UNO Minda Limited (UNOMINDA) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q2 and H1 FY27 Earnings Conference Call of UNO Minda Ltd. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantee of future performance of the company and may involve risks and uncertainties that are difficult to predict. As a reminder, all participants' line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Bora, Group CFO. Thank you and over to you, sir.

Thank you, Idra. Good afternoon, everyone, and a warm welcome to all the participants. Happy Diwali and best wishes to you and your families. On the earnings call today, I am joined by my colleague, Ankur Modi. We have uploaded our financial results and investor presentation for the quarter and half-year ending September 26th on the stock exchanges and our company's website. We hope everybody had an opportunity to go through the same. I will begin with a brief overview of the macroeconomic environment, followed by the current trends in the automotive industry, and then to our financial and operational performance for the quarter, and half-year ended September 26. Post that, we will open the floor for Q&A. Talking about the global economy, the global economic environment during the quarter remained challenging. The geopolitical conflicts have pushed up energy and commodity prices, disrupted key shipping and logistics routes. Increased transportation and input costs for businesses across the world. As a result, the overall supply chain environment remains challenging. These factors are adding to inflationary pressures and weighing on global growth. According to the IMF's October 26 World Economic Outlook, global GDP is projected to slow to 3.1% for 26, while global inflation projections have been revised upwards by 70 basis points to 4.7%. The outlook remains uncertain and the duration of the conflict along with its impact on energy supplies and global trade will be the key factors to watch. Despite a challenging global backdrop, India continues to stand out as one of the brightest spots in the world economy. Our GDP grew 7.8% in Q1 FY27 ahead of expectations. And this momentum has been recognized globally. The IMF has raised India's F527 growth forecast to 7.0%, while RBI in its October policy revised its projection upward to 7.1% from 6.7% earlier. A stronger dollar has put pressure on the rupee, which along with higher energy prices has pushed up input costs. The RBI has responded proactively, raising its inflation projections to 5.2% and increasing the repo rate by 25 basis points to 5.5% to keep price stability firmly on track. What gives us confidence is the strength of India's domestic market. Robust consumption, sustained government investment in infrastructure and steady private capital spending continues to drive growth. At the same time, the government's focus on localization, manufacturing, digital transformation, and reforms are building an economy that can absorb external shocks far better than before. We believe this places India and business like ours in a strong position for long-term growth. Moving to the automotive industry overview, for the second quarter of FY27, the Indian automotive industry sustained its strong momentum. With PV and two-wheeler waker segments recording their highest ever quarterly production, the total automotive production crossed 1,109,000,000 units, a growth of around 18% year-on-year, while domestic sales rose 18.2% to 83.9,000,000 units. This was supported by improved affordability following GST 2.0, resilient rural and urban demand, infrastructure-led activity, higher disposal income resulting from higher personal tax relief, and a gradual recovery in the replacement cycle. Export performance remained healthy. The total vehicle export stood at around 20.8 lakh units during the quarter, growing by 23.9% year-on-year. The export growth was led by strong growth in two-wheelers, three-wheelers and commercial vehicles. Passenger vehicle exports, however, declined 5.2% to 2.29 lakh minutes on account of high base and logistics constraints associated with the West Asia crisis. During the quarter, 16.6 lakh passenger vehicles were produced, up 25% year-on-year. The electrification and premiumization of Indian market continued to gather pace. Electric passenger vehicle registrations almost doubled to around 1 lakh units in the quarter, with EV penetration reaching 8% for the quarter, supported by widening product portfolio and accelerating consumer acceptance. Two-wheelers posted production of 81 lakh units for the quarter, up 16.5%, with scooters leading the way, which grew 30.1% versus 9.8% growth for motorcycles. Exports reached the highest ever Q2 level of 16.5 lakh units, up 27.7%. Electric tourer adoption accelerated further, with registrations rising 91% year-on-year to around 5.9 lakh units in the quarter and penetration crossing 11% for the quarter. Looking ahead, we expect growth momentum to continue in H2 F527, in spite of higher base last year. The festive season, wedding season and new launches are likely to support demand momentum. Moving on to the financial and operational performance for the quarter, you may refer to slide number 7 and 8. We delivered another stellar quarterly performance, achieving our highest-ever quarterly revenue and profit. This reflects the fundamental strength of our business model, innovative product and system offerings, our expanding content per vehicle, and consistent execution across market cycles. Our consolidated revenue from operations for the quarter ended September 26. stood at 6,655 crores, representing a robust 38% year-on-year growth as against revenues of 4,814 crores. This performance demonstrates our ability to capitalize on industry opportunities while consistently outperforming the underlying automotive industry growth. This growth was broad-based and high-quality, driven by value-added offerings and volume expansion across our core product offerings, including switches, lighting, alloy wheel, seating, and our rapidly scaling EV systems and alternate fuel divisions. On