Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nelcast Ltd (BOM:532864, Financial) is optimistic about future demand, anticipating a resurgence post the US election period and with new emission norms expected to stimulate the market by 2026.
- The company is actively developing new products, which are progressing as planned, and expects to secure more orders in the next 2 to 3 quarters.
- Nelcast Ltd (BOM:532864) is exploring new export markets and aims to increase its export share from 36% to 50% in the future.
- The company has successfully reduced its long-term borrowings, improving its debt-to-equity ratio from 0.63 to 0.57.
- Nelcast Ltd (BOM:532864) has completed the sale of approximately 50 acres of land, which could positively impact cash flow.
Negative Points
- The company faced a contraction in commercial vehicle demand and a slowdown in export demand, particularly from the US, affecting sales volumes and price realizations.
- The domestic tractor market has shown a flat trend, impacting performance metrics.
- Nelcast Ltd (BOM:532864) reported a decline in total income for Q2 and H1 FY25 compared to the previous year.
- EBITDA for Q2 FY25 decreased to 26 crores from 36 crores last year, and the half-year EBITDA also saw a decline.
- The company is experiencing volatility in export markets, with anticipated softness in the current quarter and uncertainty in projecting H2 performance.
Q & A Highlights
Q: Can you elaborate on the strategic goals and the progress of new product development? Are we building on a hope story, or is growth nearing?
A: P. Deepak, Managing Director, Executive Director: We are facing challenges in the domestic heavy commercial vehicle, tractor segments, and exports. The heavy commercial vehicle sector has seen a degrowth, but we are cautiously optimistic about a pickup post-elections and monsoon. The tractor segment is flat, and exports face temporary challenges due to US elections and interest rate concerns. We are confident that new products under development, especially for exports, will translate into sales in the next year.
Q: What is the outlook for H2 exports, and how are you insulated from potential tariff changes?
A: P. Deepak, Managing Director, Executive Director: It's premature to speculate on tariffs, but higher tariffs on China could benefit Indian manufacturers. We don't believe tariffs will significantly impact us. For H2, we expect softness in Q3 exports but a strong pickup in Q4, though volatility remains high.
Q: Can you explain the flat margins despite higher export share?
A: P. Deepak, Managing Director, Executive Director: The flat margins are due to increased freight costs for exports, which we recover with a lag. Despite a higher export share, margins remained flat due to this lag in cost recovery.
Q: What is the status of the European orders and potential growth from these markets?
A: P. Deepak, Managing Director, Executive Director: We are in serious discussions with major commercial vehicle OEMs in Europe. While it's premature to provide specific numbers, the potential is significant, and we hope to match North America's market opportunity over the next 2-3 years.
Q: What are the new products under development, and will they provide a competitive advantage?
A: P. Deepak, Managing Director, Executive Director: We are developing larger products like cast axles and other unique products. We are confident that these developments will lead to significant growth in the medium to long term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
