Q2FY25 Concall Summary
Business Updates
- The volume growth in Thailand was 32% in H1. In spite of dumping by China in Thailand the company has maintained market share and also done good margins
- The plant in Chennai has started and volumes from this facility shall continue to grow in upcoming quarters
- The management has started TPM projects in the Thailand and Chennai facility as well
Participants
Investec
iThought
KSA Securities
SI Investments
Kotak Mutual Fund
Magma Ventures
Kapoor & Co.
RTL Investments
QnA
- The volume off take from Chennai facility has to be at 14000 tons in current year as that was the commitment made under PLI scheme from government. 80% of commitment has to be achieved otherwise PLI benefits will not flow in
- The company has 42% market share in India and over 30% market share in Thailand and in both places even though competition has come in the margins have been maintained
- In India 65% of tire production happens in South India while the manufacturing facility of the company is in Central and West India which leads to higher freight cost
- The long term plan is to supply to customers in North and West India from the mother facilities in Indore and Pithampura while for the customers in South from the Chennai facility which will lead to optimized freight costs
- The facility in Chennai cannot be used to make any other product, as it will destroy the fabric of manufacturing culture for the particular product that is bead wire. The factory will not be disturbed to produce anything else
- While the company continues to fight for market share in the Thailand market it does affect margins because China continues to dump excessively in that market. The company does not want to apply for anti dumping in Thailand as it will not be taken positively by its customers
- Aarti Wires is doubling capacity from 15000 tons to 30000 tons with a new plant and Bansal Wire is adding capacity in multiple segments which will be new competition coming in
- Global competitors in this space have not been able to reach double digit EBITDA including the Chinese one’s while the company has done consistently double digit numbers
- From a business perspective market share holds a higher salience than running after profitability only as that will add scale over the longer term and in turn lead to profitability
- On a Rs 90000 crore tyre industry in India the bead wire industry would be valued at Rs 2000 crore considering the amount of bead wire involved in construction of a tyre
- The company has got approval from Bridgestone for their new facility in Thailand and the team from Japan will come for the final audit post which a significant allocation will start towards that company from Q4 of current financial year
- In Q2 higher quantities were sold particularly from Chennai to lower quality customers since approval from higher quality customers for the Chennai facility have not yet been received
- Towards the business in America the company has already achieved a run rate of 100 plus tons a month for some customers and volume pickup will be much faster going forward
- Structurally the prices for American and European customers are better than the South East Asian customers but volatility over the last six months have affected the margins somewhat due to elevated freight costs
- Going forward EBITDA margins will remain at 15-16% only and focus will be to achieve 20% volume growth in FY25
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