profitability front, EBITDA grew by 33% year-on-year to 733 crores, with EBITDA margins of 11%. The healthy EBITDA margins reflect our resilience, whereby the inflationary impact has been partially mitigated with operating leverage. Depreciation increased marginally by 5 crores year-on-year to 178 crores, primarily reflecting the capitalization of phase 1 of 4-wheel alloy wheel facility at Carcosa. Similarly, finance costs increased by 4 crores to 14 crores, primarily due to capitalization of Carcosa alloy wheel plant. The share of profit from associates and joint ventures remains stable at 60 crores during the quarter. During the quarter, the TGJV achieved an important milestone with the commissioning of its new manufacturing facility at Haro Ali, Bangalore. However, the profitability has been impacted due to its capitalization, wherein fixed costs, depreciation, and interest costs had significant impact on its profitability. The profit-after-tax attributable to shareholders grew 38% to 420 crores, compared to part of 304 crore in Q2-FI26. Coming to the business segment rights performance, you can refer to slide number 11. Starting with switches, our switching systems vertical, the largest contributor to the Unominda portfolio, continued its strong growth trajectory during the quarter. The vertical achieved revenues of 1,609 crore, registering a robust air revenue growth of 37% and contributing approximately 24% to the group's consolidated revenue. Growth was seen across both our 2.11 Polar Switch business. The 2.11 Switch business benefited from sustained growth in domestic volumes, favorable customer mix, and increasing penetration of value-added features. Our export business also maintained its growth momentum, reflecting the increasing acceptance of our products in international markets, and demonstrated the strength of our quality and technology capabilities. Our full message business, operated under Uno Mildarika, continued to outperform the industry, registering a strong year-end growth of over 30% to reach 617 crores. Meanwhile, the shifting of our manager operations to the expanded new Faruk Nagar facility is progressing as planned, with completion expected in the current fiscal year. This transition will further strengthen our manufacturing capabilities and provide the capacity required to support our future growth. Moving to lighting business, the lighting system vertical reported revenues of 381 crore during the quarter, registering a healthy year-on-year growth of 25% and contributing approximately 21% to the group's concerted revenues. The growth was primarily led by our two-wheeler lighting business, supported by sustained market share gains, healthy volume growth, and increasing penetration of EVs, where Unominda continues to maintain a strong position as a leading lighting solution supplier to several electric two-wheeler OEMs. On the business development front, building on our entry into new global OEM program in the previous quarter, we have secured additional orders for advanced pixel-based headlens and tail-lens from the same. Moving to our casting business, the casting vertical continued to be the fastest growing business in the group, delivering an impressive air and oil growth of 57% to 1,441 growth. It is important to note that this growth also reflects the impact of higher underlying raw material prices. The performance was driven by capacity expansion and ramp-up across all three businesses, which is 4-wheel allow-wheel business, 2-wheel allow-wheel business, and aluminum bycasting. The 4-wheel allow-wheel business revenues grew to 7.63 crores, supported by ramp-up of recently commissioned Phase 1 of 60K line at Carcosa. At our ball facility, we further enhanced capacity by approximately 20% through deep bottlenecking initiatives and operational efficiency improvements. With these improvements and recently commissioned lines at Kirkhoda, our aggregate installed capacity has increased to 6.3 million wheels per annum. Looking ahead, the capacity will be further enhanced by over 40% to 9 million wheels per annum with ongoing expansion at GSN and remaining capacity expansion at Kirkhoda and Bauer. Our two-wheel allowable business recorded revenues of 396 crores, benefiting from improved demand and addition of the new manufacturing capacity. A key milestone during the quarter was commissioning of our HPDC allowable facility at Bawal, where four of the six planned production lines became operational, adding approximately 1 million units of annual capacity. Our super facility also operated at higher capacity utilization, supported by improving demand. The commissioning of the remaining two production lines at Bowen, along with the ramp-up of existing capacities, is expected to provide further competitors to growth in the coming quarters. The current installed capacity for allowable two-wheeler has reached from 8 million wheels per annum to 9 million wheels per annum, which will increase to 9.5 million wheels per annum, post-commissioning of the above-mentioned two lines. In addition, the expansion at Khorkhoda and Holshur will increase the capacity to around 11.8 million views. With overall installed capacity increasing by around almost 50%. The aluminum die-casting business delivered an exceptional year-on-year growth of 65% with revenues reaching 2.82 crores. This performance was supported by capacity enhancement at both our Bawan and Hussu facilities, along with incremental business wins and an increase in our share of business with existing customers, further strengthening our market position. Moving to seating business, you can refer to slide number 12, please. The seating system vertical continues its strong upward trajectory. Revenue reached 476 crore, which is up to 34% year-on-year, contributing approximately 7% to the group revenues. The quarter's performance reflected strong growth across our customer base and increase in exports. During the quarter, we won strategic entry into an incumbent Japanese steeler OEM, as well as a new bus passenger seat customer. Moving to the