financial year, we should be reaching double-digit. And also we are expected that in the next financial year, we’ll do $100 million. I think all those statements that we have made in the July update holds foot.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. Sir, just one follow-up on this is, H1 has done somewhere around INR9 crores operating loss. So, I’m assuming this will be including the write-offs of the provisions or whatever [Speech Overlap].

Kula Ajith Kumar Rai — Founder and Chairman

Sorry. Can you repeat that please?

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah, in the H1, we made a provision — we made a EBITDA loss of INR9 crores to INR10 crores in LDC. And I’m assuming this is including the write-offs or the provisions.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Wherever. Yes. As I said, it’s not just only the operations. Anything that we have found that was not provided — has been provided.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Right. So if we kind of adjust for that, what will be the operating margin still in this business? [Speech Overlap]

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Let me say this. As we are operating for the first time, we don’t really want to distinguish this year between operating charges and exceptional charges. We’ll probably — unless the auditors suggest so, we will not be making it. It will be an ongoing exercise to clean up the operations. That may include operating issues and that may also include one-offs. So, we have not really — or rather, we have an internal tag, but we’ve not really talking about in the general public actually on that.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. Great. So, basically what I was trying to drive at is even adjusting for these provisions or write-offs, the margin which we are seeing currently is largely a factor of three elements, right, which is under-recovery on price, forex, and high energy costs. So is that — normally, one do expect that to reverse when we get price increases from OEs? Or that is largely — the recovery will largely be led by new order inflows.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. I think that’s a more interesting question, Viraj. I think there are two things — two aspects to it. I think in terms of business, we are also — we’re starting to win new businesses under LDC, interesting businesses. These new businesses are coming at new — what’s expected of Suprajit’s kind of margins, but they will also — you please understand, it will go into production over the next one to two years.

So there is a time lag between the new orders won at the current new margins to the time we actually receive those margins. And in terms of other points, you are right, there are multiple headwinds. On the pricing side, at the customer end, as Mohan was mentioning, on the non-automotive side, which is a smaller business for LDC, I think about 20% or so, there has been some decent traction and we’ve got some pricing, whereas the larger part, on the automotive side, it has been coming slow.

As I said, we approach the customer late and everybody is asking questions. So as you’ve also made a statement on it, Suprajit Automotive as well as Suprajit Europe, we have been able to successfully conclude most of it. So, we expect it to happen. It’s probably a question of a quarter here and there. So there’s been a slightly a bit of a lag. But I think it will happen. Some of them are — hopefully will be concluded in this quarter as well. So, that will add to the tailwind.

Supplier issues, the peak has gone but still, as we call as PPV, purchase price variances are still on the negative side at this moment, but it will turn positive hopefully over the next quarter. And last but not least is the inflation, I think. It is not just in power, it’s also in wages. For example, in places like Hungary, the wage inflation is phenomenal. So these are the kind of things that you are facing, but there is an ongoing exercise.

I think once we get a little more hang in terms of stabilizing the supplier base, consolidating the supplier base, which is what we are doing through our Max teams and getting some of the price increases during this and next quarter, I think that’s when we have a much larger clarity, but the roadmap remains the same as we have explained earlier.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Second question is on Phoenix Lamps. So as you’ve also talked about in last few quarters, there has been significant amount of cost inflation. And this is a business which although used to do a very — decent double-digit margin business and in last few quarters, we had around mid-single digit or high-single-digit kind of a margin business. So can you just provide some perspective in terms of what will drive the margin improvement from here on? And with regards to Luxlite and Trifa, do we see any further provisions or write-offs in that entity or we are by and large done with that?

Kula Ajith Kumar Rai — Founder and Chairman

I think as we have mentioned in our — this year’s — this quarter’s update and also just mentioned on the call just now, I think Phoenix Lamps, Mohan mentioned about being able to get the price increase from the customer, but it has been OEMs where it is a little bit more challenging from OLM and aftermarkets. But having said that all, I think it has slowly but steadily eased in place.

