Summary of earnings call for ASK Automotive Ltd published on 02 Aug, 2025

ASK Automotive Limited
Q1 FY26
Call date · July 30, 2025

1 · Management Commentary

Key Positives

• Consolidated revenue grew 3.5% YoY (excluding wheel assembly, revenue grew 11.1%).
• EBITDA grew 19.3% YoY; PAT up 16.3% YoY.
• Highest-ever quarterly EBITDA margin at 13.8% (up 183 bps YoY).
• All three segments (Advanced Braking System, Aluminum Light-weighting Precision Solutions, Safety Control Cable) delivered positive growth.
• Bangalore facility became EBITDA positive in Q1 FY26; Karoli plant running at ~65% capacity utilization.
• EPS increased to Rs. 3.35 vs Rs. 2.88 YoY.

Key Negatives

• Two-wheeler industry growth remained flattish; Q1 production up only 0.7% YoY.
• Export revenue stagnant at Rs. 33 crore YoY due to global geopolitical uncertainty and US tariffs.
• Strategic reduction in low-margin wheel assembly business (down 53.5% YoY).

Forward Guidance

• Capex of Rs. 450 crore planned for FY26, on track; further investments in Bangalore and Karoli.
• New JV with TD Holding (Germany) for sunroof cables; production to start next financial year, Rs. 10 crore investment this year.
• Alloy wheels: Testing ongoing; supplies expected to start in H2 FY26 (LIOHO Taiwan JV); new machinery for Karoli to arrive by December, samples by January.
• Revenue guidance of mid-teens growth (excluding wheel assembly) for FY26 remains intact.
• Targeting 13.7% EBITDA margin; aim to sustain/improve current margin levels.
• Exports expected to grow 20% in FY26, though risks remain.
• Asset turnover target of 1.75x for new plants.
• No new OEM client additions possible in two-wheeler segment; focus on new products and aftermarket growth.
• Monitoring regulatory changes on ABS; will respond with new collaborations/JVs if needed.

2 · Q&A Highlights

Q 1 (Composite): Can you clarify revenue growth guidance and margin improvement drivers, especially excluding the wheel assembly business?
A (Management):
• Mid-teens revenue growth guidance is for business excluding wheel assembly (which was 7–8% of revenue); confident of achieving this despite industry headwinds.
• Margin improvement driven by exit from low-margin wheel assembly, ramp-up of new plants, and cost optimization; targeting 13.7% EBITDA margin.

Q 2 (Composite): What is the outlook for the two-wheeler industry and ASK’s growth relative to it?
A (Management):
• Industry may grow only 3–4% in FY26 (vs earlier 6–8% guidance), but ASK expects to outperform with mid-teens revenue growth; festive season and good monsoon should boost demand in H2.

Q 3 (Composite): Updates on new JVs (sunroof cables, alloy wheels) and related capex/timelines?
A (Management):
• Sunroof cable JV with TD Holding: Rs. 10 crore investment this year, production to start next financial year.
• Alloy wheels: Testing ongoing (LIOHO Taiwan JV), supplies expected to start in H2 FY26; new machinery for Karoli to arrive by December, samples by January.

Q 4 (Composite): What is the impact of regulatory changes (ABS adoption) and ASK’s strategic response?
A (Management):
• Draft ABS notification is under discussion; current domestic ABS capacity is insufficient.
• Potential headwind of up to Rs. 230 crore annually if fully implemented, but company will seek new JVs/collaborations to mitigate impact.

Q 5 (Composite): What is the status and outlook for capacity utilization, operating leverage, and asset turnover at new plants?
A (Management):
• Bangalore facility to reach 60% utilization in Q2, 70–75% by Q4; Karoli at ~65%.
• Asset turnover target of 1.75x for both plants; full operating leverage expected as utilization ramps up.

Q 6 (Composite): Any new client additions, product launches, or segmental growth details?
A (Management):
• No new OEM clients possible in two-wheeler segment (already supplies to all); aftermarket and new product lines (especially in aluminum) are key growth drivers.
• Top 3 customers: HMSI (~35%), TVS (20–21%), Hero MotoCorp (~17%).

Q 7 (Composite): Capex plans and funding; impact on balance sheet?
A (Management):
• Rs. 450 crore capex for FY26 on track; further investments in Bangalore and Karoli.
• Debt-equity ratio expected to improve despite capex.

3 · Other Key Numbers

• Two-wheeler industry Q1 FY26 production: 5.9 million units (up 0.7% YoY).
• ASK’s Advanced Braking System revenue growth: 4% YoY.
• Aluminum Light-weighting Precision Solutions revenue growth: 15% YoY.
• Safety Control Cable revenue growth: 6% YoY.
• Export revenue: Rs. 33 crore in Q1 FY26 (flat YoY).
• Wheel assembly business reduction: -53.5% YoY; expected to phase out 60% of Rs. 380–400 crore business this year.
• Bangalore plant investment: Rs. 155 crore till March 2025; further Rs. 75–100 crore planned.
• Karoli plant investment: Rs. 490 crore.
• Asset turnover target for new plants: 1.75x.
• EPS Q1 FY26: Rs. 3.35 (vs Rs. 2.88 YoY).
• Top customer revenue contribution: HMSI ~35%, TVS 20–21%, Hero MotoCorp ~17%.
• Non-auto export business grew 48% in Q1 FY26.
• Employee benefit expenses as % of sales: Not disclosed (management clarified calculation methodology).
• Sunroof cable JV capex: Rs. 10 crore this year.
• Potential ABS regulatory headwind: up to Rs. 230 crore per year (if fully implemented).

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.