Shivalik Bimetal Controls Limited Earnings Call Summary: Q2 and H1 FY 2025

This summary focuses on the key takeaways from Shivalik Bimetal Controls Limited’s earnings call for Q2 and H1 FY 2025.

Financial Performance:

• H1 FY 2025 Revenue: ₹26.77 crore, a slight decrease of 3.86% from H1 FY 2024.
• H1 FY 2025 Gross Margin: 46.57%, marking a reduction of 272 basis points compared to the previous year. This is due to the shift towards high-demand products with slightly lower margins.
• H1 FY 2025 Profit Before Tax (PBT): ₹47.24 crore, down 11.09% from H1 FY 2024, with a margin contraction of 178 basis points to 21.79%. This was influenced by rising input costs.
• H1 FY 2025 Profit After Tax (PAT): ₹35.2 crore, representing a PAT margin of 16.27%, a modest decline from the previous year.
• Sequential Growth: Q2 FY 2025 revenue grew by 2.8% over Q1 FY 2025, signaling early signs of recovery in the automotive and industrial electronics sectors.

Business Segment Performance:

• Shunt Resistors:
  • Growth expected in Q4 FY 2025 and into the next financial year, driven by existing business and new opportunities.
  • Growth is expected in India and Asia, with the Indian market showing substantial growth.
  • US market is currently in decline but is expected to improve in Q4 FY 2025.
• Bimetal:
  • Decline in revenue is attributed to lower global commodity prices for nickel and copper, and reduced demand in certain markets, particularly Europe and Asia.
  • Strong growth is expected in the Indian market due to infrastructure growth and a strong real estate market.

Margin Guidance:

• Gross margin is expected to improve to around 50% in the next financial year, assuming a better year for the shunt business.
• Improvement is driven by stabilizing raw material costs and an expected shift in product mix with a higher contribution from the shunt business.

Management Guidance for the Future:

• Focus on delivering quality growth and building on existing R&D efforts.
• Expanding into new component applications, particularly in electric vehicles and industrial applications.
• Continued commitment to innovation, quality, and customer relationships.

Key Risks in the Business:

• Global Inventory Reset: This has impacted demand over the past two quarters, particularly in the US.
• Rising Input Costs: Contributing to margin contraction.
• Dependence on Key Markets: Performance is significantly impacted by demand fluctuations in the US, India, and European markets.
• Competition: The contact business faces more competition compared to shunt resistors.

Industry Outlook:

• Automotive and industrial electronics sectors are showing early signs of recovery, with demand gradually returning.
• The smart meter market is experiencing significant growth, driven by the increasing localization of latching relay production in India.
• Infrastructure growth and a strong real estate market in India are expected to drive demand for bimetal in the switchgear industry.

Disc: Invested

Pricol Limited Q2 and H1 FY2 Conference Call Summary

• Financial Performance: Pricol Limited reported strong financial results for Q2 and H1 of FY25.
  • Revenue from operations reached 6,500 million with an EBITDA of 871 million, resulting in an EBITDA margin of 13.4% for Q2.
  • Profit after tax (PAT) was approximately 450 million, with a PAT margin of 6.93% and basic EPS of 3.70 rupees per equity share.
  • For the first half of the fiscal year, sales reached 12,530 million, EBITDA was 1,677 million, with an EBITDA margin of 13.39%. PAT for the half year was 96 million, and basic EPS was 7.44 rupees.
• Margin Guidance: Management expects EBITDA margins to remain around 13% to 13.5%. They believe this range is reasonable for their current product mix. Margins are expected to improve by approximately 50 basis points once export volumes recover. Margin softening in Q2 compared to Q1 was attributed to product mix and a wage increase implemented on July 1st.
• Business Segment Performance:
  • Automotive: The automotive industry experienced muted sales in Q2, impacting Pricol growth. However, the company still managed to achieve a 15.54% revenue growth compared to the same period last year. Exports have been significantly impacted due to the US election and new policies, leading to much lower demand than initially projected.
  • Defense: Pricol currently has no business in the defense segment but is exploring inorganic opportunities in the railway and defense sectors in India. They believe these segments offer higher margins and growth potential.
  • New Products: Revenue from new products, such as those in the PE and So segments, is expected in 18 to 24 months. The products are ready and are being tested by customers. The company is on track to achieve its revenue target of 3200 Crores in FY26, through a combination of organic and inorganic growth.
  • Battery Management System (BMS): BMS products are still under development and have not yet generated commercial revenue. Management is not overly optimistic about the BMS market due to its fragmented nature and uncertainties surrounding EV adoption.
  • Disc Brake (DB): Commercial production of DB has begun, and supplies have commenced to six manufacturers. Significant volume ramp-up is expected in the next fiscal year (FY26).
  • Smart Cockpits and Connected Vehicle Solutions: Pricol is witnessing traction and growth in this segment.
• Management Guidance for the Future: Pricol Limited is targeting a revenue of 3200 Crores in FY26. The company plans to achieve this goal through organic growth and strategic acquisitions. They are exploring opportunities in the automotive, railway, and defense segments.
• Key Risks in the Business:
  • Muted Demand in the Automotive Industry: The automotive industry is experiencing a slowdown, which is impacting demand for Pricol products.
  • Slow EV Adoption: The pace of EV adoption is slower than initially anticipated, potentially affecting demand for EV-related products.
  • Export Market Volatility: The US market has been impacted by elections and policy changes, leading to reduced export demand for Pricol.
• Industry Performance: The two-wheeler industry is facing muted demand, with Q3 expected to be particularly weak. The industry is experiencing inventory pileups at dealerships, further indicating sluggish demand.

Capital Expenditure (CAPEX): Pricol is investing 600 crores over three years in various projects, including a new plant in Pune, expansion of the Manesar plant, land acquisition for future plants, line upgrades, a new plastic component molding shop, tool room upgrades, and new PCB lines. Approximately 200 crores will be invested this year, with 150 to 180 crores planned for next year.

Debt and Acquisitions: Pricol currently has no long-term debt and holds comfortable cash reserves. The company is willing to incur up to 300 crores of debt to fund acquisitions, primarily targeting opportunities in the automotive space.

Disc: invested and may be biased

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