So, we have also been able to tighten our belt in terms of materials, in terms of input costs. So as we have said in the last month or so, we have been seeing a change of trend. We have said that in Phoenix Lamps, we were the last man standing kind of an approach to the business and I think that is starting to yield. The patience of last probably 18 months or 24 months is starting to yield, I think, the results. We are seeing an improvement in margin. We expect that this quarter, the margins should start improving.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. If I can squeeze in one more, on the SENA part, the Wescon, the U.S. markets. We have seen a very strong double-digit growth for last two years. So it’s quite different from the trend which was earlier in this particular business. But our commentary going forward is very cautious. So can you kind of elaborate what kind of an environment you are seeing and how should we understand growth in this business over next two years, three years. Thank you.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. I think Mohan has been cautious in terms of the US market because as Wescon services mostly the U.S., North American market. When economy down trend comes, when the housing market sort of comes down, people spend for discretionary items like a lawn mower or a tractor or a whatever, off-road vehicle, sort of tends to slow down. I mean that’s how economy works when the belt tightening happens. So that’s what it is. But if you’ve seen our SENA performance, it has been in double-digit all the time. It has been double-digit even in the half yearly as well. So going forward, although the market seems to be weak, we are also winning new contracts. So how it will pan out? It depends upon the depth of the recession actually.

So, we do expect a stable half year, how much growth or something, it’s little difficult to say at this moment. Because again, we don’t know how the economy will pan out. So the point is that we are fully geared. We are getting good operational returns and we’re also getting some new businesses. Now, it will fully offset some of the businesses which will go off the table in terms of life cycle, time will tell, but I think we are still fairly comfortable in the SENA division that it will continue to perform fairly well, actually.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. I’ll come back in queue and good luck.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you.

Operator

Thank you. The next question is from the line of Aashin Modi from Equirus. Please go ahead.

Aashin Modi — Equirus Securities — Analyst

Yeah. Thanks for the opportunity, and congrats for a decent set of result. Sir, my first question is regarding global automotive cable business, that is our auto exports from India and LDC. So sir, we have seen that in USA that the industry seems to be weakening. But you’ve continuously told that we have a good order book there. So is there a scope of market share expansion that could take the — crush the degrowth and we can grow well?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Absolutely. I mean that’s the only reason we will be able to grow. If you really look at the global automotive market in the last two years, it has only been shrinking. In fact, this year, both U.S., Europe and China markets, by end of the year, expect to have a negative growth compared to the last year. So we continue to — yes, we are guiding a growth and we are guiding that we will continue to get new businesses. This, I think, I’ve been telling in all the investor calls and on most of the places where I have an opportunity to meet investors is that the consolidation of vendor is the real reason that is behind all these things.

Customers want vendors who has got strong financial position, strong global presence and absolute capability to deliver in terms of quality, cost delivery and development. I think that’s where we are winning the new contracts at the cost of small and marginal players in this business. So there are, let us say, two or three strong global players who’ll continue to get newer business, not the small ones whose financial strength is at question and whose capability to deliver globally is in question. So, that’s where I think we are winning this business. And you are right, in the process slowly but steadily, we are getting additional global share of business.

Aashin Modi — Equirus Securities — Analyst

Sure, sir. Thanks. And sir, my second question is regarding LDC. So do we face any supply chain issues in China because that’s a precious EBITDA margin plant? So do we, going ahead, expect any issues of these COVID restrictions to impact our China operations?

Kula Ajith Kumar Rai — Founder and Chairman

All I can say is I wish I could know the mind of Chinese management at the political level. I have no idea. But they have a very strong — no nonsense approach to COVID. They’re talking about taking strong views whenever there are clusters of COVID are there. You know in the recent days, in the news about how a big electronics subcontractor had to shut down and people were jumping the fences. So it is happening in China, and there is no control for anybody on this. It’s a rule — it is the law of the land how they deal with it. Is it affecting us? As you know, first quarter, we did have an effect on this because we had to shut down.

In the second quarter, we didn’t have any shutdowns internally, but some of our customers and suppliers had challenges. And we dealt with it reasonably well. Some customers could not get materials on time, some customers had shut down, so our supplies got affected. It will continue for some time till the COVID is under reasonable control in China because they have absolutely no patience in terms of relaxing any of the rules on COVID as we have seen in the rest of the world. I think that’s the political will of the nation. So, we’ll have to fall in line with that.

So, I would say that we don’t know, but as far as we are concerned, we are doing everything that we could to make our supply chain remain active and live, and our customers lines does not stop. So there are times, particularly when the COVID shutdown was there, we had about 80 people working or 90 people working, staying in the factory and delivering products because we could not afford to shut down customer lines. So, they’ve done a fantastic job on that. So having said all that, I think Chinese — Lonestar is amongst the three LDCs the best performing unit at this moment.

