NDR Auto Components Ltd - Feb 2025 Earnings Call Transcript Analysis

Earnings Call Transcript Analysis Report #

NDR Auto Components Limited Q3 & 9 Months FY'25 Earnings Call Analysis #

Financial Performance #

• Key Financial Metrics:
  • Q3 FY'25: Total Income: Rs. 176.22 crore; EBITDA: Rs. 19.61 crore; EBITDA Margin: 11.13%; PAT: Rs. 13.39 crore.
  • 9-Month FY'25: Total Income: Rs. 523.87 crore; EBITDA: Rs. 55.79 crore; EBITDA Margin: 10.65%; PAT: Rs. 36.87 crore; ROE: 21.13%; ROCE: 26.93%.
• Comparison with Previous Periods:
  • Q3 FY'25: Revenue growth of 25% YoY, EBITDA growth of 43% YoY, PAT growth of 57% YoY.
  • 9-Month FY'25: Revenue growth of 22% YoY, EBITDA growth of 31% YoY, PAT growth of 36% YoY.
  • EBITDA Margins described as “highest in the Company’s History”.
• Revised Guidance/Forecasts:
  • Targeting 11% EBITDA margin for FY'26 and 12% for FY'27.
• Areas of Growth:
  • Strong growth across all key financial metrics (revenue, EBITDA, PAT) both for Q3 and the 9-month period.

Strategic Initiatives & Business Updates #

• Major Strategic Announcements:
  • Collaboration with Toyota Tsusho India and Toyotsu Vehitecs Company for the manufacture of seat insert fabrics.
• New Products/Services/Markets:
  • Seat insert fabrics (new product).
  • Commencement of Seating Solutions sales to Kia in December 2024.
  • Sun shade business starting.
  • New Maruti vehicle.
  • BIW (Body-in-White) business.
• Significant Operational Changes:
  • Planned investment of Rs. 21.89 crore over the next two years for the seat insert fabric project.
• Ongoing/Completed Projects:
  • Seat insert fabric project targeting commercial production in July 2026.
  • Kia sales commenced.

Market & Competitive Landscape #

• Industry Trends:
  • Increasing localization of auto components.
  • Implementation of six airbags across all cars.
• Competitive Positioning Statements:
  • Exclusive collaboration with Toyota for seat insert fabrics in India.
• Market Challenges/Opportunities:
  • Opportunity for localized seat fabric production due to regulatory changes (mandatory airbags).
  • Opportunity from OEM partners’ strong performance.
• Market Share/Positioning:
  • 50% market share on Maruti’s first EV, 100% on the second.
  • Supplies to approximately 60-70% of Toyota Boshoku’s cars (250,000 out of 300,000-350,000).

Risk Factors & Challenges #

• Regulatory Issues:
  • Mention of regulatory changes making airbags mandatory.

Forward-Looking Statements #

• Outlook/Future Projections:
  • Expectation to maintain current momentum.
  • FY'28 revenue for seat insert fabric project expected to reach Rs. 100 crore.
  • Expect 250-300 crores of revenue increase next year.
• Commitments/Targets:
  • Payback period for the seat insert project estimated to be 2.4 years.
  • EBITDA Margin targets: 11% (FY'26), 12% (FY'27).
• Planned Investments/Strategic Priorities:
  • Rs. 21.89 crore investment in seat insert fabric project.
  • Focus on innovation, value addition, and operating efficiencies.
• Sentiment about Future Performance:
  • Optimistic about future opportunities and growth.

Q&A Insights #

• Most Pressing Analyst Questions:
  • Structure of the new collaboration with Toyota (JV vs. 100% subsidiary).
  • Application of seat inserts (only with six airbags or also with two).
  • Drivers of margin improvement (quantification of premiumization vs. operating leverage).
  • Timeline and revenue potential of the new Kia order.
  • Market share on Maruti’s EV.
  • Expansion plans for the Aurangabad Plant.
• Management’s Responses to Challenging Questions:
  • Provided clear answers on the structure of the collaboration (100% subsidiary with technical assistance).
  • Explained the application of seat inserts (primarily for seats with airbags).
  • Attributed margin improvement mainly to cost reduction initiatives.
  • Confirmed Kia order ramp-up is aggressive.
  • Stated market share on Maruti EVs.
• New Information Revealed During Q&A:
  • Content per vehicle for seat inserts: Rs. 350-400.
  • The 22 crore investment is sufficient for 100 crore revenue for the new project.
  • ESOP pool of 250,000 shares for key employees.
  • No new major orders until the end of the year.

Management Tone & Sentiment #

• Overall Tone:
  • Confident and optimistic.
• Areas of Confidence:
  • Achieving margin targets and maintaining growth momentum.
  • The new collaboration and its revenue potential.
  • The ramp up of the Kia Order.

Key Takeaways #

1. Strong Financial Performance: NDR Auto reported significant YoY growth in revenue, EBITDA, and PAT for both Q3 and the first nine months of FY'25, with record-high margins.
2. Strategic Collaboration: The collaboration with Toyota Tsusho for seat insert fabric manufacturing represents a major strategic move, positioning NDR Auto to capitalize on the increasing demand for localized components and safety features.
3. Growth Projections: The company is optimistic about future growth, projecting significant revenue increases and targeting ambitious EBITDA margin improvements in the coming years.
4. Focus on Innovation and Efficiency: NDR Auto continues to prioritize innovation, value addition, and operational efficiency as key drivers of its performance.
5. Market Leadership: The company is reinforcing its strong position in the market, particularly with key clients like Maruti and Toyota.
6. Confident Outlook: Management expressed a confident outlook for the future, emphasizing opportunities in the auto component space.