Xpro annual concall
- Coex division might show improved demand in H1fy24
- Deferred tax liabilities have no impact on cashflows
- All long term loans are repaid well before schedules
- First capacitor line to be installed at barjora and expected to start contributing from fy25
- Second line to contribute from fy26
- Investment in solar to commerce from 2025 & will enable savings
- Different capacitors are not designed to be interchangeable
- No import duty on dielectric films. We are able to able to compete without any duty
- No foreign owned biax film lines comming up in Bharat
- 23 cr of tax shield left. After that new regime. New shields for the new capacities
- For Many products we are costlier than imported films and still the customers prefer our films which speaks to our quality & performance characteristics. @ishmohit1
Fyi - We have developed complete range of dielectric films. Product mix improvement comes from tailor made specific customised products to meet customer requirements (shows switching costs). Specific high performance requirements are being met. Thickness is going thinner and thinner. EV segment, solar, miniaturisation drives costs from 400 rs for thinner film to 1800 rs for thicker films
- High capital cost & low turnover to capex ratio is one entry barrier. Technology, process parameters, handling capabilities, mindset, development & commercialization timeline, there is nothing called as standard off the shelf line. You need to design your Bruckner line. Customization of capex is another entry barrier. How we have advantage of being first mover. We focussed on few internationally established customers to learn from their feedback
- 15000 ton film demand in india / annum. Another entry barrier since it’s a niche product doesn’t meet with volumes of packaging film players
- 450 rupees/ kg realisation without taxes. Value mix change has led to price going up yoy. @SwarnashishC Fyi
- Coex biz is commoditized. Straight cost + basis. Material swings would translate to price change amounting to near pass through in biax division
- Today if you went to machine supplier you’d face 4 years of lead times for the good quality line. Testing stabilization, burning time all add up
- End Product mix can’t be disclosed since it is strict confidentiality basis
- 2 lines will help reduce the import dependence. 4 lines a year growing at 10% cagr. Ev requirements are growing fast in world. Huge demand for export. One major Japanese player volume has gone down since all exports are going to ev which is thinner but it is pricier. All decisions driven by econonics
- If we take a 5 year perspective, growth will be far higher than 15%
- Total capex requirements should be around 500 cr capex. Majority funded through internal accruals
- Only supplier credit from European suppliers at < 1% over uribor. So 3-4%. Typical supplier credit maximum extent is 85%. I’m not going to tell you how much we will draw
- We have been capacity utilized for 3 years. Still growing due to value added & product mix change
- Product mix is sensitive information. Whatever progress the division has made is due to value added mix. On new capacities we will go down to sub 2 micron film. Average price moving up fairly strongly over next 2-3 years. Fy21 our a average was 260. Now it is 450. Product mix change
- Average is 5-6 micron on current line. On new line we can go down to 1.5-2 micron
- We are looking at ev & solar applications not just for india but exports. Volume requirements in 2030 would be 70-80 lines we are thinking of. Market size is HUGE. Export opportunities are enormous. Existing customers are asking for more supplies. More new customers are asking for supplies. Global big players in this segment (biax division) have got us approved for supplies
- Asset turns would increase significantly over where they are right now with new lines
- R&D is tied to our plant itself. Value addition & customer requirements & future ready focussed R&D. Fair bit of spend is on R&D but it is lost in plant expenses. Won 20 awards for excellence in last 1 year
- We are constantly thinking about a 4th line. Not making an announcement yet
High level takeaways: quality is the differentiator here. Customization, configuration, process parameters for capex + high lead times for equipment, development, testing, productionization + customization of the product for specific customer application bake in high switching costs & entry barriers. The TAM highlighted is massive. With the new lines xpro will target exports for EV & solar and the global TAM for these applications alone is 70-80 lines in 2030. (For comparison, Bruckner has total lines installed till date since last 50 years which is 40-50). There is likely to be a long term demand supply mismatch imo which will ensure stable pricing. On growth he said that it will be substantially higher than 15%. Each line is a straight 30% import substitution. Realisation being higher for lower films will push the ebitda margins higher as well
Disclaimer: invested, biased. Will look to add if there is any weakness after next few quarterly numbers
Xpro India Limited Q4 FY23 Earnings Concall
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