Aashin Modi — Equirus Securities — Analyst

Okay. Thanks sir. And sir, my third question is regarding Suprajit Technical Center. So, we have just opened an electronics facility over there and we were talking about an order book of INR100 odd crores over there. So could we speak more about the clients, which we serve from there? What sort of a order book currently we have over there? And can we see revenue coming from them and how much growth do we expect over there?

Kula Ajith Kumar Rai — Founder and Chairman

I’m unable to go into the names of the customers, but suffice to say that we have got really good interesting businesses in digital clusters from at least 4 or 5 customers, of which most of them, excepting one, is all EV space. And also one of the top 4 Indian two-wheelers have also awarded electronic cluster business to us. And we are also working on a mini EMV for a marquee EV customer, for the lock actuation mechanism. We are also working with a couple of EV guys for the throttle position sensors, the TPS. And we are also working with one of our own global customers for an export of rotary sensors. They’re all current commercial products that will be — has launched and will be launched in our Electronics division. And it will start scaling up.

I think now that it has been opened, and the fact that we also have a very nice experience center, where we have displayed our STC products very professionally, whoever is coming for these products or the plant visits, will see our experience center to understand the overall range and capabilities of Suprajit Technologies, which has been very well appreciated during the inauguration.

We had some marquee customers coming and looking at what we’re capable of doing. I think there, frankly, I believe electronic division is, in a sense, a new chapter in the future of Suprajit planning [Phonetic]. The starting has been good. I think we are starting to scale up. And let me also say this, that there’s the initial start. I think once this facility gets filled up, I think we have a much bigger plan for this future.

Aashin Modi — Equirus Securities — Analyst

Okay. And sir, my last question is regarding our Indian aftermarket operations. So, we have benefited post-GST and the share of aftermarket and our revenue grew pretty strongly. So, could you please comment over there, how are we seeing traction in the aftermarket because of the shift from unorganized to organized?

Kula Ajith Kumar Rai — Founder and Chairman

I will let Mohan to answer both our DCD and PLD aftermarket, how we have worked to get such market shares. Mohan?

N.S. Mohan — Managing Director & Group Chief Executive Officer

Yeah. Thanks. There are multiple levels at which this operates. First thing is that it brings, I would say, the organized players into fore and all those hanky-pankiness which are happening and trying to hide without bill and all those kind of stuff, to a great extent, with the economy getting more into an organized economy, organized players like us get visibility and people would want to do more business with us. That is number one.

Second thing that is happening in the entire processes which we are seeing of late very clearly is when an unorganized player cannot play the game with the same rules, what they do, they will try to change their rules. What is happening, what I’m trying to allude here is there is a counterfeit. So what happens is they try to imitate — imitated product starts coming in, because they can’t sell it in their brand name in their way. Therefore, we were just looking at, for example, Suprajit, Spelling Bee, S-U-P-R-A-J-E-E-T, Suprajeet, or something like that.

So what we are doing is we are working with the law enforcement agencies and trying to clamp down on these kind of spurious, as we call them. So, overall, if I look at it, the economy is turning towards more clean economy and therefore, organized players like us benefit out of it. Having said that, can you wish the rest of the segment away? The answer is no, it will be there. But albeit its importance in the overall economy will start moving down. It will not be zero definitely.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah.

Aashin Modi — Equirus Securities — Analyst

Okay, sir. Thanks a lot. That’s all from my side.

Operator

Thank you. The next question is from the line of Mumuksh Mandlesha from Emkay Global. Please go ahead.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Thank you so much for the opportunity, sir. And congratulations on the decent performance. Sir, just wanted to understand the move on the non-automotive division, sir. Can you share any new traction being witnessed in the newer segments like agri, construction, medical, marine and power sports, sir?

Kula Ajith Kumar Rai — Founder and Chairman

Mohan, will you answer that as well?

N.S. Mohan — Managing Director & Group Chief Executive Officer

Sure. There are two portions to this answer. One is the cable portion itself, where we are gaining more traction there, because what is happening is, you would see that we are very strong in the North America, particularly U.S.. Now, what our Chairman was alluding to earlier, there is a consolidation happening. Therefore, there are some people who would want to associate themselves with a much more stronger player. Both strong in terms of technology, in terms of financial wherewithal, and very important, strong in terms of the ability to deliver across the globe. So that is what is happening. That is one portion of it.