Green Mobility segment, the newly constituted Green Mobility Vertical achieved a robust 102% year-on-year growth due to FI27, reaching 649 Crore and contributing 10% to the company's total consolidated revenues. Within this segment, Unominda EV systems led the growth with revenues of 247 Crores, followed by alternate fuels with 187 Crore revenues, reflecting strong adoption trends across the electric mobility ecosystem. Uno-Minda auto valuation contributed 156 crore, while EV business in controller division contributed 44 crores. This growth was largely driven by both vehicle segment, which is E2-wheeler and E3-wheeler. Higher volumes owing to rising penetration and increased SOB with existing customers, and higher share with newly added customers supported two-wheeler EV systems growth. The expected commissioning of the three new programs for EV chargers will further support the growth momentum in the coming quarter. A reconfigured other product portfolio continues to reflect steady operative performance, the vertical reported revenues of 1099 crores, registering a robust 17% air-on-air growth and contributing approximately 17% to the consolidated top line. Contribution during the quarter remained distributed across the remaining core and aftermarket verticals within the portfolio. Sensors and ADAS generated 261 crores, followed by acoustics at 225 crores. Blow molding products and non-EV controller business accounted for 134 crore and 89 crore, respectively. As you would have noticed, the Board also approved additional capex of around 85 crore for sunroof facility at Bawal to serve the incremental orders received and announced in the last few quarters. The additional capacity is expected to be commissioned by Q2FI28, the construction of Phase 1 of sunroof manufacturing facilities progressing as planned, with commissioning expected around the end of FY27. In August 26, as you will note, the board had approved four additional strategic expansion projects across multiple business verticals, involving a cumulative investment of approximately 1,415 crores. The key projects include Greenfield and William Dicasting Facility at Hossur, with an estimated investment of 510 crores. Expansion come relocation of our two-wheel alloy wheel capacity at Kharkhoda, Aryana, involving an investment of 155 crores. Expansion of our moulding facility in Bangalore with capex of 80 crores and a new manufacturing facility at CSN by TGSIN, JV, involving an investment of approximately 670 crores. Collectively, these investments represent an important step in standarding our long-term growth platform, expanding our capabilities across strategic product segments, and deepening our engagement with customers. They also reflect our confidence in the underlying growth potential of the automotive ecosystem. Moving to aftermarket and international revenues, you can refer to slide number 13, please. For the quarter ended September 2026, the aftermarket Business reported revenues of 387 crores. Contributing approximately 6% of consolidated revenues. In addition, sales to OEM's SPD division, which is considered as part of segment revenues, stood at 323 crore. Combined aftermarket and SPD channel generated revenues of 709 crore, representing 10% of our consolidated revenues. The international business contributed around 9% of total revenues during the quarter. This performance was driven by the improved export traction. Particularly in the two-wheeler switching and seating segments. Exports from India stood at approximately 218 crores during the quarter as against 123 crores in the corresponding quarter. We had won significant export orders in the last few quarters, specifically in the seating business, which will drive export growth in the coming years. Moving to our debt levels, our net debt as of September 26 was at 2,415 crores compared to 2,179 crores as of March 31, 2026. The cash flows generated from operations for H1 was at 711 crore. Free cash flow after sustaining capex of 37 crore was at 404 crore. The project capital expenditure was 500 crore for the half year. We would like to highlight that all of the sustaining capex and majority of our expansion program continues to be funded through healthy internal accruals, a reflection of the strong cash generation. A net debt to equity as its September 26 stands healthy at 0.31. On the ROSE front, we have achieved ROSE of 20.7% basis analyzing profits of H1 F1.27. Kindly note that the capital employed considered for calculation does not, sorry, does include the CAPEX for land bank as well as CWIP, which is currently not generating return. ROSE would be 24.6% if we exclude these non-deployed assets. Moving to Outlook, looking ahead, we remain constructive on the outlook for the Indian automotive industry and expect the growth momentum to sustain through the remainder of FF27. At Unominda, our strategic priorities remain firmly focused on delivering sustainable and profitable growth while consistently outperforming industry growth. We intend to achieve this through continued market share gains, increasing content per vehicle, deeper penetration of value-added products, and localization of advanced technologies. Our ongoing investments in manufacturing capacities, technology development, and R&D will further strengthen our capabilities to capitalize on the evolving opportunities in the mobility ecosystem. We are particularly encouraged by the growing business opportunities and the auto pipeline across several technology-led product categories, including EV powertrain systems, advanced lighting, seating, sunroof, infotainment, and automotive electronics. These emerging platforms, together with 16 projects which are either under ramp-up of recently commissioned capacities or projects under execution, provide us with multiple avenues for sustained growth over medium to long term. With this, I would like to conclude my opening remarks and invite the moderator to open the floor for questions.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Shrey Mehta from Goldman Sachs. Please go ahead.

