Analyst Meet / AGM - Analyst Meet
The company is now taking orders of only machined components
In interaction with Rohini Kalyani MD and Chairperson on 25 April 2019
Key Highlights
Auto accounts for around 60% of total sales while non-auto segment will be the remaining 40%. Within Non Auto segment, the company caters to various industries such as construction, mining, defence, railways, power, marine, agriculture and general industrials.
For CV and 2W industry, the company is a Tier 1 supplier while for Passenger car vehicle industry the company is a Tier 2 supplier.
The company has adhered to and upgraded its technology and processes to meet the desired standards and emission norms for Euro 6 and BS 6 norms. Not much increase in the cost for the company.
There has been a strategic shift in terms of company doing its business. The company has been taking orders of only machined components unlike earlier, where it used to do raw forging.
This has resulted in higher margins. However scale is missing. The reason being the lack of momentum in auto segment and in general economy for the non auto segment. Despite that, the company is able to acquire new businesses and customers both globally and locally.
The machined component sales are around 50-55% of total sales for FY 19. Raw forging sales now remains at around 35-40% of total sales, as compared to around 60-65%, couple of years back.
No more provision for any bad debts or write off of any inventory or fixed assets left. Infact company has won a claim of receivable from Belgium party and expects recovery of around Rs 4 crore in coming year.
Currently the forging capacity is operating at around 50% capacity utilization and machining capacity is operating at almost 100% of capacity.
The company in the past 2 years had incurred capex of around Rs 41 crore in total for setting up machining lines for the new customers backed by confirmed orders.
The company has a plenty of scope for operating leverage both in forging and machining division as by increasing the shifts, the output can be increased with same machining lines for existing customers.
The company is in talks with major OE based German customer and the execution is expected in FY 20 and in FY 21. The capex of the same is minimal and will leverage in significant margin benefits along with scale going forward.
The company's focus is on non automotive business be it power, construction including the growing trends in industrial, marine, aerospace, heavy engineering, infrastructure and railways. Going forward, the ratio of Auto to Non-auto, will shift towards 50:50 in the coming years, while all the sectors will continue to grow in absolute terms. Internationally, already more than 50% of the export business is to non-automotive sectors.
The company has received DIRC approval for In-house R&D center.
No further investments unless backed by confirmed machining order.
The company has participated in couple of tenders for defence orders and expects to receive orders in FY 20.
The overall order book of machined components remains healthy and has better margins. The order pipeline and enquiries continue to remain high.
The company is also ready for electric car segment and has supplied non engine components to this line of business. However its currently very small component of overall business.
There are no plans of any merger between Kalyani Forge and Bharat Forge.
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