Quick Heal Technologies Q2FY18 Concall Summary

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 Financial highlights

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  • In Q2 the retail sales team focused on efficient selling and managed the credit lines and as a result the cash position of the company has improved by 17.5%.
  •  The EBITDA has improved by about 10.5% and that is a result of multiple measures - the in-sourcing of the software basically instead of third party software using in-house software developed by the R&D.
  •  It can be seen that the EBITDA margin has improved by 6% this point over 600 BPS and EBIT and PBT also have gone up in the same sequence.
  • In the consolidated balance sheet , Cash-in-hand is of the Rs.250 Crores is in the balance sheet which is on account of cash submitted by the company
  • Rs.156 crore is on account of IPO money which has a very specific end use.
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  • Rs.24 Crores is the salary which is to be paid on the first day of the next month.
  • Volume growth and the license growth were around 3%.
  • In September 30, 02017 versus 2016 the working capital has come down and basically on account of debt, the debtors and receivable days went down from 71 to 51.
  • The Company has moved retail platform from primarily credit model to now cash carry model. The margins for the distributors have increased in the process.
  • The Company has in-sources some of the outsource activities using own skills and own software hence drop down cost substantially, which is visible in the direct cost and growth margins have gone up and operating cost have been kept under control.
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Effect of GST

  • After GST implementation, Company started collecting 18% from the customers, but then that has really impacted the pickup by the customers, so 10% to 11% have to be passed to discount to the partners, so that the sale does not get affected.
  • The lower end product is getting more sales, maybe this is because of GST impact.
  • Because of GST, there has been decline in sales, and company was not able to achieve any goal because of that in first quarter.
  • GST hit is more or less being compensated by the ITC, which is expected that will not affect the margin.

New products/offers

  • Company has launched the encryption offering in this quarter, so that gives the opportunity to cross sell this product and offering to all existing and the new customers.
  • Company recently launched Seqrite encryption which is available, which provides tool encryptions this encryption and this will give more opportunity to up sale to existing customers as well as open up those experienced customer.
  • Company is also focusing on HNS products, which was supposed to get released in last quarter, but due to some technical challenges that product is getting delayed by almost six months.
  • In February, Company will be launching a product to scale up to 5000 endpoints and also cloud version, which will help to get into the larger installations.
  • Products in the IoT and the cloud space are basically the product is in alpha stage right now, company is hiring some field trials. There are some hardware glitches that are being sorted out, but is planned to launch in Q4.
  • It is a home networking solution that is primarily for at homes where we have router, this network will definitely help to protect the devices that are connected to the router.
  • Company launched a feature called Safe Pane, which basically indicates if a mobile compromised and that is whole intent of showing to the consumer that while they are doing financial transaction they should be cautious and careful about what is going on the mobile, and company has seen good adoption in this.

Growth

  • Gross margin has improved because company has in-sourced a lot of work , company has cut out vendors or have re-negotiated and brought the cost down and much of it is using company’s own tech force and creating solutions, which would replace higher cost external vendors.
  • Company has grown the enterprise and the government sector sale by almost 27% compared to retail.
  • In retail, there is a decline, but when it comes to enterprise there is growth.
  • There has been 20% increase in the number of license sold into the enterprise and the government. Total number of licences sold are 267000.
  • Quick Heal monetizes via adds and the through paid subscription, which is Total Security
  • Mobile business is not growing too much and the management is really thinking on the entire mobile strategy,
  • Company has on boarded a large distributor in Q2 and will give expanded reach into the market and that push will continue to get more Sales and partners in the fold in Q3 and Q4.

Retail vs Enterprise

  • The goal for the government and enterprise business it is about 20% of the overall sales.
  • By two to three years’ time, company is expecting 50% to 50% of retail versus government and enterprise business.
  • In retail, company is focusing on home users as well as home offices and small offices.
  • Retail is going to have slower growth for sure because of the reduction in the laptop and desktops adoption.
  • Management wants to focus on the enterprise because the market, total addressable market is much bigger.
  • Just at a structure level there is a 3% to 4% growth on the retail business and round about 25% on enterprise and government, which has just turned about 10% of the total business.

Mobile business

  • The mobile business is 1%-2% of the total retail sales.
  • Company have stopped over 200 million Malware infections across Quick Heal users and the highest infection month being the month of July.
  • By having the good focus on acquisition, retention, and monetization, the company hopes to get more traction in mobile security.
  • Quick Heal Security Labs detected nine new Ransomware infections in this quarter with around thousands of more variant and on the mobile front the detection of Androidware in Q2 rose 40% in comparison with that of Q1, so potentially unwanted applications grew by more than 200%.
  • Monetization on the mobile happens to through advertisement in products where subscription is offered for free
  • Threat vector on mobile is not as strong, so the tool for customers from mobile security perspective is still not strong.

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Bajaj Corp Q2FY18 Concall Summary

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Financial Highlights

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  • The Company has closed the quarter with a turnover of Rs.204 Crores
  • The growth in turnover vis-à-vis the second quarter of last financial year is 3.84% with volume growth being 5.1%
  • The EBITDA for the quarter is Rs.59.6 Crores, which is a decline of 12.74% over EBITDA of Q2 of last financial year
  • The refund announced by the Government of India for units under the excise free zones in Uttarakhand, Himachal, and Assam have not been accounted while calculating above
  • The EBITDA without the refund being calculated is a very healthy 29.3%, but would have been over 32% if the refund has been accounted for
  • The profit before tax and profit after tax are Rs.64.5 Crores and Rs.50.7 Crores respectively.
  • In terms of cost of raw materials and packaging materials, the strain continues
  • The average purchase price of LLP as well as refined mustard oil  in the second quarter is  Rs.51.80 which is much higher than the Rs.44.55 per kg that was the purchase price in the second quarter of last financial year
  • There is increase in overheads as salary costs are increased by 32% YOY, as the management is building bench strength in all the departments
  • The sale of Nomarks cream, which is being actively promoted, has grown by 48% in this quarter
  • The price increase in raw materials has been largely compensated by input tax credit
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GST Impact

  • The wholesalers continue to be watchful and have not reacted positively post the implementation of GST
  • 22317 wholesalers listed in the ERP system out of which 8801 have not yet started buying from our distributors after the implementation of GST
  • Though the Government of India have extended the dates for filing GST returns for July and August most of the distributors are finding it very difficult to file the GST return
  • With the strain on wholesale channel the importance of direct distribution would be very high, so focus is on increasing numbers of distributors as well as outlook covers by field force

