Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Suprajit Engineering Ltd (BOM:532509, Financial) reported a 9% growth in consolidated revenue for the half-year ended September 30, 2024, excluding SCS.
- The company's consolidated operational profit grew by 28% for the same period, indicating strong financial performance.
- The domestic cable division has maintained a sharp focus on profitable growth and is expanding into new product areas like braking products.
- The electronics division is diversifying its market reach beyond India and has started supplying to overseas subsidiaries.
- Suprajit Engineering Ltd (BOM:532509) has achieved an 8% EBITDA level in its controls division, meeting its medium-term target.
Negative Points
- The US market is struggling with demand due to high interest rates, affecting both automotive and non-automotive sectors.
- European operations face challenges due to market conditions and the impact of Chinese car imports.
- The SCS acquisition has led to significant one-off costs and operational challenges, including a negative EBITDA for the quarter.
- Freight costs have increased due to shipment delays and container shortages, impacting overall expenses.
- The non-automotive segment has seen a decline, with its share of total revenue dropping from 19% to 16%.
Q & A Highlights
Q: Can you provide a breakdown of the additional costs incurred due to restructuring at SCS and SCD, and will these costs continue in the future?
A: The additional costs related to restructuring and acquisition of the insolvent SCS entities are around INR25 crores. This includes restructuring costs in the controls division and expenses related to acquisition in Europe. These costs will not continue at the same level in future quarters, although some costs related to the China part of the acquisition will persist.
Q: How is the restructuring of SCD progressing, and what are the expected outcomes?
A: The restructuring involves synergizing operations in Mexico and addressing management overlaps. We are focusing on consolidating management and shedding overheads. Additionally, we are bringing more manufacturing in-house, such as plastic parts and electronic components, to improve efficiency.
Q: What is the expected timeline for SCS to achieve EBITDA break-even, considering the current global situation?
A: We expect to have a clearer picture in two quarters, especially after completing the SCS Canada and China parts, which are profitable. The material cost is under control, and we aim to bring other costs under control over the next 2-3 quarters.
Q: How is the non-automotive segment performing, and what are the expectations for recovery?
A: The non-automotive segment has been challenging due to overstocking and interest rate impacts. We are not expecting significant improvement this year, but operationally, we are lean and maintaining better EBITDA margins compared to last year.
Q: What are the growth prospects for the electronics division, and what key products are expected to drive growth?
A: The electronics division is focusing on expanding beyond EVs into non-EV segments. We are gaining new business in the non-EV sector, which is expected to provide stable growth. The division will continue to be our fastest-growing segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
