JYOTICNC — earnings call

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Prepared remarks

LIMITED · MS. SHIVANGI LAKHANI –EXECUTIVE HEAD, STRATEGY

MS. SHIVANGI LAKHANI –EXECUTIVE HEAD, STRATEGY AND CORPORATE COMMUNICATION - JYOTI CNC AUTOMATION LIMITED

Moderator · Conference Operator

MR. HARSHIT PATEL – EQUIRUS SECURITIES Jyoti CNC Automation Limited May 21, 2024

Ladies and gentlemen, good day and welcome to Jyoti CNC Automation Limited Q4 FY '24

Thank you very much.

We will now begin the question and answer session.

The first question is from the line of Mohit Kumar from ICICI Securities.

Please go ahead.

Mohit Kumar

Good evening, sir.

And congratulations on a very good quarter and a fiscal.

My first question is, how do you see the new EMS orders contribution in FY '25 revenues?

I see there's no EMS order inflow in FY '24?

P.G. Jadeja

Mohit, basically in FY '24, we have already having a INR260 crores worth of orders we have received.

And then after we were having the first batch of machines to be supplied, and they were supposed to tested over there.

They have tested over there.

The testing and everything has been first batch has been completed.

And in terms of the order book, we have not put over here before the execution or let's say schedule has been not received.

But we have a confirmed return orders with us another INR550 crores from the EMS.

It is in line with that basically.

That will fall down in the next coming couple of weeks towards to us.

Mohit Kumar

And so my second question is on the defence contribution.

I think we had order book of 20 billion from defence at the beginning of FY '24.

I think there was a 5 billion contribution in FY '24.

How do you see this defence contribution ramping up in FY25 for the fiscal?

P.G. Jadeja

So in defence, let's say this year, we are anticipating close to another based on the pipe what we have.

The biggest pipe we have right now, even in India also that.

Even I last call I mentioned there.

And with the HAL and many people have come forward to buying a more machines and all Indian defence.

We are expecting close to a close to INR1,000 crores worth of orders in the next one to two quarter over here there.

And the end of the year, we are looking to be another INR1,500 crores to INR2,000 crores crores worth of orders and new orders we are expecting in this year from the defence and aerospace sectors to be there.

Mohit Kumar

My question was on the revenue side.

How do you see the defence revenues going up in FY25?

P.G. Jadeja

So FY25 to the execution side we are looking to be close to INR1,000 crores will be from the aerospace and defence that's our commitment to deliver to our customers to be there.

Mohit Kumar

My last question if you can talk about Huron’s entry into Indian defence and aerospace.

What is the progress?

How do you see this Huron's entry multiplying into order for you?

P. G. Jadeja

I beg your pardon, what you are asking?

Jyoti CNC Automation Limited May 21, 2024

Mohit Kumar

My question was on the Huron's.

I think one of the slides you mentioned that Huron is trying to make an entry into Indian defence and aerospace segment?

So just trying to how does this -- can you just tell us about some color and the progress on the Huron's entry?

P.G. Jadeja

Yes so all these what are the product I talked to about the Indian defence and all about the HAL, about the ISRO, as well as Tata Advanced Systems and now the GE is our one of the biggest customers has also has come to India over here.

So these are all our overall client and many more engine manufacturers are sitting over here.

So Uroa is going to get a better entry of this all the customers over here in Indian defence industries.

Mohit Kumar

Understood, sir.

Thank you and all the best.

Thank you.

P.G. Jadeja

Thank you.

Mohit.

Moderator · Conference Operator

Thank you.

The next question is from the line of Kamlesh Jain from Lotus Asset Managers.

Please go ahead.

Kamlesh Jain

Yes.

Just one question on the part of EMS.

So if you see quarter on quarter our order book has dipped by roughly around 38% to 40%.

So what is the reason for that?

Is one of the order got cancelled or it has been deferred by the customer?

What has happened over there, sir?

P.G. Jadeja

Kamlesh Bhai tell us what you are asking.

There are something I don't understand.

Kamlesh Jain

Yes.

Sir last quarter if I see Q3 there was roughly around INR389 crores of order book which was from EMS and at the end of Q4 I see INR240 odd crores of order book based on the percentage which has been provided in the presentation.

