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    Rico Auto Industries Limited

    RICOAUTO
    Automobile and Auto Components·13 Aug 2025
    Management Summary

    Rico Auto Industries reported a strong Q1 FY26 with profitability tripling and EPS rising to INR1.24, primarily due to effective cost control. While revenue remained flat at ~INR543 crores, new orders and upcoming businesses in Railways and Defense, along with the Hosur facility, are expected to drive future growth and margin expansion towards a 12-13% EBITDA target. The company is actively managing challenges like OEM volume slowdowns and US tariffs.

    Highlights

    5
    • Profitability tripled compared to the same quarter last year, driven by cost control efforts.

    • EPS increased significantly to INR1.24 this quarter from INR0.42 in Q1 FY25.

    • Order book pending for execution is over INR1,000 crores per annum, providing revenue visibility.

    • New businesses (Railways, Defense) and new products are expected to drive future growth and higher margins.

    • Hosur facility is on schedule for Start of Production (SOP) in Q1 2026.

    Concerns

    4
    • Q1 FY26 revenue of ~INR543 crores was similar to the previous year, despite market degrowth in some segments.

    • Slow volume production at key OEMs like Maruti and Hero impacted Q1 performance.

    • A magnet shortage in Q1 led to a revenue shortfall of INR30-35 crores.

    • The US tariff issue remains a watch item, though management expects an amicable solution.

    What Changed2

    vs Q2 FY26

    Guidance items13 → 16 (+3)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    02 metrics
    1. 01Revenue₹543 Cr
    2. 02EPS₹1.24+1.9%YoY

    Order Book

    high confidence

    Total Value

    ₹ 1,000 crores

    as of 2025-06-30

    quantified

    Inflow this qtr

    ₹ 25 crores

    Execution

    pending for execution

    "The company has a strong order book and is continuously adding new orders, despite a Q1 shortfall due to magnet shortage."

    Source:
    Prepared remarks

    Guidance & targets

    16
    CategoryTargetPriority
    Profitability
    EBITDA Margins
    12-13%
    High
    Profitability
    Railways & Defense Profitability
    20-30%
    High
    Profitability
    Consolidated Net Profit
    INR15 crores
    High
    Revenue
    Total Revenue
    INR2,600 crores
    High
    Revenue
    Revenue from New Businesses
    INR156 crores
    High
    Revenue
    Revenue from New Businesses
    INR550 crores
    High
    Revenue
    Revenue from New Businesses
    INR800 crores
    High
    Revenue
    Railways & Defense Revenue
    INR80-90 crores
    Medium
    Revenue
    Railways & Defense Revenue
    Almost double of FY26
    Medium
    Operations
    RDSO Registration for first product
    Achieved
    High
    Operations
    Hosur Facility Start of Production (SOP)
    Achieved
    High
    Capital Allocation
    Proceeds from Land Sale
    INR1,000-1,200 crores
    Medium
    Capacity
    Foundry Utilization (Grey Iron)
    60-65%
    High
    Capacity
    Foundry Utilization
    Almost 90%
    Medium
    Tax
    Standalone Tax Rate
    25%
    High
    Tax
    Consolidated Tax Rate
    ~29%
    High

    EBITDA Margin Improvement

    Next quarter
    CurrentNot explicitly stated for Q1, but 'tripled' YoY. Target 12-13%.
    TargetProgress towards 12-13%

    Why it matters

    Key indicator of operational efficiency and profitability growth, as management expects quarter-on-quarter improvement.

    So quarter-on-quarter, this should keep on improving. That is our hope.

    How to verify

    key_financials.metrics[label='EBITDA Margin']

    Risks & concerns

    4
    RiskSeverity

    Slow volume production at OEMs

    Slow volume production at OEMs, including Maruti and Hero, impacted Q1.Management acknowledged

    medium

    US Tariff Impact

    Close watch on the U.S. tariff issue; evaluating position with customers and expecting amicable solutions.Management acknowledged

    medium

    Magnet Shortage

    Magnet shortage in Q1 led to a revenue shortfall of INR30-35 crores.Management acknowledged

    medium

    Delayed Payments in Railways/Defense

    Payments for Railways and Defense business can sometimes be delayed, which is factored into profitability.Management acknowledged

    low

    Q&A highlights

    7

    “by the last quarter of this year, we should be able to achieve these figures [13% EBITDA margins]. And at annual level also, next year, definitely, it will be there. ... these are currently not coming out of Railways and Defense because our business is very less.”

    Clarifies the timeline for achieving the stated EBITDA margin target and attributes it to cost control and capacity utilization rather than new high-margin businesses yet.

    asked by Prafull Rai

    2 min read6 chapters

    Detailed Narrative

    01

    Macroeconomic and Industry Outlook

    India's economic growth forecast has been raised to 6.4% for 2025 and 2026 by the IMF, positioning it as the world's fastest-growing economy. Retail inflation in India dropped to 1.5% in July 2025, below the RBI's comfort band. Globally, growth is projected at 3% for 2025. The Indian automobile and auto component industry is expected to benefit from the India-U.K. trade agreement, offering tariff-free access.

    02

    Q1 FY26 Performance and Profitability Drivers

    Rico Auto Industries reported Q1 FY26 revenue of approximately INR543 crores, maintaining a similar level to the previous year despite slow volume production at key OEMs like Maruti and Hero. Profitability significantly improved, tripling compared to the same quarter last year, with EPS reaching INR1.24. This improvement is attributed to stringent cost control efforts and increasing utilization of existing capacities, particularly in ferrous components.

    03

    Strategic Growth Initiatives and Order Book

    The company's order book pending for execution exceeds INR1,000 crores per annum. New businesses are projected to add INR156 crores to revenue in FY26, growing to INR550 crores in FY27 and INR800 crores in FY28. Management is targeting a total revenue of INR2,600 crores for FY26. New orders worth approximately INR25 crores were secured in Q1, helping to offset a INR30-35 crore revenue shortfall due to a magnet shortage.

    04

    New Business Segments: Railways and Defense

    Rico Auto is actively expanding into Railways and Defense sectors, targeting INR80-90 crores from these segments in FY26, with expectations to double this in FY27. These segments offer higher profitability, estimated at 20-30%. The company is pursuing RDSO registration for its first product by Q3 FY26 and is involved in sensitive defense projects like BrahMos, though details remain confidential.

    05

    Capacity Expansion and Utilization

    The Hosur facility is progressing as per schedule, with the first Start of Production (SOP) planned for Q1 2026. Foundry utilization, particularly for grey iron, is expected to increase to 60-65% by the end of FY26, with a long-term target of almost 90%. This improved utilization is a key factor in driving future profitability.

    06

    US Tariff Impact and Land Monetization

    The company is closely monitoring the US tariff situation and is in constant communication with customers to find amicable solutions, noting the difficulty for OEMs to switch suppliers for critical components. On capital allocation, management is pursuing land monetization with a target of generating INR1,000-1,200 crores in proceeds, emphasizing that the sale will only proceed if it significantly benefits shareholders.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.