Detailed Narrative
Q2 FY24 Performance Overview
JTEKT India reported its highest-ever standalone revenues of ₹590 crores in Q2 FY24, marking a 2% year-on-year increase. Profit after tax (PAT) for the quarter was ₹29.4 crores, nearly flat compared to ₹29.6 crores in the corresponding quarter last year. Consolidated EBITDA margins showed a slight improvement, reaching 10.2% in Q2 FY24 from 10.1% in Q2 FY23, attributed to operational rationalization efforts.
Capacity Expansion and Capex Plans
The company is undertaking significant capacity expansions, with work started in February 2023 to add one manufacturing line each for MS Gear and CEPS, expected to be completed during 2024. This will add approximately 4 lakh units of MS Gear and 5 lakh units of CEPS to existing capacity. JTEKT India anticipates capital expenditure to exceed ₹100 crores per annum for the next few years, with a decision on a second CVJ line, estimated to cost ₹80 crores and add 4 lakh units, expected shortly.
Export Strategy and New Business
JTEKT India is actively pursuing export opportunities, with current exports to the USA (Ezgo and Club Car) showing steady growth, projected at 15% and 23% respectively for the current year. A new vehicle model, Liberty (golf cart), will add an additional ₹10 million in revenue. Discussions for supplying to a group entity in Brazil are in final stages, potentially adding ₹50 crores in annual revenues from 1.14 lakh units, with production starting in FY25-26.
CVJ Business Update and Outlook
The Constant Velocity Joint (CVJ) business, launched in September last year, is currently supplying to Maruti Suzuki and Toyota for Grand Vitara and Hyryder models. In Q2 FY24, the company sold approximately 21,500 CVJ units per month, generating about ₹5.8 crores monthly. Current capacity utilization for the first CVJ line is around 64%, with management targeting 100% utilization by the next financial year and an immediate market share target of 15%.
Merger Update and Synergies
The merger of JTEKT Fujikiko Automotive India Limited with JTEKT India Limited is in the final stages of NCLT approval, with the next meeting scheduled for November 10th. Management expects good news soon. While the legal merger is pending, the company has already implemented joint working initiatives to reduce costs, contributing to improved EBITDA margins. The full merger is expected to unlock further manufacturing rationalization and administrative cost savings.
OEM Sales Mix and Industry Context
In the first half of the current financial year, Maruti Suzuki contributed 55% of JTEKT India's sales, followed by Toyota (11%), Mahindra (9%), Honda (6%), Tata Motors (3%), and Renault-Nissan (3%), with exports accounting for 4%. The company noted that while Maruti Suzuki's sales grew 8%, its production growth was only 2%, impacting JTEKT's growth. They are actively working with OEMs for EV models, with their product compatible for the EV segment, and are in discussions with at least three OEMs for EV introductions.