Rico Auto Industries Q1 FY27 earnings call

Rico Auto Industries Limited achieved its highest-ever quarterly consolidated revenue of INR 755 crores in Q1 FY27, marking a significant 39% year-on-year growth compared to INR 543 crores in Q1 FY26. This strong top-line performance was driven by continued momentum in core automotive businesses and the ramp-up of new programs. Aluminum casting remained the principal contributor, accounting for 89% of consolidated revenue, with exports contributing almost 15% of total revenue.

Despite robust revenue growth, Q1 FY27 saw a PAT loss of INR 3.4 crores, a sharp decline from a profit of INR 16.7 crores in Q1 FY26. Profitability was severely impacted, with EBITDA margin at 4.6%. Key factors included approximately INR 13 crores in higher air freight and sorting costs due to global shipping disruptions and quality correlation issues, as well as an estimated INR 10 crores impact from the lag in raw material price settlements, particularly for aluminum which saw a 57% YoY price increase.

The company is actively engaged in 55 new programs, with 28 already launched and in ramp-up phase. These are long-term, highly profitable programs for global OEMs like Toyota, Ford, and BMW, where Rico is a single-source supplier. The new Hosur plant, expected to commence commercial production in September 2026, will specifically support hybrid and EV-related programs. Additionally, the railway and defense businesses are progressing, with RDSO approvals underway and initial supplies for railways, and computerized shooting ranges for defense.

Management reiterated confidence in surpassing its previous revenue target, now aiming for over INR 3,200 crores in FY27, with Q2, Q3, and Q4 revenues projected at INR 840 crores, INR 850 crores, and INR 900 crores respectively. While Q2 margins are expected to improve from Q1, the company anticipates returning to an EBITDA margin trajectory of around 10% by Q3 FY27, with a full-year target of 12%. This recovery is contingent on customer price revisions, improved operating efficiency, and the cessation of temporary air freight from Q3 onwards.

The company is cautiously managing investments, focusing on essential capex for the 54 ongoing projects and curbing non-essential spending for the next year. They highlighted investments in high-tonnage die-casting machines, with a 2,700-ton machine costing approximately INR 25 crores for the machine itself and INR 10-15 crores for infrastructure. In an asset monetization move, Rico expects to receive INR 10 crores by December 30, 2026, from the sale of a 2-acre land parcel in Haridwar, with proceeds earmarked for debt repayment.

Rico Auto is implementing digital transformation initiatives, including leveraging AI for design and improving manufacturing capabilities on machining lines. The company is connecting equipment for better monitoring and utilization, aiming to replicate successful pilot projects across all lines. These efforts are expected to enhance productivity, control losses, and improve execution, contributing to the overall goal of mitigating inflationary pressures and improving operating efficiency.