RAYMOND - Raymond Limited Share Price

In the Q2 FY '26 earnings conference call, management presented a positive outlook for Raymond Limited, emphasizing the company's growth trajectory across various segments, particularly aerospace, defense, and precision technology.

Management highlighted that the Indian economy is projected to maintain a GDP growth of 6.8% for the fiscal year, influenced by strong domestic demand and structural reforms. The automotive sector reported a total income of Rs.564 crores in Q2, marking a 10% increase year-on-year. The EBITDA reached Rs.79 crores with a margin of 14.1%.

For the first half of FY '26, total income totaled Rs.1,119 crores, an 11% growth from Rs.1,011 crores in H1 FY '25. However, EBITDA slightly declined to Rs.167 crores, resulting in an EBITDA margin of 14.9%. This performance is driven by a shift to more complex precision components, which are becoming crucial in the supply chain.

Key highlights included:

• The Aerospace segment saw a revenue increase of 15% year-on-year to Rs.81 crores with an EBITDA of Rs.17 crores (34% growth). The margin improved to 21%.
• Precision Technology and Auto Components reported revenue of Rs.409 crores (10% growth) and an EBITDA of Rs.57 crores (57% growth), with a margin of 13.9%.
• Management expressed optimism about future growth due to global customer onboarding, enhanced manufacturing capabilities, and a notable increase in RFQs, especially in aerospace components.

Going forward, management affirmed plans to strategically expand into high-complexity parts and additional international markets, supported by robust customer relationships and long-term contracts. They aim to enhance operational efficiency and target a sustainable EBITDA margin improvement, positioning Raymond as a key player in its sectors.

Q&A Section - Key Questions and Answers

Question 1: "The engineering business has been restructured into 2 separate subsidiaries. I just want to understand what is the long-term strategic intent for these entities? And what kind of value unlock we may expect over the next 3 to 5 years' time frame?"

Answer: The restructuring allows each subsidiary to focus on distinct growth paths. Aerospace and Defense will develop independently, targeting maximum growth potential. By doing so, we aim to maximize operational efficiency and unlock shareholder value over the next 3 to 5 years, mirroring our past successes.

Question 2: "Around 15% of the auto business is coming from hybrid and EV. What is the target for EV or hybrid as a percentage of JK Maini Precision Technology revenue in the next three years?"

Answer: Currently, hybrid products account for about 15% of our business. We anticipate significant growth in this sector, particularly in Europe, where hybrid demand is rising. While I won't specify a target, we plan to leverage our position with existing customers to expand this segment considerably over the next few years.

Question 3: "What is the expected trajectory for working capital as a percentage of sales? Are we facing any pressure from longer receivable cycles from global OEMs?"

Answer: We are managing working capital effectively despite challenges. We've established strong supplier contracts internationally, coordinating raw material sourcing efficiently, which helps in minimizing the pressure from longer receivables from global OEMs.

Question 4: "We are still in single-digit margins. What initiatives are we taking to reach double-digit rates over the coming years?"

Answer: Our operational margins are already in double digits in some segments, like Aerospace at 22.4%. Overall, we're optimizing our product mix and operational efficiencies, targeting a consistent range of 14% to 15% across our businesses as we continue to grow.

Question 5: "In the aerospace business, you've seen sequential declines in revenue and margins. Can you explain that?"

Answer: Variability in our product mix and development costs contributes to margins fluctuating. As we introduce more complex products, the temporary margin pressures are expected. Once these products stabilize and scale, margins should improve as operating efficiencies kick in.

Question 6: "How do you see the aerospace business evolving in the next two years? Are we targeting INR500 crores in revenue?"

Answer: I won't commit to a specific number, but we're targeting healthy growth. Opportunities in aerospace are abundant, especially as backlogs at major OEMs remain high. With effective execution, I believe we can significantly expand our revenue in the future.

Question 7: "What is our current order book situation and how does it influence our planning and capacity?"

Answer: We generally run with a 5-year order book in aerospace, and our current visibility is strong, approximately 2.5 to 3 times our annual revenue. We have a healthy pipeline of new product developments and robust contracts with major players, aiding in long-term planning and capacity management.

Question 8: "What is your capex plan for FY '26 and beyond, especially regarding the new facilities in Andhra Pradesh?"

Answer: We aim to invest around INR100 crores annually, with significant outlays in Andhra Pradesh for expansion, anticipating double the capacity in the next 4 to 5 years as we ramp up our manufacturing capabilities.

Question 9: "Segment margins in Aerospace have been declining sequentially. Are we at the bottom of this trend?"

Answer: Our current margins can fluctuate based on top-line performance. As we increase our sales volume and manage operational leverage, margins will likely show improvement in subsequent quarters.

Question 10: "What are the competitive advantages you see in your aerospace business?"

Answer: Our long history in precision machining, strong relationships with OEMs, and diversified capabilities across multiple segments give us a competitive edge. As we go up the value chain, our commitment to quality and customer service is paramount.