Congratulations on good side of results, and thank you for taking my questions. Now, a couple of questions. Let's post one being with expected softening input costs. How do we expect the margin trajectory to pan out in H2F by 27? The second one is, how is the ramp up taking place at everyone's business, and if you can share any about it.

I don't know if you are using hands-free or you are on phone. What do you want to hear clearly, actually?

Is this better?

Yeah, a little, if you can just close it to the mic, please.

Sure. So, I have a couple of questions. The first one being with expected softening and input cost, how do we expect margin trajectory panning out in H2F527? How is the ramp-up taking place at Innoven's business? And if we can share any updates on potential new customers in the Sandroff business.

Anything else, please?

No, sir, that's it.

Thanks, Shreya, and thanks for the compliments. So, in terms of margin trajectory for FR27, and you mentioned expected softening of input costs. So, you know, first thing is our endeavor always has been that whatever are the input costs to commodities, etc., whether it is upward or downward, our endeavor is to have a pass-through to our customers. So, it works both ways. So, even if it softens, we don't know whether it is, but if it will be, obviously that will be passed on to our customers back to back. Hence, the margin guidance what we have given at the beginning of the year of 11% plus minus 50, we are holding on to that guidance despite the fact which we have also shared in the last quarter that because of the higher commodity prices, even though you are able to pass on, you don't have any sort of gross up of that. So it is actually margin relative. So despite that, we are holding on to our margin guidance for the full year. That's number one. Number two, in terms of ramp-up of Innois, that also the project is currently under execution phase, and we expect to commission this plant by end of the current fiscal year in the care city. And in terms of new customers in Sandrup business, all I can say is that it's an established player in the country. So we normally don't take name from the customer. So maybe once the product is launched by the customer, that will be the time we will be able to share the customer's name.