Second portion of the new business that we’re talking about, where we are also very much keen and interested is new products, beyond cable products, be it electronics or throttle controls, rotary sensors. These are some of the products that we are getting into and we are positioning ourselves as a vendor of choice with these customers. Therefore, the growth will be on two counts. One is cannibalizing on the existing players. The second one is moving on to new technologies.

Kula Ajith Kumar Rai — Founder and Chairman

Just to add to what Mohan has said also, I think one of the advantages that is a strength that we have additionally got is the strength of our engineering and marketing and business development team. With the LDC getting integrated into it, we have now a much stronger team to present our range of products, not just our cable or lamps or whatever, even of the new products that we’re developing at STC and commercializing at our electronics division to the world.

So it’s not just Indian market. We will be even — currently or eventually looking at, I think these same teams are quite excited about the product. In fact, Jim was here for a week till last week and I think a lot of new things would be happening. I’m again talking about medium term, next two years, three years time, that some of the products that we’re developing at STC will be presented to not just two-wheelers or whatever Indian market, but also global non-automotive, as well as some places in automotive businesses.

N.S. Mohan — Managing Director & Group Chief Executive Officer

A classic example, if I may add, is our Seeder gear boxes.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Exactly. Yeah. Thank you.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Yeah. So on the LDCs, is it possible to share any guidance for the H2? What kind of margins do you see? And also on LDC, you’ve mentioned some new contract wins and working on larger orders. Can you throw some color on this, sir?

Kula Ajith Kumar Rai — Founder and Chairman

Yes. In terms of the quarter-to-quarter, I’m sure you’ll appreciate the global market is in such a turmoil and we have just acquired a business which needs to be worked on, restructured and strengthened. So giving a quarter-to-quarter number is not appropriate. But I think we have given a fairly clear roadmap in our July 25 brief update — I mean, the detailed update on LDC. I think that holds.

We have said that the second half would be — we should be in the black. And at the end of next year, we should be in double-digit and the next year’s revenue should be 100 million. I think those — the larger parameter of our guidelines still holds good. Within that, there will be some upheavals. But I think we’ve got a business of 100 million for a 40 million value. So, I think it’s a phenomenal value. So we need to be that much patient, but still those guidelines hold good. That’s on that.

What is the other question? Sorry?

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Just on the new contract wins.

Kula Ajith Kumar Rai — Founder and Chairman

New business? Okay.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Yeah. New business.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Yeah. Okay. So yes, I think both for automotive and non-automotive, we have received new businesses both at LDC and at Wescon. We are not at liberty to talk again. We have been now going into the fine print of our contracts with our customers. We are not supposed to talk about specific customer and the value of business. But I could say this that existing customers are bringing new business on the table for us. Some of the customers who are our long-term customers have also have second sources and other sources. They find some challenges with them. Those businesses have been asked to requote by us.

So, we have received orders. But again, as I said earlier, these businesses are for, let’s say, end of ’23 ’24 ’25 kind of businesses, but they are all fair value, historically under Suprajit Automotive or Suprajit Europe, if I get 0.5 million business or a 250,000 business per year, which is something like on a lifetime, let’s say, 2 million business. Today, we are talking about few millions a year kind of a business — 1 million, 2 million, 3 million business, which on the lifeline, if you’re talking about five, seven-years life, it’s a much larger number. So it is an interesting space we are in. I think once we settle down in LDC, I think we have space in Matamoros, we have space in Suprajit Automotive. We would be able to literally leverage these new businesses quite well. So, we are quite excited over the medium term on the business outlook for LDC.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

And sir, is it possible to indicate what would be the revenues for the new products which we have launched, digital clusters and sensor-led products in first half? Is it possible to share what kind of revenue was there for these new products?

Kula Ajith Kumar Rai — Founder and Chairman

Again, we have given a guidance for the year and next year. We have not been giving business win guidance historically at Suprajit. We wouldn’t do that. All I can say is that it will ensure that LDC will grow at a healthy margin in terms of, let’s say, at least a double-digit margin going forward — I mean growth growing forward because of these large wins, despite the global automotive business shrinking. So that’s all I can say.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Right, sir. Just last question. So any capex guidance for FY ’23? And what would be the tax rate expected at consolidated levels for FY ’23, sir?

Kula Ajith Kumar Rai — Founder and Chairman

On the capex, I think, we did mention for the India business about INR140 crores between this year and next year. This is largely to meet the electronics division’s new facility which will go into production, a plant in Narasapura and a new plant for the aftermarket, plus other capexes at various places, including PLDs. That still holds good. It’s sort of a two-year guidance I have — we have given. That is what it is. Yeah.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

And sir, on the tax rate, sir, for FY ’23?

