Analyst Meet / AGM     21-May-15
Conference Call
Gabriel India
Focus will be on exports and inorganic growth
Gabriel India held its conference call on 21 May 2015 after March 2015 results.

Manoj Kolhatkar, Managing Director and CEO of the company addressed the call.

Highlights of the call:

FY 2015 was decent for the company in specific and the auto industry in general.

First Half of FY 2015 was very good largely due to euphoria of new government taking charge and also onsent of festive season.

However second half and Q4 did not keep pace with the first half.

In first half the government took positive steps. In H1 FY 2015 2 wheeler grew 9%, scooter sales were satisfactory. 3-Wheeler grew 13%. MCHV was impressive as it grew 17% MHCV continued to see good growth in Q4.

However small CV and LCV are still not doing well. In fact small CV saw significant decline.

Q4 could not keep up pace with H1. 2 wheeler fell 6%, motorcycle sales also suffered and fell 8%. The scenario continues in Q1. However the government being proactive and measures taken by the government for Make in Indi movement and steady commodity prices ensures that FY 2016 will be good for the auto industry.

During the quarter ended March 2015 sales grew 4% to Rs 348.36 crore. OPM stood at 8.2% against 8.1% which saw OP growing 3% to Rs 28.40 crore. PBT grew 8% to Rs 20.19 crore. EO loss stood at Rs 15 lakh against Rs 4.20 crore thus PBT after EO soared 38% to Rs 20.04 crore. PAT stood at Rs 12.96 crore, up 56%.

During the quarter tax rate grew from 33% to 35%.

In FY 2015 sales grew 12 % to Rs 1444.10 crore. OPM improved from 7.0% to 8.1% which resulted in OP growing 29% to Rs 116.45 crore. PBT grew 40% to Rs 84.15 crore. EO loss stood at Rs 15 lakh against Rs 4.20 crore thus PBT after EO soared 50% to Rs 83.55 crore. After providing for taxation, PAT grew 41% to Rs 60.02 crore.

During the FY tax rate grew from 22% to 28%.

In FY 2015 Sales grew by 12% due to growth in 2/3W & CV Segments.

In FY 2015 exports grew 50%.

Aftermarket Sales grew by 15%.

OPM expanded in FY 2015 from 7.0% to 8.1% largely due to in higher sales volume and reduction in expenses.

The company managed to reduce working capital debt thus interest fell 39% to Rs 5.48 crore.

Long term borrowings fell from Rs 9.6 crore to Rs 5.8 crore in FY 2015.

Short term borrowings fell from Rs 46.8 crore in FY 2014 to NIL.

Debt equity ratio fell from 0.23 to 0.04

In FY 2015 sales from 2/3 Wheelers accounted for 63% of sales against 59% in FY 2014.

In FY 2015 sales from Passenger cars accounted for 26% of sales against 30% in FY 2014.

In FY 2015 sales from Commercial Vehicles accounted for 11% of sales against 11% in FY 2014.

Cash and bank balances fell to 3.9 crore against Rs 4.7 crore.

RoCE soared from 18.0% to 25.5%.

Capex fell from Rs 39.6 crore in FY 2014 to Rs 34.8 crore.

Declared Final Dividend of Rs.0.60 per share, amounting to 60% of Face Value. The company will like to maintain its dividend @ 30%.

The company has well diversified OEM customer base in every automotive segment, 2/3 Wheelers, Passenger Cars and Commercial Vehicles.

It has strong R&D with over 11 patents in Products & Processes.

In FY 2015 sales from OEM accounted for 86%, Aftermarket (AM) accounted for 11% and exports accounted for 4%.

The company has orders for Maruti and Mahindra vehicles which it feels will grow in sales in H2. Mahindra car will be manufactured in Michigan. Also it hopes to get Isuzu order in the year. Thus its passenger car business is likely to grow too.

4 wheeler is a competitive market but the company does not need to add capacity so any increase in 4 wheeler volume will increase its profitability.

In 2-wheeler it has market share of 25%.

In passenger car it has market share of 26%. This market share will improve. The company hopes it will go to 30% going forward.

CV it is the leader in excess of 75%.

The company has focused on exports and it expects major order this year thus its exports will also grow. The company been focusing on exports in past 2 years. The company wants to be in double digits. Now it is 4%.

The company has reduced its break even points in its passenger car plants.

In FY 2015 the company launched 80 new products.

For FY 2016 it has lined up many new products.

The company has solid brand value and it hopes to cash -in on the same.

Going forward the company will focus on debt reduction and automation.

Focus will be on exports and inorganic growth. It will also focus to improve its global manufacturing.

The company has 350 dealers and 10000 retail outlets.

The company sees good potential in AM exports. It has a good breakthrough in Russia last year but Russia is having problems now but is expected to bounce back.

The company has increased its engagements in Australia, Bangladesh and Sri Lanka. So exports are expected to grow well in FY 2016.

HMSI Gujarat plant is yet to start, will start in 2016. It has got nominated for business from that plant. The plant has been reviewed by Honda and they are happy with the progress.

For Royal Enfield all the new platforms (models) are coming Gabriel way. The new models to be launched are all with Gabriel.

Royal Enfield is setting up the third plant in Chennai and Gabriel is looking at doubling its sales with them.

Capacity utilization for 2 wheeler is 80% it was better before but has fallen due to reduced demand from the rural areas. .CV capacity utilization is around 57% and in Passenger car its 65%.

Margin grew 100 basis points in FY 2015. It came thru operative leverage from Q3 of last year onwards. The company has taken whole lot of cost reduction exercise especially in raw materials and also in its plants which will help it maintain margins.

The company has strongly adopted innovation in Gabriel and Anand group. Innovations have helped in coming out thru some breakthrough ideas which has helped it to reduce energy cost and raw material cost.

The company wants to improve its OPM to double digit figures.

The company enjoys tax benefits due to 80IC for its plant in Himachal Pradesh and R&D. These benefits will end in FY 2018. Beyond that period the tax rate will be normal rate.

For FY 2016 it will be around tax rate of FY 2015.

For railways the company is looking at products used in new coaches of Duranto and other super fast trains which need better shock absorbers. The railways take time to give orders but the company is confident of getting good order for this product.

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