Sure, sir. Really helpful. Thank you. Thank you.

Thank you. The next question is from the line of Siddhartha Vera from Nomura. Please go ahead.

Yeah, thanks for the opportunity, sir, and congrats on a great set of numbers. Diwali wishes also to the entire team. Sir, first question is on the LMT segment. I mean, we did see a strong step up in especially the four-wheeler side of the allowable business. If you can roughly highlight first for the overall LMT, what will be the impact of commodity in the quarter? And in four-wheelers, is it some increase in customer share, wallet share, or new customer, or penetration? I mean, what is the reason for such a healthy entry-wheelers numbers here? Second question, sir, on the switches business also, we did see a strong growth in the quarter, which was sort of much slower in the past. So, any new order execution which has helped the growth or what has happened here? Also, lastly, on the margins also, I mean, we did see RM2 sales going up consistently in the last few quarters, obviously, with the commodity costs. Do you think this normalizes or operating leverage will be a driver of margin? Because I think the other cost also was quite high in the current quarter. So, do you see operating leverage being a margin driver or gross margins probably to improve with the initiatives or the lower inflation. So, yeah, that will be all from my side.

Yeah. Thanks, Sindhav. Thanks for the compliments and happy to you and your families. Starting with your first question in terms of LMT segment, in terms of how much is the commodity price impact for the aluminum business? So overall, the commodity price impact for the aluminum business is roughly around 260-270 crores. Then, whether we have increased wallet share, yes. In fact, there is improvement in wallet share, as we shared, increasing because of the capacity also. And like in two-wheeler, there is an increase in capacity because of the new plant, HPDC plant in Bauer. So that is a share gain. And also, there is a share gain in the casting business, which also is partially because of the favorable customer mix, etc. So it's a mix of all these areas. In terms of switch, yes, it has given a strong growth, and as we shared in the past, the export is doing pretty well. The export growth in the switch business is significantly higher during the quarter, and we do expect to produce momentum. Also, in terms of business, we have been gaining share despite the high base we have in the switch business that also partially also because of the favorable customer looks as well. In terms of margin, RM2 sales, you are right, is increased because of the higher convertive prices, etc. And whether the operating leverage will be the only driver, no. We do expect as we move forward. Normally, when you would have seen... The RM prices increase while they are pass-through, but in future, whatever new business you try and secure, the new price becomes a base, right? So over the period, you expect that RM to sales ratio also to improve. And not only operating leverage is a driver, but the GC also or the cost contribution also we expect to improve as we move forward. So it will be both the drivers we expect to contribute to our EBITDA margins. I hope I have covered all your questions. Yeah, thanks.

Thanks, sir. I'll come back in the queue.

Thank you.

Thank you. The next question is from the line of Mihir Gora from Aquarius Securities Private Limited. Please go ahead.

Yeah, thank you for taking my question, and congrats on to the good set of numbers, sir. So, my two questions are mainly relating to the bookkeeping questions here. Now, this quarter, if we see the employee expenses as such, they were largely in control, like this is the best ever sort of 11.3% of sales kind of employee cost. So, like with the new plants coming in and, you know, new capacities coming in, what kind of employee cost trajectory do we see going ahead? And other than that, the second part was on to the depreciation, wherein if I see the depreciation rate currently as a percentage of the overall gross block, so that also seems to be under control at around 7% versus historical of around 8.5% to 9%. So, with new capacities coming, just some guidance on to the overall trajectory of the employee cost and the depreciation expenses here.