Kula Ajith Kumar Rai — Founder and Chairman

Sorry? Tax rate. Okay. Medappa, any comments on the consolidated tax rate? I mean, in India, of course, it is 25%, whatever. What is on a consolidated tax rate? Do you have any idea?

Medappa Gowda — Chief Financial Officer and Company Secretary

Effective tax rate is around 27%. 27%.

Kula Ajith Kumar Rai — Founder and Chairman

How much?

Medappa Gowda — Chief Financial Officer and Company Secretary

Including deferred tax.

Kula Ajith Kumar Rai — Founder and Chairman

Including deferred tax. Okay.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Yeah. That’s helpful, sir. Thank you so much.

Operator

Mr. Mandlesha, are you done with your question?

Mumuksh Mandlesha — Emkay Global Financial Services Ltd — Analyst

Yeah. I’m done. Thank you so much.

Operator

Thank you. We’ll move on to the next question. That is from the line of Abhishek Jain from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Thanks for opportunity, sir. Sir, SENA division margin has improved [Speech Overlap].

Operator

Sorry to interrupt. Mr. Jain, we are not able to hear you clearly.

Abhishek Jain — Dolat Capital — Analyst

Hello?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah.

Abhishek Jain — Dolat Capital — Analyst

Sir, SENA division margin has improved. Is it due to the high exports from Unit 9? Or is it because of the better product mix?

Kula Ajith Kumar Rai — Founder and Chairman

No, I think, again, you must realize that this one quarter number should not be taken. You should take at least half year level because what happened, there has been some price increases here and there, and its effect gets magnified in some quarter and it chews the numbers. But if you look at the half year number, we are in line with the last year, about 12%, 13%. I think that is what the margin going forward. It has got no other effects.

Abhishek Jain — Dolat Capital — Analyst

Sir, your full-year guidance would be the 12%, 13%?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. In this range, current numbers should hold good. Yes.

Abhishek Jain — Dolat Capital — Analyst

But quarter four margin is always better than the other quarters. So in last two quarters already, you have done well. So in the second half, margin would not be better than this [Speech Overlap]

Kula Ajith Kumar Rai — Founder and Chairman

Again, I must say that it is probably last year, if you have seen, in the last quarter, number has improved. It had some effects of price increases also, which was probably relating to prior periods. So, I wouldn’t think that there is quarter-to-quarter margin fluctuations excepting the timing effects and also probably some currency fluctuation effects. Otherwise, I don’t think there is much of a change.

Abhishek Jain — Dolat Capital — Analyst

So in non-automotive business, what is the current contribution from the export? And can we see the increase in contribution from export in coming days because freight rate is going down now?

Kula Ajith Kumar Rai — Founder and Chairman

Yes. Freight, it’s a good point. In terms of the freight rate, it has come down, but this is one of the many spokes in the wheel as they say. Something has come down through. Will it have an effect? Freight by itself is not a big part of our costs, but of course, is one of the costs which has gone up significantly. So there has been some reduction. Will it have some improvement in margin? Yes. But will it be into 1% or 2%? I don’t think so actually.

Abhishek Jain — Dolat Capital — Analyst

And as you mentioned that you are looking to shift manufacturing in India for LDC business for few parts. So how much shift can we see in the coming quarters?

Kula Ajith Kumar Rai — Founder and Chairman

No, I think this shift of business is how — there are two sides to it. One is customer wanting a shift because they want certain advantage, whether in terms of logistics or in terms of costs, then it becomes customer driven. Sometimes it becomes driven by us because we see certain parts made in certain plants of ours are not able to generate margins, then of course, we try to approach customer and give them some minor advantages and try to move. So the one that has been mentioned, I think in the call or elsewhere is largely because the margins was impacted in the manufacturing locations.

So, we found that, that can be made better by consolidating because we are doing a very similar product in India. So, we said by bringing it here, consolidating our manufacturing volume, which will help our volume growth as well as margin improvement. So it will reduce the margin depletion in one plant and increase the margin in other plant. Now how much of that will happen? It all again depends upon how we work with customers. Yes, some more businesses can move. It is both ways. It is possible that some of the business that we do in China or in India can move to Matamoros and Hungary also if that’s what customer wants. So it typically depends upon the customer, but there have been one or two instances where we have moved the business to India for an improving in the margin.

