Rajratan Global Wire LtdQ3 FY23Auto Components

Rajratan Global Wire Ltd

Q3 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.

Revenue guidance

Category 3

→The company expects around 18%-20% volume growth for the full year on a consolidated basis.
→India business volumes grew by approximately 1,000 tons in the recent quarter, indicating growth momentum.
→Thailand operations saw a volume increase of about 3,000 tons, with capacity utilization rising to around 80%-85%.
→Chennai plant capacity of 60,000 tons will ramp up gradually over 3-4 years, targeting about 14,000-15,000 tons next year (around 25% utilization).
→Positive feedback and approvals from European and American customers may contribute to incremental international volumes starting next year.
→There is optimism about improved demand from Europe and America despite geopolitical uncertainties.
→The company is focused on competing with Chinese imports and increasing market share domestically and internationally.
→Tata Steel’s increased capacity and imports reduction are expected to stabilize market dynamics in India.

Category 3

→The company expects around 18-20% volume growth for the full year, supported by increased capacity utilization in both Thailand (80-85%) and India (85%) plants.
→Consolidated EBITDA margin target is around 18%, with Thailand margins expected to improve from 11% towards 15-16%, driven primarily by higher production and efficiencies.
→India EBITDA margin is currently around 18.5-19%, with potential for improvement through increased order approvals and premium customers, particularly from Europe.
→Chennai plant ramp-up may initially have lower margins due to 25% utilization but is expected to improve with scale.
→Management expresses confidence in volume growth despite geopolitical uncertainties and competition from China, focusing on cost reduction and market share gains.
→Overall, improved volume and better production efficiencies are anticipated to drive earnings and operating profit growth over the next two quarters.

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→The company has invested around INR195 crores in the Chennai facility so far, with an additional INR20-25 crores required to start production in the current financial year.
→A further INR70-80 crores is planned to be invested over the next year to support capacity growth.
→There is no explicit mention of new fundraising through debt or equity in the transcript.
→Capital expenditure appears to be funded from internal accruals or existing sources, with no indicated plans for raising fresh capital via debt or equity at this time.

Yes

→Rajratan Global Wire Limited has received positive feedback from major international tyre companies like Bridgestone, Continental, and Goodyear regarding supply from the Thailand plant.
→These companies have begun audits and are considering Rajratan for Request for Quotations (RFQ) for 2024.
→Currently, Rajratan is not supplying these major international players from Thailand but is supplying them domestically in Thailand and India.
→The company expects to start considerable supplies to at least one European customer in the current and next quarters.
→Customer approvals, especially from multinational tyre companies in Europe and America, show good traction with gradual ramp-up expected over the next two quarters.
→The Chennai plant trials are planned to start later this quarter or early next quarter, potentially supporting new orders.

Yes

→Chennai plant investment: Approximately INR 195 crores invested so far, with an additional INR 20-25 crores needed to start production within the current financial year.
→Total expected investment in Chennai plant: Around INR 220-225 crores to start production in FY24.
→Future expansion capex: An additional INR 70-80 crores to be invested over the next year as the business grows and capacity is increased.
→Chennai plant capacity: 60,000 tons, expected to take 3-4 years to achieve full utilization. Initial production in FY24 planned around 14,000-15,000 tons.
→The expansion aims to serve local customers with just-in-time supply benefits and reduce imports in India’s southern market.
→There are no mentions of other major capex beyond Chennai.

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