Distribution Channel

  • The share of wholesale was more than 50% of the total turnover, it has dropped to below 40% already and is expected to drop even further
  • As of September the total number of distributors has gone up from 9695 as against 7707 as on March 17, 2017
  • During Q@FY18, two sales verticals namely canteen stores department and international business have shown a negative trend as a result the sales to CSD have declined by 21% in the second quarter.
  • The outlook for CSD, which is now under 5% of the total business, does not look very promising for the remaining part of this financial year

International Business

  • International business, which has been a growth driver for the company, had also declined during the second quarter by 15.4%
  • The regions of MENA have shown the highest decline of 35% led by loss of sales in UAE and KSA

Innovation

  • The Innovations Center started in April by housing the R&D Center in Mumbai has started working
  • With help of R & D the company plan to launch at least differentiated and well researched product every quarter from here on

Industry Update

  • The volumes in the hair oil industry have grown by 6.7% as against 50.6% during the last quarter
  • The volumes of the light hair oil industry have slowed down a little and slowed down to 2.6% however  the lead brand  of the company Bajaj Almond Drops continues to outpace the light hair oil industry with an off take growth of 4.8%
  • The rural volume growths of the total hair oil had dropped from 12% in the first quarter to 4.8% in the second quarter of this financial year.

Future Prospects

  • Going forward the primary objective is to be able to reach as many people as possible
  • Focus is also on increasing the reach of direct distribution otherwise company would lose a bit of what it is communicating as a brand as you cannot control the reach of the advertisement
  • The growth in CSD is not expected in future quarters because of policies (to scale down)the  Ministry of Defense and Canteen Store Department is following
  • The volume growth in Nomarks is expected to grow in future quarters as the company is moving into more settees with the concentrated chemist plant which will increase its base

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Mahindra CIE Q2FY18 Concall Summary

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Financial Highlights

Quarter Performance

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  • Excellent performance in terms of revenue and profitability
  •  Increase in EBITDA by 87% when compared to the same period last year
  • Increase in EBITDA margins by 1.8%
  • The growth of the divisions in India excluding Bill Forge was 21% vs 2016 3QCY17
  • Comparison with Q2CY17 has also shown an improvement in profitability
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Nine month performance

  • Nine months of MCIE growth minus Bill Forge is 15%
  • EBITDA margin without Bill Forge increased by 1% YoY; some part of this can be attributed to increase in steel prices
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Growth drivers

  • Positive market evolution across segments in India
  • Growth of key customers
  • MCIE grown higher than its key customers namely M&M, Maruti and Tata Motors both in 3Q as well as in the nine months

 Performance of Bill Forge

  • Performance in line with the expectations set during time of partnership
  • Growth of close to 20%
  • EBITDA margin of approximately 20%

European Results

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  • MCIE Europe has grown by 16% in 3Q 2017 that is approximately 22.6% growth after adjusting for currency movement
  • The 9 month growth was around 6% in rupee terms and 11% in Euro terms
  • Growth is driven by CIE Forgings and Metalcastello
  • Drop in EBITDA percentage between Q2 2017 and Q3 2017 due to stock consumption in August
  • EBITDA percentage over revenues on adding up both sales and stock variation is 12.7% in both periods

Consolidated performance

  • Net debt remains similar to the end of last calender year
  • CAPEX of Rs. 2,371 million on consolidated basis, spread across many verticals like the forging business in Spain and Lithuania, Metalcastello, Bill Forge (Both in India and Mexico), Gears and Stamping works in India etc.

 Impact of Electrical Vehicles

  •  Roughly 10% of MCIE business in India and 25% of MCIE Europe business could be affected due to Electrical Vehicles.
  • Consolidated, around 18% of the total business could be affected by EVs
  • No changes in the next two years; growth to be observed in the next 5 years; Impact on reducing revenues not expected for atleast next 10 years
  • Top automotive customers like BMW, Daimler, Volkswagen, Audi etc are likely to move towards hybrid vehicles instead of a fully-fledged Battery car

 European plant highlights

  •  Metalcastello plant – Awarded a project worth €15 million turnover per yer by Caterpillar
  • Lithuania – Supply of crankshafts to Volkswagen worth €5-6 million
  • Galfor company in Galicia supply crankshaft to several customers
  • Organic revenue growth in Germany in MFE was close to 8%
  • CapEx for Volkswagen line in Lithuania around €4 million; Peak Revenue : €8 million - €9 million

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DCM Shriram Q2FY18 Concall Summary

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Financial highlights:

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  • The overall Q2’18 Net Revenue is Rs. 1605 crores and it grew 17.5% over same period last year.
  • The revenues of the company’s own products at Rs. 1394 crores were up by 33% whereas revenues of traded products at Rs. 211 crores were down by 34%.
  • Growth in revenues of own products included 23% growth in volumes led mainly by Chemicals & Sugar.
  • All other businesses also registered volume growth.
  • The PBDIT for Q2’18 at Rs.306 crores was up by 133%.
  • The PBDIT for own products was Rs. 299.2 crores, up 121% over last year.
  • The margin for own products went up from 13% to 21%.
  • Tax rate was also higher, estimated at ~ 24% for the current year vis-à-vis 13% last year.
  • The Net profit at Rs. 172 crores is 88% higher than last year.
  • The Gross Debt as at 30th September, 2017 was Rs. 673 crores and net debt at Rs. Negative 44 crores vs. Rs. 737 crores and Rs. 707 crores respectively, last year.
  • The financials for H1’18 recorded similar trends as the Q2’18 financials.
  • Overall net revenue was up 26.5% with revenues of own products going up by 42%.
  • The own products recorded 33% volume growth, led by Sugar & Chemicals. The PBDIT at Rs. 648 crores was up 70% and PAT at Rs. 405 crores was up 57% over H1FY17
  • The cash on the balance sheet as of now is around Rs. 750 crore whereas the debt is around Rs. 670 crore.
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Non-Financial Highlights:

  • The turnover of Hariyali Business went down as we surrendered 8 of the 37 fuel pumps back to BPCL.
  • With the objective of strengthening the businesses, primarily on downstream products, Company is implementing projects worth Rs. 350 crore in Sugar and Chemicals businesses.
  • The Distillery in Sugar will come on-stream by January 2018 at an investment of ~RS. 190 crores.
  • The capacity expansion in Caustic Soda Liquid & Flakes and Stable bleaching powder at Kota at an investment of Rs. 98 crore and Ammonium Chloride Plant at Bharuch at an investment of ~Rs. 43 crore is expected to be commissioned by June 2018.
  • The Board has approved additional investments worth ~Rs. 850 crore in Sugar and Chemicals Business along with Power utility.
  • In Sugar business the proposed investment is Rs. 500 Crore. Sugar and Co-gen capacity expansion at an investment of Rs. 360 crore will be commissioned by Oct 2018.
  • In Chemicals business the proposed investment is Rs. 98 crore.
  • In Power utility we are investing Rs. 240 crore to setup a new Power plant at Kota in part replacement of existing power plant
  • Chemicals business witnessed growth in volumes and margins, Sugar business reported higher volumes with stable margins.