So that suggests roughly around 38% decline in your EMS order book.

P. G. Jadeja

No. Order book has not been declined basically.

What this order was there last time, it has been dispatched the parts goods, and net off debt today is INR253 crores.

There is nothing has been delayed and nothing has been cancelled to be there.

It has been delivered.

Kamlesh Jain

Because if I see order intake you have INR636 crores and their EMS share is roughly around 2% and on the sales side on the order which has been [inaudible 27:16] like say for the revenue which you have realized in this particular quarter INR50 crores and 3% over there.

So if you do the math like INR112 odd crores of new orders and INR13 crores of sales booked.

So net-net nothing incremental or like the order intake and sale value is the same while your order book has dipped to INR40 crores and which was earlier quarter 3 INR389 crores.

So I am referring from your presentation only.

You are referring to which slide on a presentation.

P. G. Jadeja

You are referring to which slide on a presentation?

Kamlesh Jain

I am referring to your like on Q4, for the Q4 your order book is on slide number 7.

P.G. Jadeja

Okay, I mean, let's say in slide number 7 of today's presentation.

Kamlesh Jain

Yes and if I see the sixth slide of Q3 FY24 last quarter, so it was 14%.

EMS was 12% which has gone down to 7%?

Jyoti CNC Automation Limited May 21, 2024

P.G. Jadeja

Yes, you are referring to the last quarter 3 presentation.

Kamlesh Jain

Yes quarter 3.

P. G. Jadeja

I'm just opening up that.

Sir that 13% of the quarter 3 order book was only INR49 crores basically.

So the total or that is what you are referring the slide INR377 crores and 13%, correct?

Kamlesh Jain

So INR3,242 crores was your order book.

P.G. Jadeja

That is the total order book out of that 12% of the total.

Kamlesh Jain

Was EMS which has gone down to 7% in this quarter.

P.G. Jadeja

I will make a mess and we'll come back to you Kamlesh by parallelly there.

Okay, we'll take the questions to be there.

Yes, because no orders has been cancelled and everything is there.

Kamlesh Jain

Yes.

Okay.

And secondly, can you give us the number of machine-safe data in this quarter?

How much was the machine-safe sold in this quarter?

P.G. Jadeja

Number of machines?

Kamlesh Jain

Yes.

For the quarter and last quarter and for the third quarter.

P.G. Jadeja

Yes.

One second, I'm parallelly here.

So in terms of a revenue breakup, I am giving you that first. let's say in this quarter, my entry- level product.

It's the 2,200 million, let's say INR220 crores.

That high-end machine is close to INR162 crores and mid-level machine is close to INR669 crores.

Kamlesh Jain

Okay.

And the number of machines?

P.G. Jadeja

And the Q3, let's say Q3 entry-level product was 241 and the high-end machine was 123.

So this high-end machine combination has increased from INR123 crores to INR162 crores.

And entry- level, let's say in this quarter has been reduced from INR241 crores to INR220 crores to be there.

Yes.

So the growth are the numbers also I'm going to give you exactly on the numbers of Q3 and Q4 to be there.

Until let's say the next question, we can take it.

I'll give you both the numbers.

Kamlesh Jain

Sure.

And lastly, like your other expenditure, that has in fact fallen year-over-year as well as quarter-over-quarter.

So like around INR29 crores vis-a-vis INR32 crores in the same quarter last year.

And on last quarter, it was INR43 crores.

Despite the fact that in quarter four, you had a higher revenue quarter-over-quarter.

Despite that, your other expenses have fallen very sharply, both on quarter-over-quarter as well as year-over-year.

So any provision right back has been there or what has gone into that?

P.G. Jadeja

Yes.

So I'll give you a quarter-on-quarter.

Let's say my employee costs on a quarter three to quarter four.

Let's say in quarter three, it was INR55 crores and quarter four is close to INR56 crores.

Finance cost has reduced there.

And depreciation and amortization also has a little bit reduced.

And other expenditure has reduced from INR43 crores to INR28 crores.

See, basically, Jyoti CNC Automation Limited May 21, 2024 in a quarter three, we have whatever the exhibition we have participated over there, that cost has come, it is not coming every quarter to be there.

