Keytakeaways of call

Revenue for FY20 is expected to be around Rs 1100-1200 crore (a fall of about 38-43%yoy) and the EBITDA margin is estimated to be about 11-11.2% compared to 11.9% in FY19.

The company continues to focus on cost control and productivity improvement to minimize the fixed cost impact on account of lower revenue. The fall in revenue will be lower than the market degrowth which is expected to be about 49% for FY19.

November so far is better than October and October is better than September. So Q3FY20 will be better than Q2FY20. CV Inventory is expected to get liquidated by Jan 2019. But there is lot of uncertainties. Overall the CV market is expected to improve by middle of CY 2020 only.

The company has products and caters to vehicles with gross weight tonnage of 7.5 tonne and above.

Share of business improvement is key focus area for the company. Tata Motors looks outside when they feel there is product gap in application. The company now supplies to some models of Ultra range of vehicles. The company continues to negotiate with them for increasing the supply.

Exports – the company currently taps only two avenues i.e. export of sub assemblies within Meritor Group and full axle & brakes to overseas OEMs. Now the company is working on exporting subassemblies directly to outside OEMs for which there is huge demand. For example OEMs in Europe so far manufacture axles in-house with subassemblies sourced from countries such as turkey etc. But now they are looking for low cost manufacturers outside this existing supplier. The company has put up a dedicated team to work on this segment and expect some breakthrough in next one or two quarters.

The company is close to completion of its capacity expansion programme and will be completed in next one or two months. There will be no capital expenditure on capacity in next 2-3 years except sustenance capex. However the company will continue to invest in development of new products. At any point of time the company will be working about 4-5 new products. In the last five years the company has launched about five new products in five various platforms.

Suspension axle, a new product is of high potential and will bring in additional revenue for the company. Once it is proven and the market sees the value proportion increased adoption will happen.

The company does not cater to aftermarket in exports.

BSVI does not require any change in axles products. But globally when there is change in technology there will be upgradation to higher level of axle capacity suitable to change in other relevant components and resultant increase in tonnage etc.. This is the way there will be enhancement in value per vehicle.