 Business wise highlights

 Chloro-vinyl

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  • The Chloro-Vinyl business of the Company has highly integrated operations with multiple revenue streams and 143 MW captive power generation facilities. Chemicals operations are at two locations (Kota – Rajasthan and Bharuch – Gujarat), while Vinyl is at Kota only. The multiple revenue streams enable the Company to optimize operations in a manner to maximize the contribution per unit of power .

Chemicals :

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  • Net revenue for Q2’18 is at Rs. 338 crores and grew by 66% YoY and 15% sequentially.
  • The business has achieved overall capacity utilization of 93% in Q2’18. The prices of Chlor-Alkali firmed up during the quarter, up 9% over Q1’18 and 28% over last year.
  • The PBDIT of the business, at Rs. 163 crores was up 171% YoY and 33% sequentially.
  • Caustic soda business is growing at about 6% a year, which is being consistent.
  • The plant is now operating at 90% capacity utilisation.
  • The Capacity expansion project at Bharuch completed last year has taken up our total Chlor-alkali capacity from 780 TPD to 1345 TPD.
  • The new Aluminium Chloride plant has a capacity of 60 TPD

Plastics:

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  • The Net Revenues of the business for Q2’18 was up by 17% due to higher volumes.
  • PVC prices remained at last year’s level, where as carbide prices were up by 6%
  • PBDIT went up to Rs. 34.5 crores vis-à-vis Rs. 23 crores last year due to higher volumes and a one time debit of Rs. 5 crores last year.
  • With the objective of improving efficiency in power generation, company is now setting up a 66 MW power plant in replacement of old sets of 50 MW at Kota.
  • The new plant will be ~22% more efficient than the existing sets.

 Sugar

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  • Q2 Net Revenues of sugar business at Rs. 516 crores were up 39% YoY.
  • Sugar sales volume were up 34%.
  • The selling prices went up by 5%
  • The PBDIT of the business at Rs. 81.4 crores was up 18.1% in Q2’18 vs. last year.
  • Total inventory was valued at Rs. 2,970 per quintal and the inventory was 3.9 lakh quintal.
  • For portfolio sugar and its byproducts, company is adding co-gen as well as ethanol or distillery to manufacture ethanol as well as other alcohol products and spirits, so company is not dependent on only bagasse and molasses
  • There is a plan to value add on this, so that will make business more stable and stronger.
  • The sugarcane pricing has been raised by only Rs. 10 per quintal, to make the sugar industry more stable.
  • This year the crushing has started early and it is expected to reach close to 100% capacity utilisation.
  • Around 9% to 10% higher production can be probably seen this year vis-a-vis last year
  • Cane availability in the area is improving. Industry fundamentals have been positive over last few years.
  • Board has approved expansion at Hariawan unit which involves Sugar Capacity addition of 5000 TCD, Co-gen by 34 MW and Distillery by 100 KLD. These investments will take the total Sugar capacity to 38000 TCD, Distillery to 250 KLD and Power to 145 MW and makes the business highly integrated.
  • The combined Chlor-Alkali current capacity is 1345 TPD now which will increase as company is undertaking expansion of about 350 tons which will get completed by September ’19 in phases; the split is 330 TPD at Kota and 1,015 TPD at Bharuch.
  • There is  implementation of two expansions at Kota; one for 80 tons which will get completed in August-September ’18 and the second expansion of 80-85 tons will get done in June ’19
  • There is an expansion of 162 tons at Bharuch, end capacity will be 1660-1670 tons by September ’19.

Shriram Farm Solutions

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  • The growth in this business is expected to remain muted in the near term.
  • Q2FY18 net revenue declined by 37 % to Rs. 152 crores. ‘Value Added’ segment’s revenue stood lower by 24 % vis-à-vis last year.
  • The PBIT stood up at Rs. 7 crores vs loss of Rs. 3 crs last year.

Fertiliser

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  • Net Revenues of fertiliser business in Q2’18 were up 13.1% YoY. The volumes were up 14% as we had 11 days plant shutdown in Q2’17.
  • The PBDIT for the quarter was Rs. 35.7 crores vs. Rs. 7.9 crores last year, due to higher volumes and accrual of Rs. 14 crores during the quarter on account of revision in freight rates for 2008-09 to 2015-16.

Fenesta Building Systems

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  • The Q2 FY18 net revenue was up 35% YoY due to higher volumes. ‘Retail’ revenue was up 14% and ‘Projects revenue’ was up 107% as the execution in both Retail & Project segment was satisfactory.
  • 70% of the total real estate business is retail.
  • There has been lower order bookings in the ‘project’ vertical, a result of slowdown in real estate industry.

 Bioseed

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  • India Revenues in Q2 FY18 increased to Rs. 58 cr. vs. Rs. 44 cr. last year.
  • PBIT loss for India business at Rs. 2 crore was lower vis-à-vis Rs. 3 crore last year.
  • International Business saw stable revenues at Rs. 22 cr. vs. Rs. 23 cr. last year.
  • PBIT loss reduced to Rs. 0.5 crore from a loss of Rs. 5 crores last year.
  •  In Khariff 2017 season the total sales of BT cotton stood at 37 lac packet vs 32 lac packets in the last season.

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Aegis Logistics Q2FY18 Concall Summary

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 Financial Highlights

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  • Total revenues in Q2 FY18 were Rs. 1,241 crores versus Rs. 677 crores year earlier, that is a rise of 83%.
  • Total segment EBITDA for the quarter was Rs. 76.87 crores versus Rs. 55.74 crores year earlier,that is a rise of 38%.
  • Profit before tax was Rs59.52 crores vs 39.4 crores earlier , that is a rise of 59%.
  • Profit after tax was Rs. 55.96 versus Rs. 27.52 crores a year earlier, that is a growth of 103%.
  • Profit after tax after minority interest wasRs. 52.06 crores versus Rs. 24.96 crores year earlier, that is a 109% increase year-on-year.

