Jyoti CNC Automation Limited analyst Q&A

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.

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?

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.

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?

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.

My question was on the revenue side. How do you see the defence revenues going up in FY25?

So FY25 to the execution side w e 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.

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?

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?

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 a nd now the GE is our one of the biggest customers has also has come to India over h ere. 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.

Understood, sir. Thank you and all the best. Thank you.

Thank you. Mohit.

Thank you. The next question is from the line of Kamlesh Jain from Lotus Asset Managers . Please go ahead.

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?

Kamlesh Bhai tell us what you are asking. There are something I don't understand.

Yes. Sir last quarter if I see Q3 there was roughly around INR389 crores of order book which was from EMS a nd 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.

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.

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 ref erring from your presentation only. You are referring to which slide on a presentation.

You are referring to which slide on a presentation?

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

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

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

Yes quarter 3.

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?

So INR3,242 crores was your order book.

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

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

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.

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?

Number of machines?

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

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.

Okay. And the number of machines?

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.

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?

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, 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.

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

Yes, more than exhibitions and marketing costs to be there. Just everything is in on a track there.

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.

Yes. Thank you.

Thank you, Kamlesh.

Thank you. The next question is from the line of Yash from Stallions Assets. Please go ahead.

Hi, thank you for the opportunity. Sir, I just wanted to understand, what is the expected order inflow for FY'25?

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.

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?

Correct.

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?

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.

Got it. That was it, sir. Thank you.

Thank you. The next question is from the line of Ja gvir Singh from Shade Capital. Please go ahead.

Yes. Thanks for the opportunity. So, sir, we have a closed order book around INR3,400 crores.

Correct.\

So, in how much time it will be executed?

Okay. So any guidance for this FY25 EBITDA margin and revenue?

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

Okay. And the EBITDA margin, sir?

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.

Okay. So this is from…

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.

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?

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.

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

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.

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?

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, d o 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.

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

Okay, thank you very much, sir.

Thank you.

Thank you. The next question is from the line of Pritesh Shah from Lucky Investments. Please go ahead.

Yes. Hello, sir. This is Pritesh.

Yes Pritesh.

Hello, sir. How many machines did you sell in FY24?

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

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

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.

Okay. And what is the progress on the Apple machine?

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.

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

Yes.

So, how will this interest expense move?

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

Okay.

We have already paid the debt. We already paid the debt.

Okay. And what is the growth rate in the machine tool industry in FY24 in your opinion? Indian market would have grown/

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

Okay. Thank you very much.

Thank you. The next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.

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. 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?

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.

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

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.

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?

You are putting me in a little bit of trouble. Okay. So basically in EMS industries.

This is not customer specific? In the broad prospective?

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.

Understood. Thank you very much for taking my questions.

Thank you. The next question is f rom the line of Sampat Naik from Tiger Asset s. Please go ahead.

My question has been answered. Thank you.

Thank you. The next question is from the line of Darshan Patel, an individual investor. Please go ahead.

Sir, my questions have already been answered. Thank you so much.

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?

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 havi ng 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.

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?

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.

Thank you.

Yes, hi, Jadeja sir. Thank you for taking the question.

Hi, Depesh, how are you?

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.

What do you ask?

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?

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.

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?

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

Okay.

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.

In FY’25?

In FY’25.

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? And I just want to understand what is the new orders that are coming to support that increase that you are doing in France?

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.

Okay. So, it will be booked as a Huron only. So, execution will be done by Huron?

Yes.

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?

Yes, thank you, De pesh. 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.

Great, sir. Thank you very much, sir. All the best.

Thank you. The next follow -up question is from the line of Yash from Stallion Assets. Please go ahead.

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?

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.

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?

It is mainly this manufacturing time is more than a year. So, it is a one and a half to two years there.

Okay. Broadly, it is one and a half to two years. Got it. Thank you.

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 hav e a wonderful year to go ahead. Thank you very much.

Thank you. On behalf of Equirus Securities, that concludes this conference. Than k you for joining us. And you may now disconnect your lines. Thank you.