RAYMOND - Raymond Limited Share Price

In the Q1 FY '26 earnings conference call, management provided an optimistic outlook amid a steady quarterly performance. The company's total income was reported at INR 555 crores with an EBITDA of INR 87 crores, reflecting an EBITDA margin of 15.7%. This compares to INR 500 crores income and an EBITDA of INR 95 crores (18.9% margin) in Q1 FY '25.

Key forward-looking points include:

1. Aerospace and Defence Growth: The newly established JK Maini Global Aerospace Limited reported revenues of INR 87 crores (up 37% YoY) with an EBITDA of INR 21 crores and an EBITDA margin of 23.7%. Management anticipates high-teen percentage growth for the aerospace segment and early-teen growth for industrial automotive.

2. Restructuring: Following the formation of two new subsidiaries focusing on aerospace and precision technology, management is committed to enhancing operational focus, with the restructuring effective from August 1, 2025.

3. Cash Position: The company remains debt-free with a net cash surplus of INR 157 crores as of June 2025, highlighting strong liquidity.

4. Long-term Partnerships: Strategic agreements with Pratt & Whitney and Safran Aircraft Engines underline the company's commitment to growing its aerospace footprint.

5. EV and Hybrid Opportunities: JKMPTL expects to leverage the global penetration of EVs and hybrids, anticipating increased demand as customers diversify supply chains away from China.

6. Market Response to Tariffs: Management acknowledged challenges due to rising tariffs in export markets but remained focused on maintaining value creation despite uncertainties, particularly in supply chain dynamics.

7. Outlook for Margins: They aim for a gradual improvement in margins through cost engineering and value addition in new product developments.

The overall sentiment is one of cautious optimism with a strategic focus on growth areas and adaptability to external challenges.

Major Questions and Answers from the Q&A Section of the Earnings Transcript

1. Question: "Can you please elaborate what are they and what kind of products they make?"
   Answer: "All 17 manufacturing locations are in India. The ones shown in Europe are our 12 third-party logistics (3PL) warehouses, which help distribute our products globally."

2. Question: "Do you see the headwinds in terms of the tariff and all those kinds of things going on at the moment?"
   Answer: "Tariff situations change rapidly. While there are no immediate knee-jerk reactions, we monitor closely. The U.S. market has potential, but we also focus on Latin America, Europe, and Africa, where we have established customer relationships."

3. Question: "How does our aerospace and industrial automotive kind of businesses get affected by this?"
   Answer: "Components we supply are small relative to the aircraft price. Even with tariffs, companies can absorb costs. Most contracts are DAP, meaning we supply locally to U.S. customers, mitigating risk."

4. Question: "Can you give me an outlook for your aerospace and industrial business for FY '26?"
   Answer: "In Europe, we anticipate steady growth without tariff issues. For the U.S., we expect a high-teen growth in aerospace and early teens in industrial business, reflecting established supply chains."

5. Question: "What about the margins for aerospace this quarter, and will they improve in Q2 or Q3?"
   Answer: "Margins can fluctuate due to product mix, but overall, we anticipate stability. For FY '26, we expect margins around 25%, consistent with our long-term goals."

6. Question: "Do we have any capabilities in defence?"
   Answer: "Yes, we have substantial overseas experience in defence contracts. We aim to leverage this for the Make in India initiative, evolving from components to larger assemblies over time."

7. Question: "What specific value-added products will drive improvements in tool and hardware margins?"
   Answer: "We're focusing on high-value industrial segments, including aerospace tools. Our strategy involves innovation and leveraging testing capabilities to introduce more valuable products gradually."

8. Question: "What steps are being taken for localization of aerospace raw materials?"
   Answer: "Localization efforts are ongoing. While currently, raw materials are imported, I expect significant localization in 5 years, enhancing our competitiveness and potentially improving margins."

9. Question: "What is the debt situation now compared to FY '25?"
   Answer: "We've refinanced our debt externally, leading to an increased gross debt figure. However, cash also increased correspondingly. Our focus remains on growth rather than substantial debt reduction in the near term."

10. Question: "What are your thoughts on raising the ROCE or ROE profile of the business?"
    Answer: "ROCE has room for improvement as we move past legacy issues affecting our financials. We're in a growth phase and anticipate return metrics will stabilize over the next 2 years."