Segment analysis

Liquid terminal division

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  • Revenues for Q2 FY18 were Rs. 40.79 crores versus Rs. 37.12 crores year earlier, that is a rise of 10%.
  • EBITDA was Rs. 26.29 crores versus 21.19 crores, a year earlier that is a rise of 24%.
  • The main reason for this healthy rise is particularly Haldia terminal in Bengal

Gas terminal division

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  • Revenues for the quarter wereRs.1,200 crores versus Rs 639 crores year earlier, that is arise ofvrores
  • The EBITDA for the quarter wasRs. 50.58 crores versus Rs 34.55 crores year earlier a big jump of 46% in the gas terminal EBITDA.

LPG Volumes analysis

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  • The LPG throughput volume handled in Q2FY18in all our terminals were 441,532 metric tonnes versus 252,254 metric tonne year earlier, a truly stunning rise of 75% year-on-year.
  • This has been one of the main factors driving Q2 FY18 earnings.
  • The Mumbai and Pipavav we therefore has record volumes
  • Haldia LPG volumes will start appearing from Q3 FY 2018
  • The sourcing volumes for the gas are also up in a stunning number, Q2 FY18 was 352,902 metric tonnes versus 203,649 tonnes a year earlier showing a growth of 73% in sourcing volumes for LPG
  •  Packed LPG cylinders sold 3,342 metric tonnes versus 3,345 metric tonneser
  • Bulk industrial sales were 7,754 metric tonnes versus 5,674 metric tonnes year earlier, a rise of 37%
  • Auto gas sales for the quarter was 6,344 metric tonnes versus 5,664 metric tonnes year earlier that is a rise of 12%.
  • 107 auto gas stations operational.
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Piparav operations

  • Liquid terminal is still around 20% to 21% capacity utilization
  • With Kandla project coming up, we would be focusing on in Gujarat- shipping lines
  • The company contines to work with Gujarat Piparav port on the railway gantry, etc
  • In future, the company plans to bring petroleum by rail, but this is not completely resolved

Company Outlook

  •  Bigger revenues expected in liquid terminal division in Q4FY18 as new Kandla liquid terminal with capacity of 100,000 kilo liters will start.
  • Haldia, with extra capacity of 35,000 kiloliters, is expected to start contributing by Q1FY19 to revenues and earnings
  • BPCL has already started bringing cargos
  • In gas division, completed the additional 10,200 metric tonnes of expansion in Piparav
  • Greater revenues and earnings from LPG expected because of Pipavav expansion and Haldia expansion.
  • The company continues to work on completing necklace of terminals in the next three years by FY2021
  • For Haldia LPG terminal, the demand would be more than expected levels
  • Piparav- 10,200 metric tonne expansion, which could increase the LPG throughput by 800,00 tonnes

Capex

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  • The company continues to work aggressively on completing the necklace of terminals.
  • Two more projects coming up after the Haldia project. One has reached the negotiation stage, the other one is still in initial stage
  • One is in West Coat of India
  • 100,000 kiloliters liquid terminals in Kandla coming up
  • Haldia 25,000 kiloliters
  • Expansion  still going on in Mangalore
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Industry outlook

  • Imports is expected to increase from 11 mllion tonnes last year to 20 million tonnes in 2035
  • Domestic supply will also increase, but slower than the domestic supply
  • Aegis would cater to the increasing demand, and would try to fill the gap covered by imports
  • Ramping up occurring in Haldia and Piparav, and better results are expected in next quarters

Updates on pipelines

Uran Chakran pipeline

  • The company has completed its part in December 2016
  • The company is waiting for HPCL to complete its part, expected by March 2018
  • After that, the company can start moving LPG at the HPCL request through that very large pipeline.

Durgapur pipleline

  • IOCL started the work there

Updates on tenders

  • No new updates
  • In 2017, the company has beaten the forecasts- the LPG demand is higher

Non-cash tax write-back

  • Benefit for only the FY 2018
  •  Next year, will return to the P&L basis

Change of auditors

  • No specific reason; Company norm

Competitors

  • There are LPG traders, whoever is on the list registered with IOC, HPCL, BPCL
  • Joint venture company with the Japanese called Aegis Group International from Singapore,make Aegis competitive
  • Normal international LPG traders who are the company’s competitors

Updated on Dividend

  •  Company is planning to provide soon- interim dividend plus final dividend

ITOCHU funds

  • Deal almost completed

Effect of price changes

  •  The company charges the service fees from the oil companies, on the basis of amount per tonne figure
  • It depends on the type of customer- range of 800-1000 Rs per tonne
  • It does not get affected by the change in prices by the oil companies

Updates on Reliance

  • Reliance may be considering changing its input feedstock- status quo

Updates on Gujarat Piparav port

  •  APM Terminals group may be considering divesting their stake in Gujarat Piparav port- No such plans at present
  • If it happens, it will have no impact on the business of Aegis

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Salzer Electronics Q2FY18 Concall Summaries

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 Q2FY18 Financial Performance

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  • Financials restated as per Indian Accounting standard, Ind-AS
  • The net revenues from operations were at 101 Crores
  • A year-on-year growth of 9% witnessed as compared to Q2 FY’17
  • A net growth in revenues demonstrated
  • Growth mainly driven by higher demand in Wire and Cable business and Industrial Switchgear business
  • 29% year-on-year growth in exports due to the increased exports to UK and USA
  • The EBITDA grew by 8% to Rs.13 Crores as compared to Rs.12 Crores in the corresponding previous quarter
  • Sequentially, growth of 23% witnessed for EBITDA
  • The EBITDA margins improved by over 270 basis points to 12.8% on a quarter-on-quarter basis
  • These were the best margins over the past four quarters
  • Further improvement trend for margins was expected to continue
  • Better product mix and increased exports was the main reasons for increase in EBITDA margins
  • The profit after tax grew by 8% to Rs. 6 Crores in Q2FY2018 as against 5 Crores in the corresponding previous quarter
  • Sequentially, the PAT increased by 43%
  • The PAT margins for the quarter were flat at 5.8%
  • Sequentially PAT margins improved by over 190-basis points
  • Exports contributed 23% of the total revenue in the quarter
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H1FY2018 Financial Performance

