Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pricol Ltd (BOM:540293, Financial) reported a revenue growth of 15.54% year-over-year for Q2 FY25, outperforming the market.
- The company achieved an EBITDA growth of 24.7% for the same period, indicating strong operational performance.
- Pricol Ltd (BOM:540293) has maintained a healthy EBITDA margin of 13.4% for Q2 FY25.
- The company is debt-free at a consolidated level, with comfortable cash reserves as of September 30, 2024.
- Pricol Ltd (BOM:540293) is exploring inorganic opportunities in the railway and defense segments, which could provide higher margins and growth impetus.
Negative Points
- The company's working capital trade receivables have increased, attributed to higher sales and reduced factoring.
- Exports have been significantly muted, particularly due to geopolitical factors, impacting the company's revenue mix.
- The domestic automotive industry demand remains muted, with Q3 expected to be a weak quarter.
- There has been a softening in gross margins due to product mix changes and wage increases.
- The proportion of exports in revenue decreased from 9% last year to 6.5% this year, affecting overall margins.
Q & A Highlights
Q: With the increase in India's defense budget and growing demand for defense equipment, how does Pricol plan to capitalize on opportunities in this sector? Are there any specific initiatives planned?
A: While Pricol currently has no business in the defense segment, the management is exploring inorganic opportunities to enter the railway and defense sectors in India. These opportunities are in early stages, but they could provide higher margins and growth impetus in the future. - Vikram Mohan, Managing Director
Q: There seems to be an increase in trade receivables this year. Can you explain the reason behind this?
A: The increase in receivables is due to a 15% growth in sales. Additionally, the amount of factoring used was higher in March compared to September, making the receivables appear higher. However, the number of days for receivables remains under control. - Priyadarsi Bastia, Chief Financial Officer
Q: What is the timeline for revenue generation from new products, and are you on track to achieve your revenue targets for FY26?
A: Revenue from new products is expected in 18 to 24 months as they are currently being tested by customers. We are on track to achieve our revenue targets for FY26 through a combination of organic and inorganic growth. - Vikram Mohan, Managing Director
Q: Can you provide insights into the margin profile and the impact of product mix on margins?
A: The margin profile varies with product mix. For example, mechanical clusters have lower margins compared to electronic clusters. Export margins are significantly higher than domestic margins, and muted exports have impacted margins by 50 to 80 basis points. - Vikram Mohan, Managing Director
Q: What is the outlook for the automotive industry demand, particularly for two-wheelers, and how does it affect Pricol?
A: The demand in the automotive industry is muted, and Q3 is expected to be weaker than usual. Export demand has been lower due to geopolitical factors, but we hope it will normalize in the coming quarters. Domestic demand will remain muted. - Vikram Mohan, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