Abhishek Jain — Dolat Capital — Analyst

And, sir, as manufacturing cost is going up in global markets, especially in the Europe, so what sort of the benefit you can get it from this?

Kula Ajith Kumar Rai — Founder and Chairman

No, I think, obviously, the manufacturing cost in Western world is higher. Even in China it is higher than India, for example. But that is not the reason why customer will ask for a change of location to the lowest cost. There is also a strategic advantage. Today, most customers want to derisk a single location and single geography and also want to be close to their plant. For example, in the last crisis of containers not getting delivered and freight costs going up, there is a lot of insourcing also — in-shoring also being discussed.

So it’s a very dynamic situation. We are very open with the customers and say, this is what our plans are, that’s our advantage. That’s why we are winning contracts. We are saying that this is our footprint. If our footprint fits you, which it does most of the time, you tell us where to make. And different locations will have different costs. It is not that we are letting go the margins. The cost structure is different and it is known to the customer. And customer understands this and accordingly the pricing gets finalized.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. And my last question is related with the digital instrument cluster. You have just introduced this product. So how much is the content per vehicle in two-wheelers and four-wheelers?

Kula Ajith Kumar Rai — Founder and Chairman

We are not in the four-wheeler cluster. Let me make it clear at this moment at least. It’s probably somewhere down the road map. We are talking about the two-wheeler digital clusters, both for EVs — mostly for EVs and also for the regular IC engine guys. It’s a range depending upon the features. A digital cluster can be anywhere from INR600 to INR2,000. And similar thing, a set of cables for the same two-wheeler may be INR150.

So what we have said in our past updates and briefings is that the intent of our company is to make sure that in the next five years’ time, we have higher content per two-wheeler than what we have today, which is only into cables. So that is the intent and that’s what we are moving on, and that’s why this commercialization of cluster line is a very big feather in the cap for us, as we have not just one-off order, at least four, five separate, different customers placing orders on us in the two-wheeler space, that is.

Abhishek Jain — Dolat Capital — Analyst

Thank you, sir.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Thank you.

Operator

Thank you. The next question is from the line of Viraj from SiMPL. Please go ahead.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Hello. Am I audible?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Sir, I just had one question on Wescon. Basically, just wanted to understand, if I look at the growth rate for last two years, three years, it’s been a very — we’ve seen a very high double-digit kind of growth rate in a market which is traditionally a low single-digit kind of a growth rate. But if I were to look at the margin, it’s still around 14%, 14.5%, the operating margin versus what it used to do around close to, say, 17%, 18% when we acquired it. So just trying to understand what is the reason why margin is still around these levels despite the growth rate being very healthy?

Kula Ajith Kumar Rai — Founder and Chairman

I mean you were a little — it was a little difficult to get your question. But if I understood correctly, you were talking about the double-digit growth. Yes, we have had double-digit growth and I think it is continuing this year also in a market where the customer growth is less. It is largely because we have — when we first started acquiring it, it is a basically outdoor power equipment market. But in the last two years, three years, we have also got into power sports vehicles. Now we are into agri and construction. So, we are slowly expanding our market within the non-automotive space. So despite individual market of outdoor power equipment not growing or de-growing because we have gone parallely across the non-automotive space, we have been able to get that growth.

Now in terms of margins, I think we have been always historically at around 15% or — I mean when we acquired, that’s only before they sold that margin was there. It came down to 7%, 8%. From there we are in the double-digit. I think that’s where our comfort zone is. And I think, of course, ultimately there is also market forces and competition. So at a decent double-digit is a good margin to be, as I understand, on this business.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. Second question is on LDC. Sir, you said margins in the near term to be around 5% to 7%. And in terms of sales, I kind of missed it. So you said around — so last time we talked, you talked somewhere around $95 million of sales in current year. So is the guidance still intact or we kind of [Speech Overlap]

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. I think we have made that update in this latest press release why there is a 5% to 7% lower guidance now, is largely because of translation. If you know, forint, one of our reporting currencies, has depreciated by 30%. Euro has depreciated. Yuan, they all have depreciated by anywhere from 10% to 12%. So although underlying businesses are reporting the same sale, the conversion into dollar translates into lower sales. So, that’s what we have already said in our business update.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. And last question is on STC. So if we look at our [Speech Overlap]

Kula Ajith Kumar Rai — Founder and Chairman

Pardon? Sorry?