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  • Net revenues from the operations were at 205 Crores in the first half of FY2018
  • A year-on-year growth of 13% seen as compared to H1 FY2017
  • Growth was driven by Industrial Switchgear and Wire and Cable business
  • EBITDA for H1FY2018 remained flat at Rs.23 Crores
  • The PAT increased by 2% to Rs.10 Crores in H1FY2018
  • Exports contributed to 18% of total revenues
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GST Implementation

  • GST regime was implemented in July
  • Slight teething problems to start witnessed though the overall long-term prospects remain extremely positive for the organized players like Salzer
  • Salzer was insulated to a large extent on account of its product offerings to a wide variety of industries, quality consistency and its recheck across geographies

About Salzer Electronic

  • Incorporated in 1985
  • Collaborated with the German Salzer, the manufacturer CAM operated rotary switches
  • Evolved from a single product company to a complete customized electrical solutions provider
  • Technical associations with the reputed companies across the world
  • Deals in high quality products of international standards
  • Associated with Larson & Toubro from 1993, Plitron from Canada in 1995 and with Trafomodern model from Austria in 2016
  • Focused on getting into niche and of great value technologies
  • Has a preferred vendor status with global giants like GE and Schneider
  • All the products are international certified
  • Operate under electrical and electronics segment
  • Classifies business into four different divisions-
    • Industrial Switchgear Division
    • Copper, Wires and Cable Division
    • Buildings Segment Division
    • Energy Management Division

External Environment and Impact

  • Country witnessed drastic and disruptive changes in economic terms
  • Government put forth its vision of make in India recognizable
  • Numerous economic reforms were implemented
  • A lot of teething problems in implementation of these reforms were witnessed by Salzer
  • Despite the numerous headwinds in the economy, Salzer continued to invest in businesses
  • The need to be future ready as soon as the business conditions revive is foremost priority
  • Salzer is very optimistic about the future prospects

Industrial Switchgear Division

  • Contributed 50% to the total revenues in Q2FY18 and 43% for H1FY18
  • With the GST regime in place and overall positive economic scenario early signs of revival in Switchgear business being witnessed
  • Received very good enquiries from large OEMs like BHEL, Schneider and GE, etc., for Switchgear products
  • Due to high standards of quality, demand expected to significantly improve further
  • New products like the Dry Type Transformers and Wire Harnesses witnessed a significant growth in Q2FY18

Wire and Cable Division

  • Second largest contributor to the revenues in Q2FY18
  • Focused at brand labeling for major brands like L&T
  • Started branding for companies like Crompton Greaves Consumer Products, Texmo, EFAB and a few other brands
  • In the previous two years, focused on giving value added products to customers
  • Came out with specialized products like elevator cables, solar cables, highly flexible hoist cables and other similar cables
  • This segment contributed 46% of the total revenues of the company in Q2 FY2018 and 51% for the H1FY18

Building Products Division

  • The only B2C business of Salzer
  • The contribution of the total revenue remains small
  • Increase in the contribution in the next two to three years to around 10% levelsis expected
  • Got annual rate contracts with major builders like Sobha Developers, Purvankara, Reddy Structures and Kumar Builders
  • The Building Product Division contributed around 4% of the revenues for Q2FY18 and H1FY18

Energy Management Division

  • Being order book driven business during Q2FY18, Salzer did not book any revenues
  • For the H1FY18 it was 1% of the total revenues of the company
  • Salzer expect to book revenues for the first year of the contract it took in Tamil Nadu
  • Contact is 12.5% of the total contract value of Rs.86 Crores
  • Focus remains to achieve profitable growth by adding newer, customized and value added nature products
  • Newer geographies, which can yield better margins were also explored
  • With a very competent team in place Salzer is confident of achieving the milestones

Strategy for Steady Progress

  • Board in its meeting on November 17, 2017 approved the proposal to acquire the entire business of Salzer Magnet Wires
  • Acquisition is as a going concern on a slump sale basis with appointed date as April 1, 2017
  • It is subject to necessary further consent from the shareholders of both companies and clearance from regulatory authorities

Salzer Magnet Wires

  • Founded in 2008 and was promoted as a separate company because there were other investors who wanted to invest and setup this business
  • Offers extensive range of enamel coated copper wires suitable for winding applications in transformers, motors, alternators, contactors, relay and auto-electricals.
  • Business witnessed a compounded annual growth of around 20% since its inception in 2008
  • Polyester coated wires for deep well pumps and fine enamel copper wires also manufactured
  • Absolutely no holding by Salzer Eelctronics. It is held by Salzer promoters
  • 50% is held by the Salzer promoters and the rest by other directors of Salzer and from some outside people
  • Cables and Wires made by Salzer electronics and enamel copper wires made by the Salzer Magnet Wires are very similar in nature.EBITDA level it is around 8.5% to 9%.• For current set of operations, being at 11% it is slightly better than Wires and Cable Division
  • The fine enamel wire for which the plant has been setup for manufacturing going to be better margin product
  • The selling price are significantly higher than the current selling products

Acquisition of Salzer Magnet Wires

  • Bringing a new business into Salzer Electronics without testing the waters wasn’t desired
  • Process of this acquisition will take two months
  • Some regulatory approvals and the shareholder approvals are expected to complete by end of December
  • The consolidated numbers should be there in FY2018
  •  Capital employed is around Rs.16 Crores.

Benefits of Acquisition

  • A lot of synergies can be seen in bringing that into Salzer Electronics today due to Wire and Cable Division and work with Larsen and Toubro
  • The synergies are mainly in sourcing of raw materials
  • Volumes are going to significantly increase due to acquisition for both
  • Rs.60 Crores will be added in sales volume for Salzer Electronics in FY2018
  • Result in incremental growth of 20% to 25% in the next five years
  • 3% is the PAT margins of the company and it is going to be EPS accretive
  •  Strengthening of the product portfolio will give opportunities for further improvement of market penetration of the products of Salzer Magnet Wires
  • It will enable to focus global markets over the next few years
  • Integration of the two companies’ business would provide leverage for better price negotiation with suppliers of copper on the volume growth basis
  • It will give price benefit of at least 1% to 2% in the raw material of both wires, cable and new company getting acquired
  • Acquisition would bring cost efficiency in manufacturing and provide scope for improvement in operational synergies of Wires and Cable Business
  • Products like three phased transformers and Toroidal Transformers would get more benefit in terms of better pricing and margin
  • The products of Salzer Magnet Wires will have better scope for innovation and application with support of Salzer electronics’ in-house R&D facility
  • Salzer Magnet Wires will also bring in completely new customer base to Salzer Electronics
  • It will provide opportunity to get new customers for our Salzer Electronics existing products

