Notes from Q4 FY23 concall whatever I could capture. Please counter check from the actual transcript as there might be some errors in my listening:
Overall Results & Future Outlook:
- FY24 guidance – 18 % EBIDTA at consolidated level and 15-20 % growth in revenues.
- Indian tyre market expected to grow to Rs.165,000 crores in 2030 from Rs.65,000 crores in FY23. This is what the tyre manufacturers are expecting. Tyre exports may double, as per our customers.
- Currently we have 8 % global market share.
- Total production next year – expected to be 110,000 tonnes.
- RM costs have now softened, we are seeing about 2 % reduction this quarter.
- Thailand tyre companies are mainly exporting whereas Indian tyre companies mainly sell to domestic market. This is the difference between Thailand & Indian tyre market.
- There is no major disruptive technological change in bead wire as a product.
- Shift to EV – only change this will cause is EV requires lightweight tyre, noiseless tyre. There is no change in the requirement of bead wire in that. EV vehicles are heavier as batteries are heavy, so if anything, tyre requirement will be higher in future.
- We are world no. 4 or 5 probably but Chinese numbers are unreliable. Ex-China – we will be 2nd biggest in the world after 180,000 TPA expansion is complete.
- Time lag in passing on RM cost price increase to customers is 1.5 months approx.
- Bead wire cost is 3 % of the tyre cost.
Thailand:
(There was a lot of discussion on Thailand since that is where the company has taken a hit)
- Saw Chinese competition in Thailand, they were selling at lower prices while we decided to hold our prices. So lost market share and volumes were lower.
- Five main Chinese competitors (could not understand the names). They are much bigger companies with bigger capacities in China.
- In Thailand, EBIDTA margin was 8.5 % in Q4.
- Thailand supplies to Bridgestone and Continental. Their requirements came down this year.
- Earlier the customers were operating at 50 % capacity since July but now since Feb – March onwards there is a pick up.
- Our Thailand market share in the last quarter was 16-17 % vs 20-25 % generally. The dip was due to 5 Chinese tyre companies who shifted to Chinese bead wire companies. And Sumitomo – one of our major customer – operating at a lower level.
- In Thailand, we expect minimum 40,000 tonnes sales (70 % capacity utilization) next year, up from 30,000 last year. But at lower margins.
- We expect 14 % EBIDTA margin in FY24.
- No major capex required here now.
India:
- We saw 15% growth, Production target for FY24 is 70,000 tonnes in FY24.
- We expect EBIDTA margin will be above 18 %, may be 20 % also.
- In India there is less competition.
- We are the only supplier to Michelin in India. But it is incremental demand and does not multiply the demand.
- Current level realizations in India will sustain if RM prices remain the same.
- Chinese bead wire companies cannot sell in India, there is no threat from them here. They used to sell in the past when there was 13 % subsidy given by their govt. But not now.
Chennai Plant:
- Rs.30-40 crore capex this year before the production starts. Total Capex in Chennai is Rs.160 crore.
- New plant may start production in H2 of this year but our projections do not include any production from Chennai.
- PLI benefits – we have requested to shift the benefits one year forward which the govt has agreed. So, it will start in FY25, not FY24.
- Scale up of Chennai plant – it will take 3 years to achieve full utilization.
Exports market:
- Discussions going on with several customers at an advanced stage – Bridgestone, Continental, Euro + 3 – 4 Korean tyre companies.
- Next year lot of volumes will go to Europe and America.
- China de-risk trend is still on, companies looking at India now.
- Europe demand is now picking up, nobody is talking about war or energy crisis.
(Disc: Invested)
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