Precision Camshafts LtdQ1 FY23Auto Components

Precision Camshafts Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Camshaft business has shown significant growth, with a 24% year-on-year increase in revenue from INR 530 crores in FY22 to INR 660 crores in FY23, driven by passenger car volume growth and export business expansion.
→Order book for current and next year is solid, with OEM partnerships in Europe, the Netherlands, Germany, Scandinavia, UK, and New Zealand supporting consistent demand.
→New non-automotive business at MFT (Germany) is expected to contribute to future growth.
→EMOSS business has capacity to scale volumes beyond current INR 235-240 crores revenue and expects substantial revenue growth over next 2-3 years.
→Domestic EV retrofitment business has potential due to a large base of 2 million vehicles, with capacity expected to grow as demand picks up.
→Overall, growth drivers include new business wins, geographic expansion, and innovative EV product offerings aligned with market trends.

Margin guidance

Category 3

→Camshaft business has shown strong growth: 24% YoY increase in revenue from INR530 crores in FY22 to INR660 crores in FY23.
→Sustainable EBITDA margin expected at 20%-22% for standalone camshaft business, improving from current 13%-15% due to captive power cost savings.
→New 15 MW power plant commissioning expected to improve margins by reducing power costs from July 2023.
→Order books for current and next year are solid with growth projected beyond 2024–2025 based on OEM partnerships in Europe and new customer acquisition.
→EMOSS subsidiary showing significant revenue growth, though Q4 impacted by supply chain shocks in Europe; capacity not a constraint for future volume increases.
→Group planning INR85 crores capex in FY24 for growth across standalone and subsidiaries.
→Margins and earnings are somewhat predictable on order-backed auto components but fluctuate in in-house and EMOSS business due to supply-side shocks.

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Fundraise plans

→There is no explicit mention in the transcript of any current or future fundraising planned through debt or equity.
→Discussion around converting loans to equity for overseas subsidiaries indicates an internal restructuring of funds rather than new fundraising.
→Capex planned for the year includes INR 50 crores for standalone, INR 5 crores for MEMCO, and INR 30 crores for overseas (MFT), funded primarily through internal generation.
→No reference to raising external capital for these investments.
→The company focuses on internal funding for capacity expansion and new business initiatives like the EV retrofit plant in Solapur.
→Overall, the emphasis is on organic growth and self-funded capital expenditure rather than new fundraising activities.

Order book

Yes

- The order book for EMOSS and other businesses is described as very solid for this year and next year. - The company is building out the order book for 2025 onwards, indicating ongoing business growth and secured future demand. - OEM partnerships in Europe (Netherlands, Germany, Scandinavia, UK, New Zealand) continue strongly, contributing to a stable order pipeline. - Despite some supply chain shocks impacting Q4, recovery is underway and the company strives to recover shortfalls in revenue. - On the auto component side, order books are more or less predictable due to advance booking. - The company is actively looking for new customers to grow the business further. (Reference: Pages 13 and 9)

Capex plans

Yes

→Standalone capex for FY24 is about INR 50 crores, earmarked for new business at PCL.
→MEMCO expects capex of around INR 5 crores, and MFT overseas around INR 30 crores.
→INR 65 crores spent on a 15 MW power plant at Mangalwedha, Solapur, commissioned by July 1, 2023, expected to increase margins.
→EV initiative includes a retrofit plant in Solapur with a modest capex of INR 5-7 crores, converting an existing plant rather than large automation.
→New camshaft and non-camshaft machining lines have received INR 70-80 crores investment recently.
→Continued capacity expansion at EMOSS for EV powertrains, with internal generation funding most capex.
→No current capex numbers given for future EV capacity; the retrofit model and scaling depend on market uptake.

How does Precision Camshafts Ltd rank vs peers in Auto Components?

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