Igarashi Motors India LtdQ2 FY16Auto Components

Igarashi Motors India Ltd

Q2 FY16 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Revenue guidance

Category 3

→Targeting 50% of total sales from EGR and Turbocharger applications within 3-4 years (currently 5%).
→Expected volume ramp-up for new programs (e.g., flexible motor platforms for engine, emission, and Turbocharger) starting end of FY2016-17 with growth through 2017 and beyond.
→Capacity expansion at approx. 25% per year over the next 1-3 years to meet rising demand.
→Customer-driven growth with new application platforms approved by major OEMs (Bosch, Continental, Pierburg, Hella).
→Volume growth in engine application motors expected at 10-12% minimum annually.
→Investments ongoing for flexible production capacity aiming for 1 million units in new applications by end of calendar year.
→Focus on leveraging technology platforms for multiple applications to proliferate sales and de-risk business.

Category 3

→The company aims to grow volumes faster than its current pace by adding capacity at 20-25% per year over the next 1-3 years.
→Earnings and margins are currently above average; while margin expansion is not the primary strategy, slight improvements are possible in the short term.
→Focus is on volume growth to match capacity increases for higher top line and absolute EBITDA.
→Strategic growth is targeted in EGR and Turbocharger applications, expected to constitute about 50% of total sales in 4-5 years (currently about 5%).
→Engine application motors are expected to grow at 10-12% minimum.
→Realizations per motor may decline modestly (~2-2.5% per year) due to cost reductions and technical improvements, but profitability is managed through cost control.
→New product launches and technology investments are expected to drive future growth in earnings and EPS.

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→The transcript provided on page 18 and surrounding pages does not specifically mention any current or future plans for fundraising through debt or equity.
→There is detailed discussion on capital investment and capacity expansion, such as setting up capacity for 1 million motors and investment in R&D (e.g., $1 million allocated for BLDC motor technology development).
→The focus appears to be on organic growth, technology development, and capacity addition rather than on external fundraising.
→Pricing and commercial decisions are made internally by the pricing committee in India.
→No explicit mention of plans for raising funds through debt or equity in the given pages of the earnings call transcript.

→The company has several new programs in the pipeline targeting growth, with volume ramp-up expected from the end of FY2016-17 and into subsequent years.
→Three major product programs have been launched targeting customers like Bosch, Continental, Pierburg, Hella, and Helical.
→Initial sales from new flexible platform motors for engine, emission, and turbocharger applications began around end of FY2016-17, with ramp-up expected from end 2017.
→There is an order enquiry from a European customer for 12 million motors over four years for the Wastegate Turbocharger application; the company is initially setting up capacity for 1 million motors.
→The company aims to capture about 33% share as a second source from customers currently sourcing from Chinese suppliers.
→Progress heavily driven by customer engagements and technical audits rather than formal market research.
→Annual target is to develop three new products to maintain the order pipeline and technology leadership.

Yes

→Allocated $1 million over last and current year for BLDC (Brushless DC) motor R&D to address technical challenges like high-temperature PCB circuitry, aiming for validation with anchor customers before commercial launch.
→Capacity additions at about 25% per year over past 1-3 years tailored to new programs, including:
→ - Setting up 1 million flexible line capacity for Wastegate Turbocharger application by end of calendar year 2016.
→ - Launch of three new programs targeting EGR, Wastegate, and Turbocharger actuator markets with ramp-up expected from end of 2017 and beyond.
→Focus on developing flexible genetic motor platforms usable across multiple applications (engine, emission, Turbocharger) to efficiently address various customer needs.
→Investing strategically in technology to maintain and grow market share amid emerging applications, with anchored customers guiding development priorities.
→Overall strategic endeavor to grow volume in new actuator programs and maintain above-average margins.

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