SMW Acquisition Cost To The Company

  • The cost to Salzer Electronics will be 10.3 lakh shares  on a fully converted basis
  • The shares are being issued at Rs.197, as per the SEBI rule for the pricing of the shares.
  • Approximately amounts to Rs.20 Crores
  • Company’s FY2017 turnover was Rs.60 Crores
  • For September 2017, it was around Rs.37 Crores
  • It is expected to be around Rs.70 Crores in FY2018

Focus Of The Company After Acquisition

  •  Approximately 15% of the production of this company will be used with 15% to 20% ason captive basis
  • The company has set up a fine wireenameling plant
  • The fine wire enameling has a very highmargin with limited Indian manufacturers and a very good market.
  • Salzer Electronic customer base will be able to consume a lot of this finewire fine enamel wires

Fine Enamel Wire

  • Used in electrical, auto electrical, the products like contactors, relays, lot of coils, and auto relays
  • It is 100% copper enamel and copper polyester wire

Raw Material Expense

  •  Raw material prices have always remained at around 70% to 72%.
  • Two major product segments:
    • Wire and cable industry
    • Switchgear.
  • On the switchgear front, it is around 60%
  • On the wire and cable, it is around 85% to 86%
  • The rise in raw material price for the commodities like copper and steel, is completely passed on to customers
  • The rest of the raw material, have not witnessed any major price changes

Target For The Full Year And FY2019

  • The full year target to be between 11% and 12%
  • It also depends onthe product mix that in the next two quarters
  • A higher EBITDA margin can be expected if the revenue share of the switchgear business is goes higher,
  • With the increase in revenue share of the wires and cable, the EBITDA margin percentage will be be low even though the absolute numbers are higher
  • A four to six week order book position I worked upon

GST Rate Applicable

  • Was at 28% when it was implemented then reduced to 18%.

Future Path Ahead

  •  For the past four or even six quarters growth has been very small
  • The main reason is the struggling Indian market
  • Going forward, the Indian market is on the verge of the growth path
  • Industrial switchgear business is one that is poised to grow at a much faster pace than what it was in the past six quarters
  • Exports will pick up significantly to Europe and US, giving better margins
  • 95% of exports are switchgears business.

Three-Phase Transformer Activity Wiring Harness

  •  Three-phase Dry Type Transformer production started in January, 2017
  • Significant enquiries were seen from very good OEMs in India
  • In Q2FY2017 a business of around Rs.3 Crores
  • Business around Rs.15 Crores to Rs.18 Crores in FY2018 is expected for three phase dry type transformers
  • Companies like BHEL, companies like Toshiba, Mitsubishi, and UPS, companies like Schneider, ABB, and from Indian Railway made enquiries

Wire Harness

  •  Wire harness segment was started in the previous year
  • A good growth almost doubling of business is being seen
  • It is not for any automotive, wire harness is for industries
  • Not many organized players are present in this segment
  • Focus is on Wire Harness industry where the demand is quite good
  • Got business from almost all the elevator companies and various other industries are being looking at for wire harness.

Affordable housing

  • Government of India is planning to invest for affordable housing
  • It is going to be a game changer in the real estate market
  • Salzer has products for building like wires, switches, MCBs, and distribution boards
  • There will be enormous demand if the Government of India invests for the affordable housing
  • More focus is into the building

Trade Receivables

  • Rs.86 Crores business was done with Tamil Nadu Government for the street light energy efficiency project
  • As payment term in the contract 12.5% will be received every year
  • The non-current is the first 12.5% that has been built and the payment is expected
  • By March of FY2018, the payment is expected
  • The overall receivable levels is going to be around 90 days
  • That has been the industry norm in the segment
  • It has increased a little bit beyond 90 days, going forward its expected to remain at 90 days

Industrial Switchgear Business Demand

  • The biggest advantage being a supplier to a wide variety of industries starting from the core infrastructure industries to the renewables to the backup power industry to machine tools to medical equipment industry
  • The general industrial pickup in the country will give a boost
  • The power generation, transmission, and distribution across all three sectors is a significant factor for the product growth
  • Around 30% of the business goes into power segment
  • No new business, getting large amount of business for maintenance

10 Years Contract With GE Transportation

  • GE Transportation signed the contract with Government of India
  • A locomotive plant will be set up in Bihar for manufacturing 1000 locos over the next 10 years
  • Coming around 100 locos every year
  • A contract with GE made for supplying a very special customized contactor to the locomotives
  • The size of the business is not very significant
  • The size of the business is approximately around Rs.12 to Rs.15 Crores over the next 10 years
  • The biggest advantage is getting an opening into GE Locomotive, which is much larger business globally
  • Starting the business with Indian company with GE Locomotive, aim is to get the products to GE Locomotive in US where the size of the business isat least 10 times bigger
  •  Significant opportunities in transformers is also being explored
  • Samples for various other Salzer products have been submitted to GE Locomotives
  • Testing is being done by GE as that require a very long-term testing
  • After getting through the quality testing a business of around Rs.8, Rs.9 Crores with GE Locomotives is expected

German Tie Up With The Salzer German

  • Focus is to sell CAM operated rotary switches to Salzer Germany and to market it in Europe under their brand through their network
  • If that stabilizes over the next two or three quarters, new products will be added in the same network
  • GST implication on cable business
  • The reduction is definitely good for the industry overall and demand pickup is expected because of that

Energy Management Business

  • Large project was done the previous year
  • An order from EESL company for Rs.20 Crores for Varanasi and Jharkhand was received in FY2018
  • Some portion has been built in the first two quarters
  • Could not do anything in Q3 as EESL actually postponed thedelivery schedules
  • The first-year revenue of the Tamil Nadu project, approximately around Rs.10.5 Crores has not been billed
  • Waiting some certifications to come in
  • After that in FY2018 first 12.5% of the Tamil Nadu project will be billed as well as some revenues for the EESL in the next two quarters
  • This was for Tirupur, Erode and Vellore, the three corporations.
  • Every year Rs.10.5 Crores is expected to be received
  • • The margins would be very, very high