Kamlesh Jain

So you are saying it's more related to exhibition costs?

P.G. Jadeja

Yes, more than exhibitions and marketing costs to be there.

Just everything is in on a track there.

Kamlesh Jain

Just last suggestion, if you can provide, like say, how many machines was sold for a quarter?

So I'm just giving you both in presentation as well.

So that would be very helpful.

P.G. Jadeja

Yes.

Thank you.

Thank you, Kamlesh.

Moderator · Conference Operator

Thank you.

The next question is from the line of Yash from Stallions Assets.

Please go ahead.

Yash

Hi, thank you for the opportunity.

Sir, I just wanted to understand, what is the expected order inflow for FY'25?

P.G. Jadeja

Order inflow, we are looking in terms of aerospace and defence alone, we are looking to be close to INR1500 crores there.

Apart from that, there is an EMS we are looking to be close to INR500 crores.

And rest, let's say another INR500 crores to INR700 crores.

So INR2,500 to INR3,000 crores order book, we are looking to be in FY'25 to be there.

Yash

Got it.

And this is obviously on top of your order execution, that will be there for INR3,400 crores over the next one, one and a half year, right?

P.G. Jadeja

Correct.

Yash

Got it.

And so we've seen some volatility in your EBITDA margin.

So, in Q3, Q4, we have 30% EBITDA margin.

I mean, just for a couple of years going ahead, what is the steady state EBITDA margin that you expect?

P.G. Jadeja

So basically, with this combination of the business in aerospace, defence, and now with this EMS, okay, and with this volume, let's say what EBITDA today we are able to reach to close to 25 to 27 percentage is going to be sustainable.

You can look at that.

Yash

Got it.

That was it, sir.

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Jagvir Singh from Shade Capital.

Please go ahead.

Jagvir Singh

Yes.

Thanks for the opportunity.

So, sir, we have a closed order book around INR3,400 crores.

P.G. Jadeja

Correct.\

Jagvir Singh

So, in how much time it will be executed?

P.G. Jadeja

It's in one and a half year.

Jyoti CNC Automation Limited May 21, 2024

Jagvir Singh

Okay.

So any guidance for this FY25 EBITDA margin and revenue?

P.G. Jadeja

So, you can consider, let's say, this order book has to be executed within a one and a half year time.

Jagvir Singh

Okay.

And the EBITDA margin, sir?

P.G. Jadeja

EBITDA margin is a little bit we are improving from here, this level to further more.

Once the execution has been increasing, EBITDA margin is a little bit improvements are going to be seen in the next coming days.

Jagvir Singh

Okay.

So this is from…

P.G. Jadeja

Largely this year, we are going to execute this order book.

And order book, there is a large order book on aerospace and defence.

So, our EBITDA margin is going to be, seem to be, improvement in this year.

Jagvir Singh

Okay.

So, given the government focus on the manufacturing in India, so how do you see the next three, four years for the Jyoti CNC?

P.G. Jadeja

Yes.

So, basically, if you look at that, the manufacturing is growing.

And the way the machine tool consumptions are required, we are looking the entire consumptions are going to be a 20% to 25% CHR over here.

So, that's the, let's say, India today is close to $3.3 billion of a consumption.

And it is going to be a more than double in the next three to four years’ time.

And there we have a great opportunity to be there.

Because out of that, still 65% of machines are being imports.

Jagvir Singh

And sir, how do you see this supported in export?

P.G. Jadeja

And right now, in aerospace and defence industries, mainly in Europe, we are exporting.

And we are looking to be more exports opportunities from that same zone to be there.

Jagvir Singh

Okay.

And you are supplying to HAL and these customers, so they have a great, great order book.

So, I think it will be helpful for the Jyoti CNC also in the near term?

P.G. Jadeja

Yes, we are, in the near term, we are looking to be very great business opportunities has already created.

And in Indian defence sectors, and even the government has given them a large budget to expand the capacity, even though all the Ordnance factories, now the eight companies are there, they also have come forward, do investment over there.

We already have a big pipe, we already filed the tenders and everything.

Once that everything will be open, we'll have a large order book in this year.

That's already talked to under my deck.

