TATA ELXSI Earning concalls Annual Transcript FY20-21
Q1FY21 Concalls
- On better operating cost compared to last quarter performance
Leveraging long standing
relationship with client
Medical device segment continues to grow with utilization rate ranging between 70-75%. Also, gives enough headroom if the demand creation goes up.
On Acquisition:
On top customer engagement and
revenue:
On de-risking from JLR
On steps taken to mitigate
slowdown in transportation segment:
So consciously what we have been
doing over the last two or three quarters, we have been looking at adjacencies
to this market, which is we are looking at rail, off-road, and commercial so
that the skillsets are similar, the skill sets are fungible. So that is a
segment that we are really focusing on, having additional sales bandwidth,
delivery bandwidth, and so on, so to an extent, yes, we have been pretty
successful;
Over three years, our stated
objective is to have these adjacencies grow to between 15% to 20% of the
overall transportation business, so that is what we are looking at.
On internal cost control:
Management outlook going forward on vertical mix:
New Platform in pipeline for remote monitoring of human capital for media industry
Q. on the industrial design
segment, we have seen revenues at around 40 crores for around nine quarters
now, so just wanted to get a color on the opportunities we see here and also
the kind of end industries we serve here. Is this mostly transportation, or is
this more than that, and are there growth opportunities?
IP across verticals
More than 93% of the sequential
growth in the quarter gone by was volume-led.
Closed a multi-year deal with a European tier-1 supplier for vehicle electronics and software. Also added a new automotive OEM as a customer
Salary hike for the employee
On non-linear growth – taking initiative
On large pile of cash reserve – 900-950
crores
Platform active in business
On partnership with INVIDI, then GEC with Schaeffler, and partnering with Google
Space venture?
Management believes the offshore work will continue to stay even after the travel restrictions are relaxed
Expecting IDV revenue to grow much faster compared to EPD
revenues in next 2 to 3 years’ timeframe and this will be key focus area
for the business in the same time period. A lot of investment on the ground in
terms of people have happened and once customer acquisition starts, margin will
start improving
Management walking the talk on medical business revenue –
Q-o-Q improved from 5% to 9%
Q. This medical business more an
annuity business, or is it a typical ER&D business where project ramp
up/ramp downs can give way to lumpiness?
A. Yes, there is an ER&D,
that is a product design sort of a business that could be a contract-based
business. But then we have the entire regulatory piece that is more
annuity-based, so you have a mix of both project-based as well as annuity
businesses. But the good thing is that we see many long-term, multi-year
contracts in this business.’
Management is bullish on the H2 growth
Engagement with Schaeffler started generating revenue in
this quarter.
On sales marketing in COVID
__________________________________________________________________________________
Q3FY21
Performance Highlights
Deal wins
Financials
Commentary
- Over 90% sequential growth was volume led
- PAT crossing 100 crore for the first time
- All cylinders we went firing, and all the verticals performed exceedingly well, all the geographies also performed exceptionally well.
- healthcare continues to grow faster than the rest, with about 24% growth quarter-on-quarter.
- Media and communication again delivered another steady quarter with 8% sequential growth.
- sustained recovery in the automotive market for the second consecutive quarter growing 7.9% QoQ
- PBT margins higher than the targeted range of 22-24%
- In Automotive sector, main focus is towards the EV technology
- Earlier order duration used to be maybe a couple of months, 3 months but now it is a yearlong or even multiyear long orders and thus the average size of the project has increased and also average revenue per customer also increased.
This increase in duration may be attributed to not only the product launch but complete life span of the product.
Management pretty bullish on the healthy order book like never before
On Japan business
TATA ELXSI becomes the subsidiary of TATA sons from 1st December, 2020
On capital allocation policy
On exchange rate fluctuation control measures as 88% revenue is from export.
Conflict from Autospace with TCS
On operating leverage play in
business if any
Continued to gain market share
given that listed peers have de-grown, other listed competitors have de-grown.
So what would you attribute this to?
Any benefit which Tata Elxsi can
derive with PLI scheme ecosystem developing in country?
Outlook on next 5 years and 10
years? And relevant challenges that company sees going forward
On new opportunity as in new line
of business from 3 to 5 year perspective
Management on one-time revenue in
the business of medical and media
Why healthcare industry segment
performing better than other
___________________________________________________________________________________
Q4FY21
Performance highlights
Commentary
- Growth was again led by volume
- PBT beats the conservative management 22-24% range
- Design business continues to grow strongly with improved deal flows and deal sizes
- Q4 is typically a good quarter for System Integration (SI) business as customers spend their residual infrastructure budgets for the fiscal year and as it is also the year end for them.
- In SI business, because of COVID, lot of deals that were put off has fructified in last 2 quarters
- Growth in healthcare continue to grow fastest followed by media & communication and then transport.
- Utilization rate improved to 77% this quarter
- Revenue have stabilized over last few quarter
Board finally approved dividend
of 480% i.e. 48/- per share
-
Healthcare and medical business has multi-year
visibility
If company is working in VR tech
which is growing very fast?
How about margins from VR?
How sustainable is 30% EBITA
margin going forward and is there any scope of further utilization improvement?
Reason for sequential uptick in gross margin by 260bps to 43%
Issue on supply side?
Management on getting to revenue of 1BN USD
Any volatility going forward on
the revenue trajectory?
10% of the headcount now in
onsite role.
- On Export incentive from
government
On top quartile customer growth
and pipeline
Company
is providing one-month extra bonus salary to employee apart from normal Hike
Perspective of average deal
duration in FY21
Which are some white spaces that
we would like to strengthen ourselves from a capability perspective through
inorganic growth led by acquisition
Foray into education sector?
Working with Japanese client and
relevant issues which outsourcing faces
Disruption!! Let it come !!
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