Building Material Division

  • Q2FY2016 was extremely good for the building segment
  • That is why a little slowdown is felt in Fy2018,
  • Division on an annual basis is expected to clock around Rs.27 Crores, Rs.28 Crores compared to last year’s Rs.23 Crores
  • Definitely seeing a 20%, 25% growth in the segment
  • It has better gross margins, but less EBITDA as of now
  • Aim is to attain critical level of around Rs.35, Rs.40 Crores
  • After crossing a significant jump is expected in the EBITDA margins for this product in this segment.
  • The estimation for FY2018 is around 420 without the acquisition
  • With this acquisition 10% more or more than that is expected

Expected Financials

  • The company is expected to do in FY2018 turnover of approximately Rs.70 Crores
  • A margin of around 3% to 3.5%. on the PAT levels.
  • On the EBITDA level, it is going to be around 9%.
  • For FY2019 EBITDA margin is going to be between 11% and 12% depending on the product mix
  • If the switchgear segment witnesses higher growth, EBITDA margins can be a bit higher than 12% else between 11% and 12
  • 18% to 20% growth both in top and bottom line for FY2019 is excepted

Evaluation Of The Current Scenario

  • Major changes in the economy can’t be observed
  • The economy is still struggling to grow
  • That is the reason for very less demand for the products in India, in the industrial sector
  • The reasons for that is various reforms came in into shorter time
  • FY2019 will see significant pickup in demand resulting in growth of 20%
  • Growth will be much faster if the Indian economic changes.

Product Mix

  • More products are being added into industrial switchgear division
  • Wire Harness, Three Phase Dry Type transformers are the examples
  • That is going to be the more focused division
  • It gives 15% to 16% EBITDA
  • Good exports give EBITDA margins of around 16.5% in the switchgear business
  • The wire and cable division is growing at a much faster pace
  • The EBITDA margins are lower at around 8.5% or 8%
  • The absolute number will be much better if that grows
  • Focusing in the building segment business to sell wires under Salzer brand
  • Salzer has a good brand name as far as at least South Indian states are concerned
  • Started taking advantage of brand name
  • The same network of selling switches, MCBs and distribution boxes is being used to sell building segment wires

Plan for Getting CFO

  • Salzer has a very good team behind, though they are not facing the company outside
  • The team is excellent providing support in all aspects of the business
  • Mr. Rajesh Doraiswamy will be handling finance part

Growth Sustenance

  • No revenues for energy management were booked in Q2FY2018
  • Seen good growth and growth is expected to continue for next two quarters or even better
  • The Wire and Cable, year-on-year has grown 20%
  • Switchgear grew around 8%
  • Switchgear is expected to grow a little better and Wire and Cable will continue to grow at around20%
  • On energy management business, the demand is shifted to the not central government the EESL, Energy Efficiency Services Limited
  • The demand is picking up but EESL is finding difficult to deal with various corporations in various states
  • The future is going to be good for this division
  • With EESL stabilizing things will get better
  • No scope for this business in industrial market

Exports

  •  Will be touching around Rs.70 Crores for sure and may lie around Rs.80 Crores
  • Rs.39 Crores business has been done by half-year
  • 29% jump seen in second quarter exports as compared to the first quarter exports
  • The second quarter trend is expected to continue for the next two quarters
  • At least Rs.40 Crores to Rs.45 Crores will be done in the next half year

Dividend Payout

  • The Company has a dividend payout policy of around 15% to 20% of the PAT
  • It will be between 15% and 20% of the PAT in FY2018
  • No news for debt reduction but still looking at opportunities

Equity Dilution

  • Have ESOP running, and is getting issued right now

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Apollo Tyres Q2FY18 Concall Summary

Apollo Tyres.png

 Financial Highlights 

  • Net sales on a consolidated basis were Rs 34 billion
  • This is a growth of 11.5% on a YoY basis and 5% on QoQ basis
  • This growth was essentially led by India Operations, which registered revenue growth of nearly 18% on a YoY basis
  • Reifen sales were €27 million with negative EBITDA margin

Operational Updates

  • Overall volume growth across product categories on standalone basis was around 10%
  • Overall truck segment grew by 12% led by TBR OE which almost doubled on YoY basis
  • OE segment grew by about 12%, and exports saw sharp decline
  • In terms of revenue segmentation, radial is now about 55%
  • The industry radialisation level is somewhere between 45-50%
  • On a YOY basis, the OEM & replacement mix has changed in favour of OE
  • The mix was 60% Replacement and OE 31%, balance being exports
  • Last year it was 64% Replacement, 25% OE and 11% exports
  • On QoQ basis, the mix has moved in favour of OE with shift of 6% in Q2

Europe Operations 

  •  In the Europe Operations, the company faced a decline in revenue
  •  EBITDA excluding other income was Rs3.6 billion
  • EBITDA registered a margin of 10.7%- a decline of about 3.5% on a YoY basis, but an improvement of 2.2%on a QoQ basis
  • This was primarily due to raw materials price moving upwards-nearly 12% on a YoY basis,however it fell by9% on a sequential basis
  • The net debt on a consolidated basis was at Rs 41.4 billion, an increase of about Rs 7 billion on a QoQbasis
  • This was essentially on account of funding of capex
  • The company has concluded a QIP issue at the beginning of Q3
  • Going forward, the company expects the debt would not increase, as some capex would be funded through internal accruals and the equity raised
  • The volume decline in Europe is about 5%

India Operations

  • Sales were Rs 24.2 billion, a growth of 18% on YoY basis
  • This was on account of a nearly double digit volume growth and a price and mix growth of about 8%
  • On QoQ basis,growth of about 6% was primarily led by the volume growth, which came in from growth across product categories, except farm, which seasonally was weaker in Q2FY18
  • EBITDA excluding other income was Rs 2.8 billion, a margin of 11.8% compared to 16% last year, however, EBITDA increased by 3.3% on a sequential basis
  • The net debt in the Indian operation was at Rs 21.2 billion vis-à-vis Rs 17.7 billion as of the end of Q1
  • The company expects to see strong volume pickup in future in the India

Dutch and Hungarian operations

  •  The company’s Dutch and the Hungarian Operations reported sales of€107 million
  • This is a de-growth of 5% on a YoY basis, which was primarily on account of volume decline
  • The company’s decline was more than that of the market
  • This resulted in pressure on the margins, given the operating leverage
  • The EBITDA was€9 million at 8.5%, which takes into account start up losses of Hungary
  • The German distribution company also had a negative revenue growth and reported EBITDA loss