Jagvir Singh

Is there any impact of new orders due to the elections?

P.G. Jadeja

No, we have not seen any effect to be there, because there's all the defence, aerospace, and there's all EMS customers, these are the all outside customers, they are not looking to be just election and kind of things like that.

It's a, it's just a daily, our life to be there.

Jyoti CNC Automation Limited May 21, 2024

Jagvir Singh

Okay, thank you very much, sir.

P.G. Jadeja

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Pritesh Shah from Lucky Investments.

Please go ahead.

Pritesh Shah

Yes.

Hello, sir.

This is Pritesh.

P.G. Jadeja

Yes Pritesh.

Pritesh Shah

Hello, sir.

How many machines did you sell in FY24?

P.G. Jadeja

Just I'm calculating and come back to you on complex numbers also there.

Pritesh Shah

Okay.

So, this 4,400 machine capacity will be fully utilized?

P.G. Jadeja

No, no, the total numbers I know that I'm just going to give you third quarter.

So, total is 3,450 machines we have produced here.

Pritesh Shah

Okay.

And what is the progress on the Apple machine?

P.G. Jadeja

Pritesh, I cannot, we have a very tight contract, so I cannot leave a name.

But we are, we are already having a good shape to be there.

Pritesh Shah

Okay.

And so lastly, this INR90 crores interest expense, which is there now you've done your fundraise.

P.G. Jadeja

Yes.

Pritesh Shah

So, how will this interest expense move?

P.G. Jadeja

So, we are expecting close to INR60 crores to INR65 crores is going to be reduced.

Pritesh Shah

Okay.

P.G. Jadeja

We have already paid the debt.

We already paid the debt.

Pritesh Shah

Okay.

And what is the growth rate in the machine tool industry in FY24 in your opinion?

Indian market would have grown/

P.G. Jadeja

We are just waiting the consolidated number, but it has crossed more than 23 percentage there.

Pritesh Shah

Okay.

Thank you very much.

Moderator · Conference Operator

Thank you.

The next question is from the line of Harshit Patel from Equirus Securities.

Please go ahead.

Harshit Patel

Thank you very much for the opportunity, sir.

Firstly, on the aerospace and defence, you mentioned that we would be receiving close to INR1500 crores of orders in financial year '25.

Jyoti CNC Automation Limited May 21, 2024 So out of that, what would be booked in Huron and how much could be the inflow from duty standalone perspective from the domestic market?

P.G. Jadeja

So out of that, let's say everything is because of all the Huron product.

So it is directly or indirectly it is connected to the Huron.

Let's say you can say like that.

The 50% is going to be manufactured over here and 50% has been manufactured there.

So that executions are going to be like that.

The order is a common pool to be there.

You can say that India, we are looking to be close to INR1000 crores to be there and rest we are from other market.

Harshit Patel

Understood.

What would be the order intake for Huron in the entire FY '24?

P.G. Jadeja

So that I need to calculate because I have combined over here.

But it is close to in FY '24 is close to INR1200 crores to be there.

Harshit Patel

Understood.

Second question is on the EMS.

So could you explain what are the typical applications within EMS that we are right now catering to and going ahead in the future?

What would be the incremental applications that could come into the fold?

So in nutshell, how the market is going to expand for us from the applications perspective?

P.G. Jadeja

You are putting me in a little bit of trouble.

Okay.

So basically in EMS industries.

Harshit Patel

This is not customer specific?

In the broad prospective?

P.G. Jadeja

So broad perspective, let's say broadly, let's say mobile is one of the largest machine consumer.

And those companies, those who are making the mobile on a metal bodies.

Okay.

So out of body, outer body is in part is to be a metal cutting completely.

Plus backside glass and everything also is fully machine over there.

In a mobile, there is around 66 components are required to be machining over there.

Then there is a tablet.

So tablet also is required to be a fully CNC machine as well as watches.

Now we're all digital.

This watch is electronic watches is also a completely made from the CNC machines to be there.

Even the keyboard, even the now the metal body of a laptop and all these started manufacturing over here.

So this is how the opportunities are like that.

Harshit Patel

Understood.

Thank you very much for taking my questions.

Moderator · Conference Operator

Thank you.

