Uravi Defence &Q3 FY24Auto Components

Uravi Defence &

Q3 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 1

Fundraise

Yes

Order

N/A

Capex

Yes

3 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

Future Growth Expectations for Uravi Defence and Technology Limited: - Targeting a 10% revenue increase in FY25 by deepening relationships with existing customers and approaching new OEMs. - Anticipating 5% to 8% growth in automotive lamps this year, with potential double-digit growth once LED product penetration improves. - Expecting defense segment revenue to contribute about 70% to overall revenue by FY26, with higher profitability margins. - SKL acquisition expected to boost consolidated revenue significantly, with orders like INR26 crores for power supply systems for 244 guns. - Planning new product development in SKL (power supplies, alternators, engine components) with INR5-7 crores internal capex. - EV charger business development is ongoing; a definite timeline for commercial rollout expected by January 2025. - Exploring expansion into South American markets leveraging OEM presence and plans for international acquisitions to enhance technology growth.

Margin guidance

Category 1

→FY25 revenue growth target is around 10%, driven by deepening OEM relationships, adding new OEMs, and product development.
→EBITDA for H1 FY25 improved to INR 3.36 crores with a margin of 14.95%, indicating operational efficiency gains.
→Net profit for H1 FY25 reached INR 0.79 crores, with EPS of INR 0.70, reflecting improvement over prior periods.
→Expect consolidation of SKL acquisition to significantly enhance consolidated revenue and profitability by FY25-end.
→Defense segment revenue projected to contribute around 70% by FY26 with higher profitability margins.
→Automotive lamps segment expected to grow 5-8% in FY25; LED segment growth to accelerate to double digits once fully operational.
→Planned internal capex of INR 5-7 crores for SKL expansion to boost production capacity and product range.
→EV charging business investments to be clarified in the next investor call, with expected product maturity leading to future profits.

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Fundraise plans

Yes

→No explicit mention of any current or immediate future fundraising through debt or equity in the call.
→The company has already raised funds which were used for the acquisition of SKL India Pvt. Ltd.
→Plans exist for acquisitions and expansions funded internally, e.g., capex of INR 5-7 crores for SKL expansion will be 100% internally funded.
→The management is open to future acquisitions if opportunities arise but no concrete fundraising plans were disclosed.
→Focus is on internal funding and operational cash flow for growth and expansions including new products and segments.

Order book

→Current order book includes a significant defense contract from L&T Defense for around 200 guns, valued approximately at INR 26 crores, focused on power supply systems.
→Orders related to SKL India Pvt. Ltd. were around INR 22 crores yearly as of FY24, with expected growth in the coming years as production ramps up.
→Outsourcing contracts are identified to utilize spare manufacturing capacity at SKL, pending OEM approvals, providing additional revenue opportunities.
→The company is also exploring new product development and expansion in both automotive and defense sectors, aiming for steady order inflows.
→Export orders, particularly in South American markets, are anticipated soon, pending regulatory formalities.
→Overall, the order book is expected to grow with SKL acquisition consolidation and new defense and automotive contracts.

Capex plans

Yes

→Capex of INR 5 to 7 crores planned for SKL to expand capacity and introduce new products like alternators and engine components.
→This capex will be 100% funded internally.
→Currently, no immediate need for capacity extension in traditional business due to existing spare capacities.
→Exploring opportunities for outsourcing manufacturing contracts post OEM approvals to utilize unutilized capacity and generate additional revenue.
→Investments in EV charger business are planned but dependent on product maturation; a definitive investment outlook expected by January 2025.
→Long-term strategy includes potential acquisitions and technology acquisitions in EV charging and defense segments.
→Exploring overseas acquisitions to enhance technology growth in various segments aligning with long-term innovation and growth strategy.

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