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Last question is on STC, the new product which we have launched and scaling up. So we have launched and got the orders for digital cluster. I think we’ve also got an order for electronic throttle controls, product actuators and the related products. Just want to understand the overall market opportunity for each of these. What would that be if we just were to talk only for the India market?

Kula Ajith Kumar Rai — Founder and Chairman

I mean, I don’t think we are looking at a percentage of share of business in that market size. Just to give you a simple example, I gave an idea of what is a digital speedometer cost, anywhere from a lower end costing INR500, INR600, to a higher end costing INR2,000. You know the number of two-wheelers made in India. I mean that is the volume for you, but I’m not saying that we’ll get a 10% business of that, but that is the size if you were to assess.

So a throttle motion controller may be INR250 or INR300 or INR400. Each one of their little throttle controller is twice the content of cables per two-wheeler today. So in five years, 10 years, if every one of them will have a TPS? Maybe, maybe not, I don’t know, but you know the size of it, but that’s for number crunching. But for us, I don’t think we are looking at that kind of a number, but we are looking at entering those markets and slowly establishing us as a reliable long-term supplier.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. And just to understand a little bit on the competition in each of these markets, any perspective you can share who are the major players and how many players we have already catered — already catering to the OEs in this market?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Yeah. Of course, in digital — on the digital speedometers, there are enough — there are at least two, three major players. They are all known. We don’t want to talk about the competition, but they are known in the market. Whereas the other products are new in the market. Currently, they are also imported. So, there will be others also who are trying to develop like us. It is not that we are the only one in the market, but for those other products that we have mentioned, it is a greenfield, everybody is new in the business and I think people who are first in the market will have a first-mover advantage.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

That is right. Thank you and good luck, sir.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you.

Operator

Thank you. The next question is from the line of Ravi Purohit from Securities Investment Management Private Ltd. Please go ahead.

Ravi Purohit — Securities Investment Management Private Ltd. — Analyst

Yeah. Hi. Thanks for taking my question. Good morning, gentlemen. Mr. Rai, two questions. One was in the past for Phoenix Lamps, I think we’ve maintained that we will kind of continue with halogen lamps. Is there any change of thought there on doing LED lamps going forward?

And second question was on these digital sensors, actuators, clusters, that we are kind of launching more electronics products. In the past, our product did not — were not like electronic components or did not have. So, I’m not sure if they had like the product liability clause or product recall clauses and all that, right? Now when we get into electronics, those kind of things will kind of add. So any thoughts that you can kind of share on these two?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Thank you, Ravi. On the halogen PLD, I think PLDs manufacturing facility is to make halogen lamps. So can I change over to LED? No. We’ll have to put a new infrastructure. Now what is our plan? I think we will continue to be a significant halogen player. We have talked about the last man standing position on this business and I think that holds good. And we are starting to get the traction on this. As I said earlier, it is starting to show in our margins going forward. And I think we will also start getting those businesses as we go forward.

In terms of LED, we have also talked about launching in the aftermarket the LED business for the headlamps. That has been pretty well taken in the market. In fact, we are probably market leaders in that particular product that we have launched. Our product is accepted better than the global majors’ product and has been selling well. So, we’ll continue to keep feeding that market to increase our traction.

So, a small part of our business is already delivering an LED solution in the aftermarket. Digital foray, the product liabilities, Ravi, is everywhere. It is not that it is not in our current products. Whether it is halogen lamps, whether it is cables, product liability is part of every auto component play as long as they are doing a priority or rather proprietary part to our design. If it is a customer design, it’s a different matter. So, these products will also have liability issues. But I think we have dealt with these kind of liabilities historically very well and have understood the products’ liability issues and we are very careful as to what we do and how we introduce to the market and when we are ready to introduce. So we don’t really see it as — I mean if is there, but it’s part of our lives.

Ravi Purohit — Securities Investment Management Private Ltd. — Analyst

Yeah. Okay. Okay. Thank you so much. And all the best.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you.

Operator

Thank you.

Kula Ajith Kumar Rai — Founder and Chairman

It is 11.58. We will take maybe another one question, so that 12 o’clock we can wrap it up.

Operator

Sure, sir. We’ll take the next question from the line of Falguni Dutta from Jet Age Securities Private Limited. Please go ahead.

Falguni Dutta — Jet Age Securities Private Ltd. — Analyst

Yeah. Good morning, sir. Sir, just one question. What is the percentage of exports out of India in automotive and non-automotive for us? Percentage of revenue, exports.