The next question is from the line of Sampat Naik from Tiger Assets.

Please go ahead.

Sampat Naik

My question has been answered.

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Darshan Patel, an individual investor.

Please go ahead.

Darshan Patel

Sir, my questions have already been answered.

Thank you so much.

Moderator · Conference Operator

Thank you.

The next question is from the line of Kamlesh Jain from Lotus Asset Managers.

Please go ahead.

Jyoti CNC Automation Limited May 21, 2024

Kamlesh Jain

Yes, sir.

Just one question on the part of your aerospace and defence.

So like largely Makino and DMG are they goes machine suppliers there.

And on the cost front, like no doubt they are much costlier.

But like if we see all these players, like they have a large orders from all their global like GE and all these big players.

So how does it make sense or how are we actually making a sense for the customer to buy the machine from us?

And the major part is that in the case of all these big MNC, CNC manufacturers, they have the same recent value is also very strong there.

So how are we pushing our products given the steep competition from the global CNC players?

P.G. Jadeja

Yes.

Thank you very much for a nice question there.

See, basically, I'll tell you this Makino, Morisaki, Mazat are these Japanese manufacturers.

There is one company called DMG also to be there.

And let's say Huron, we are in aerospace and defence because of the Huron subsidiary.

And now subsequently we are making over here.

So Huron was always to be a very high precision and unique machine manufacturer.

The earlier part before, let's say, three years back or four years back, Huron was always to be making a very unique application for the aerospace and defence industries.

And the machine prices was always even higher than the Makino and the Mazat to be there.

And customers are ready to pay there in Europe because they are producing very precision and unique machines to be there.

And that's why Huron always, let's say, very specific the product they were serving.

And largely that all this kind of a high precision machine was not required to these customers.

So numbers was not increasing.

Over a period after the Jyoti started manufacturing all this back- to-back manufacturing in India and supplying this components of assemblies and now fully machine to those customers.

So we are able to compete.

Earlier we were having always to be 20%-25% was a higher price.

Now we are able to compete them and people are ready still to pay of a Huron’s brand and the product over there.

They are able to pay us around 5 percentage higher there.

And that's why we are able to increase our order book on the same client over there basically.

Hope you can understand that.

Kamlesh Jain

Yes, but sir, in aerospace and defence, how much would be your, let's say, the machines going to the PSUs?

How large is your PSU customers?

P.G. Jadeja

Let's say in aerospace and defence, we have a large customers in Europe like General Electric, the Airbus, the MBDA.

In China, we have a customer called the Avic.

Okay.

And globally, we have many customers.

In India, we have a Tata Advanced Systems.

And in all Indian PSUs, like all ordnance factories, the HAL and then ISRO, Bharat Dynamics, those are our customers are here.

Kamlesh Jain

Thank you.

Moderator · Conference Operator

The next question is from the line of Depesh Kashyap from Invesco Mutual Fund.

Please go ahead.

Jyoti CNC Automation Limited May 21, 2024

Depesh Kashyap

Yes, hi, Jadeja sir.

Thank you for taking the question.

P.G. Jadeja

Hi, Depesh, how are you?

Depesh Kashyap

Very good.

So, sorry, I joined late.

So, sorry for the repetition.

But just want to understand the muted top-line growth in the Indian entity, the standalone.

Is it just a timing issue or something is there?

If you can just highlight that.

P.G. Jadeja

What do you ask?

Depesh Kashyap

I'm saying in the Q4, in the standalone entity, that is an Indian entity, the top-line growth was not there, right?

It's actually a decline.

So, was it just a timing issue that the delay in the batch of machines or how to look at it?

P.G. Jadeja

No, so basically, that, Depesh, we were always talking to be on the larger machines, capacity constraint was there.

Okay, that's why our assembly we have started.

And because of this large high-end machine, we have executed because of the force of the customers was there.

And the assembly was a bottleneck over there.

So, there are a number of machines and the top- line has been not increased over here.

But the margin we could able to do a better because of this high-end machine has been executed on a Q4 to be there.

And that is been now over here.

Our next assembly is constructed and it comes to an assembly stage over there.

So, coming forward, we will not see this bottleneck to be there.