New plant at Hungary

  • The European operations would continue to go through some difficult time till Hungary reaches a certain scale
  • The company expects to see Hungary contributing into the results from next year and the full impact of the scaled up operations coming into play in FY2020
  • The company expects the Hungarian Operations to turn positive from Q4
  • Initial supplies are to replacement and that would be the case for any new tyre plant around the world
  • The current supplies to European OEMs have started out of the Dutch plant
  • The earliest OE supplies from Hungary plant would be in FY2020

OEM and Replacement segments

  • The growth in truck replacement segment was about mid single digit
  • The OE pickup, particularly was a big factor in the truck segment which led to about 12% overall volume growth
  • The truck OEMs went through a significant decline in the Q1 on account of the BS-III to BS-IV switch
  • On the truck radial side,it was much stronger growth
  • The truck cross-ply continues to decline
  • Almost double digit growth in PCROE segment was negated by a decline in exports,resulting in an overall flat growth in the segment
  • The light commercial vehicle had a marginal volume growth
  •  Farm grew by almost 15% on a YoY basis

PV Replacement segment

  • PV replacement segment saw light growth
  • The company is currentlyfacing acapacity constraint
  • Flat overall growth implies a growth in the domestic market, but given the capacity constraints,the company had to cut supplies in some instances,to the export market
  • The company feels a need to expand the PCR capacity
  • The company is not thinking of any price cuts in the near term

Capex plans

  • Capex planned for FY18 across geographies is Rs 2400 Crores
  • This includes expansion capex, maintenance capex and capex for other projects
  • Chennai capex out of Rs 2400 crores would be close to Rs 1000 Crores
  • For FY2019 based on current estimates,capex should be about Rs 2100 Crores
  • This includes completion of Hungary, some spill over of Chennai capex and primarily capex for passenger car tyre capacity in Andhra Pradesh

Landed cost of raw materials

  • Natural Rubber Rs 160/kg, Synthetic Rubber Rs 130/kg, Fabric Rs 260/kg, Carbon Black Rs 65/kg

Effects of Anti-Dumping duty and Demonetisation

  • The Chinese imports from the highs of pre-demonetisation of 1,50,000 tyres a month were down somewhere at 80,000- 90,000
  • They are trending further down- currently they are at about 70,000
  •  The company expects them to settle further at a lower level

Loss of market share in European operations

  • It emanates from the strong growth in India market
  • The company had to curtail supplies to export markets because of the very strong growth in domestic market
  • This included curtailing supplies to the European market also
  • While the company had the Hungary plant coming on-stream,but just having the equipment is not enough to produce all the sizes
  • There is long cycle of product industrialisation where each of the SKUs need to be produced,stabilised,etc.
  • The company will be able to produce each SKU in the Hungary plant in a year time
  • The Indian operation supplies both brands (Apollo and Vredestein ), largely Apollo tyres

2-wheeler segment

  • The run rates are up nearly 50%, as compared to the previous year
  • The company is still a very small player in the overall segment
  • The company plans to continue pursuing the market through outsourcing strategy
  • The company is looking to supplement this strategy with setting up of a pilot capacity on the higher end of the 2-wheeler segment, which is a very small niche market
  • The company is satisfied with the growth
  • The company does not plan for any in-house manufacturing capacity in near term
  • The company will,as part of the conversion of truck cross-ply,set up a small capacity of two wheeler tyres, which will serve this higher end of the market
  • OEs would beat lower price point and initially the company would not make any money when they supply from the Dutch plant
  • The company considers itthe price of entry into anOE
  • These are ons pecific models at a particular point of time
  • For a year, the company will have to supply out of the Dutch plant with a higher cost structure

Company outlook

  • The raw material scenario for Q3 is expected to be stable
  • It will go up marginally during the quarter, however, the average for the quarter would be at same level as Q2
  • The company expects a slight increase in RM prices in the Q4 of this fiscal year
  • India demand continues to be strong on the passenger side; so the capacity constraint will not ease up
  • The situation in Europe will continue to improve every month as the capacity of Hungary keeps going up including the product industrialisation issue
  • Depending on how the winter is or how the recovery is, the company would continue to have some constraints, but that situation is constantly improving

Company strategy

  • The company continues to ramp up its truck radial capacity in Chennai- current capacity being in excess of 8000 tyres per day
  • 8000 tyres per day is the current production level; capacity is ramping up and currently in excess of 9000 tyres per day.
  • This capacity is coming in at the right time as company expects a strong demand pickup in this segment
  • In Hungary, the Operations continues to ramp up
  • The company has already crossed levels of 2000 car tyres a day and expects to be crossing level of 5000 tyres per day average for Q4 of this fiscal year
  • If the raw material basket goes up, the company would look to take a price increase
  • Efforts are being made to debottleneck capacities, but again they would be barely sufficient to serve the growing India market itself
  • De-bottlenecking options will increase capacity by about 10%.
  • Given the brand equity for the Apollo brand, and the demand, there is pressure on the plan to ramp up the capacity quickly
  • The second brand would remain as a very limited offering in a couple of markets
  • The situation is constantly evolving and would be evaluated by the Indian Operations team
  • If a change is necessary, then they would take it
  • As of today, the focus continues on the main brand
  • Some of the prices are fairly standardised across operations
  • The company may have the opportunity to develop another supplier or a particular grade, which is lower cost
  • Mix of materials that will deliver the required performance, but could come at a lower cost
  • That is a work that purchase and R&D work together very closely
  • Other things in control is tracking the other cost elements- the manufacturing costs, the selling general and administrative costs

Price changes in domestic truck tyres

  • The higher end has not seen much change
  • At the lower end where the Chinese,and the lower end second brands were being offered, there is a
  • price increase of about 3% in the market

Europe price hikes

  • Given that the raw materials’ prices increased through few quarters and just around the time when the price increases were announced, raw material came down
  • Now the short-term outlook is stable to minor inching up; there has not been much of pricing action
  • In some cases,small 1% price increases have been implemented
  • However, the higher price increases, which were announced at the end of first quarter for winter tyres were not implemented

Drop in Inventory days in H1

  • Given the strong sales scenario, the inventory has come down,including finished goods
  • GST implementation also led to a certain stocking up
  • The cost element of excise post-GST has gone out
  • The decline in PCR replacement market has to be seen in light of the overall European market,which itself has had negative growth
  • In longer term, it still ends up at around that 1.5%-2% volume growth
  • The company does not expect the cheaper brand to cannibalise the main brand
  • The company has launched in a very limited manner, looking at the experience of other players
  • The thinking is not to extend it across different markets-both from the risk perspective; and also from a perspective of the demand for the main brand

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