Kula Ajith Kumar Rai — Founder and Chairman

That immediately I may not be able to give you. You may have to come offline to Medappa because we have multiple exports and I don’t have the data in my hand.

Falguni Dutta — Jet Age Securities Private Ltd. — Analyst

Okay, sir. Thank you. That’s all from us.

Kula Ajith Kumar Rai — Founder and Chairman

We can take one more question operator if there is any more.

Operator

Thank you. The next question is from the line of Rohit Balakrishnan from iThought PMS. Please go ahead.

Rohit Balakrishnan — ithought PMS — Analyst

Hello?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Hi.

Rohit Balakrishnan — ithought PMS — Analyst

Thanks for the opportunity, sir. Hi. Sir, just couple of questions. So, I mean, you’ve given an outlook on LDC earlier on this call as well, but let’s say, couple of years out at a consolidated level, I mean, we’ve been very consistent with our overall margin of that very tight range of 14% to 16%. So for the next couple of years, do you think that whatever businesses that we have, the electronics business also and LDC as well, let’s say, two, three — two years out from FY ’23, do you think that we’ll be able to maintain that margin of 14% to 16% at a consolidated level? Or do you think that could be a challenge, given you are entering a new business and also this acquisition?

Kula Ajith Kumar Rai — Founder and Chairman

Yeah, I think if you talk about LDC standalone as a separate entity, we have said that by end of next financial year, it’s probably Q4 of ’23, ’24, we are expecting to get into double digits. So, we have never said that we will be in the 14% to 16% margin. And from then onwards, I think we will see where we will go from there, depending upon how the market forces are there. The challenge is to reach the double-digit in the next, let us say, 18 months’ time. I

Think that’s what our team is working on in terms of LDC. Now ex-LDC, yes, we have said 14% to 16% margin. I think it generally holds good. Although we did mention that during — considering the huge uncertainties in terms of commodity prices and supply chain constraints, etc., etc., it may fall short. But as you’ve seen even in the second quarter, our margins are around 14%. So, I suppose we should be able to more or less there in terms of margins.

Rohit Balakrishnan — ithought PMS — Analyst

Right. And just one follow-up on this is that our electronics business, will that be a margin accretive business over the next couple of years? Or will it be in a similar range?

Kula Ajith Kumar Rai — Founder and Chairman

Again, electronics is a volume game. So, we need to scale up the business, then only the margins will be seen. In a fully scaled-up version, the margins would certainly be interesting and exciting. In the initial year, any new business that you start, it takes a couple of years to stabilize in margins. All I can say is that it will be a small business compared to our larger overall business in the first year. So the margins even if it’s a little less, it probably will get covered with other divisions doing well. But over a medium term, let’s say, two years, three years’ time, the aim is certainly going to be that we should be in the double-digit rate. But if one expects that in the first year it will happen, it will not happen. No.

Rohit Balakrishnan — ithought PMS — Analyst

No. My question was more on the medium term, sir. So — yeah.

Kula Ajith Kumar Rai — Founder and Chairman

Medium term, three years to four years, will it be double-digit? I think so, yes. Certainly, two years, three years’ time. Yeah.

Rohit Balakrishnan — ithought PMS — Analyst

Sure. And last question, sir. On Phoenix, I think few quarters back — four, five quarters back, we were talking about penetrating the U.S. market — the U.S. aftermarket. So any update if you’d like to share on that, that would be helpful.

Kula Ajith Kumar Rai — Founder and Chairman

In Phoenix, yes. In Phoenix, no, we have not been — we have been still talking because there’s a lot of logistics related and number of part number related issues. I think there are some discussions going on, but then there are lot of things happening in terms of now global economic scenario. So, I think certain priorities of customers also changed. So there has been some progress, but it is not ready for commercial launch at all at this moment. So, we don’t know the outcome of it yet.

Rohit Balakrishnan — ithought PMS — Analyst

Sure, sir. Thank you very much. And all the very best, sir. Thank you.

Kula Ajith Kumar Rai — Founder and Chairman

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.

Kula Ajith Kumar Rai — Founder and Chairman

Yeah. Again, thank you all for your continued interest in Suprajit and taking part in this con call. If there any further queries, you are most welcome to contact us again. Medappa is our single point contact. You can always write to him or contact him.

I would like to thank you all for your patient hearing on our performance for the last one hour. And I would also like to thank Anandh Rathi, Vijay Sarthy and his team for organizing this con call. Thank you very much and have a great day. Thank you.

Operator

[Operator Closing Remarks]