Depesh Kashyap

Secondly, sir, on taxation part, I just want to understand that I see that in your standalone entity, you are paying full tax rate, right?

And in your subsidiary, there might be no tax because of the committed losses that you have.

So, how in the next year, how should we look at the execution and how should we look at the tax rate that you will see on the consolidated basis?

P.G. Jadeja

So, basically, we have a tax losses, carry forward tax losses available at Huron’s level is close to INR90 crores.

Depesh Kashyap

Okay.

P.G. Jadeja

That we can and in France, there is a rules like that we have a EUR1 million after the profit is completely tax free.

And then let us say we have made a EUR5 million as a profit.

So, 1 million is there is no tax.

And then after 4 million, 50% goes off.

And let us say another, let us say EUR2 million, we have to pay 25% of tax.

So, kind of a calculation like that.

So, combinedly, we can look at that as close to 20% we will come.

Depesh Kashyap

In FY’25?

P.G. Jadeja

In FY’25.

Depesh Kashyap

And lastly, you gave that the new order that you expect in this year, right?

So, I just want to understand how much is going to be Huron.

And when you say that your HAL, ISRO and all those orders are coming, how much basically it is going to Indian entity versus Huron?

Because why I ask this question is because you are increasing the employee count also in France, right?

Jyoti CNC Automation Limited May 21, 2024 And I just want to understand what is the new orders that are coming to support that increase that you are doing in France?

P.G. Jadeja

So, basically, this year, we are expecting of a full year, we are expecting from INR1500 crores to INR2,000 crores orders from a Huron’s side.

Let us say Huron’s side means that is a 5-axis and large machines.

Machine being manufactured in Indian factory also and machine is being manufactured at France also there now.

And this year, we are expecting close to a EUR50 million to EUR55 million execution are going to be from that.

And our customers, needs are very more machines.

So, more machines are going to produce in India and going to supply to them.

Depesh Kashyap

Okay.

So, it will be booked as a Huron only.

So, execution will be done by Huron?

P.G. Jadeja

Yes.

Depesh Kashyap

And lastly, sir, the inventory days, right?

That you have done a good work, it has come down as you have been highlighting.

But how much more improvement can we see as a sales ramp up, sir?

P.G. Jadeja

Yes, thank you, Depesh.

So, as we have discussed earlier also, once the sales has increasing, inventory is being optimizing there.

Let us say today, we are inventory days has come down from 320 to 325 to a 236 days.

And we are expecting to be a 160 days to 170 days in between in FY’25.

Depesh Kashyap

Great, sir.

Thank you very much, sir.

All the best.

Moderator · Conference Operator

Thank you.

The next follow-up question is from the line of Yash from Stallion Assets.

Please go ahead.

Yash

Thanks again for the opportunity, sir.

Just one question.

So, out of the INR2,500 crores to INR3,000 crores of order inflow that you are expecting in FY’25, how much would be the execution on that?

Like, how much would we be able to convert to revenue broadly?

P.G. Jadeja

Let us say this, or I can say like that, that next one and a half year with existing order book, we are going to be executed to be there.

Yash

No, so, I understand that.

I am just saying that just from my understanding.

So, if you get like, let us say INR1,500 crores order of aerospace and defence, how much time does that normally take?

Is it like a year or just depends on specific products?

P.G. Jadeja

It is mainly this manufacturing time is more than a year.

So, it is a one and a half to two years there.

Yash

Okay.

Broadly, it is one and a half to two years.

Got it.

Thank you.

Moderator · Conference Operator

Thank you.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Over to you, sir.

Jyoti CNC Automation Limited May 21, 2024

P.G. Jadeja

Kamleshji, there was one answer was pending from my side, let us say.

So, there is a 797 is close to 800 machines was been delivered in Q3. And 991 is close to, let us say, 1,000 machine has been delivered on Q4. And total number of machine has reached to 3,495 to be near.

Okay.

And let us say thank you very much to all of you over here.

And thank you for participating into this call to every one of you here, each of you here.

And have a wonderful year to go ahead.

Thank you very much.

Moderator · Conference Operator

Thank you.

On behalf of Equirus Securities, that concludes this conference.

Thank you for joining us.

And you may now disconnect your lines.

Thank you.