Yeah, Mir. So, thanks for compliments. In terms of employee expenses, you are right. This is one of the lowest number which we have seen in the recent past. And then we have been in the range of around. 12.5% to 12.5%. So this is a clear depiction of the benefit we are seeing because of the operating leverage, at least on the manpower side, with 38% top-line growth. Obviously, don't expect that kind of increase in your manpower. While variable manpower does increase, but you do have fixed manpower or the staffs where you don't have proportionate increase. Now, in terms of new capacities, definitely they will come. So, as of now, whatever are the projects, obviously, you capitalize large part of the cost which are directly related to the capacity expansion. So, once those capacities gets online, obviously, over the years, you also expect those capacities over the three years to deliver their numbers. So, we don't expect any significant impact because of that. Yes, in short term, it might have something in first two years impact on the manpower Because you are in the ramp of pace, but when the business is stabilized, you don't expect these numbers to go significantly higher. Same for depreciation. Depreciation has been under control because this quarter there was only one plant, a major plant which was capitalized at Karkoza, which was a low yield plant, which has impacted roughly 5 crores. Also, what happens on year-on-year basis for this casting business, which is a continuous process plant, we follow a WDV sort of a method for depreciation. So, obviously, when you start the new year, you have a little bit of benefit of the lower base. So, to that extent, you do expect this depreciation also to remain in control, yes. When these new capacities get commissioned, obviously, at that time, you might see a little bit of bump up because we have 16 plants under, as you said, under project stage, either under commissioning or under construction. So, once they get online, you will see some initial impact in terms of higher, little bit increase in the depreciation.

Sure. Okay, sir. That answers my question. Thank you.

Thank you.

Thank you. The next question is from the line of Jyoti Singh from Hightong Securities. Please go ahead.

Thank you for the opportunity, and sir, Congress, I'm a good set of numbers. So, lastly, I wanted to understand on the considering the significant CapEx pipeline and what kind of incremental revenue and EBITDA potential does this company invest from this investment? And what kind of incremental ROC can expect once this facility reach optimal utilization? And another might be a little bit diversified question around humanoids. So I was hearing we are doing some bit of work, but if you can update around it.

Yeah, thanks, Jyoti, for your compliments. In terms of Capex pipeline, as you know, we have currently roughly around 5,200, 5,300, including today's announced Capex of projects which are under execution. Partially has been commissioned like Carcoda, which we obviously will take it out as you move forward. So, in terms of EBITDA and ROSI, incremental revenue also you asked. So, in terms of incremental revenue, we do expect the revenues to be roughly around 2 in terms of the asset turn because there are businesses which the asset turn is roughly 1.25, 1.3 and that business where the asset turn is even higher up to 2.5 or 3, right. So, on an average, you do expect an asset turn to be between 1.8 to 2 initially on this capex, but what happens is once you set up a plant and then whatever is the incremental growth, on the incremental growth or the capex which goes through sustaining capex model, the asset turn is much better because your land, building, infra, all the setup is already there, right? So, as you move forward, the incremental asset is on the higher side. That's what we see in our experience in our current operating plans. In terms of EBITDA and ROSI, so our target has always been on the ROSI side, Jyoti, because the businesses we are in, as I shared, have varied as a turn. So our target ROSI is roughly around 18 to 20% pre-tax in the third full year of production. And that is what our matrices is when we sort of propose the project to the board or the board approves the project. That's on the Roski and EBITDA also on a blended basis for all these projects. You do expect within the range of our current company profitability. In terms of Humonite, I don't know. There is nothing much I can share about Humonite because I don't know where this honestly came from.

Okay.

Thank you so much, sir.

Thanks, Tati.

Thank you. The next question is from the line of Shagun Beria from Anand Rati, Share and Stock Brokers. Please go ahead. We lost the connection for Shagun. So, ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Bora for closing comments.

Thank you, and I would like to thank everyone for joining the call. I hope we have been able to respond to most of your queries adequately. For any further information, we request you to please do get in touch with us directly. Thank you.

Thank you. On behalf of UNO Minda Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.