- Landmark Cars Limited Q2 FY204 earnings conference call hosted by Monarch Network Capital
- Landmark Cars is experiencing growth in the Indian auto industry
- Partnership with MG Motors and Mahindra and Mahindra has been profitable
- Revenue per transaction has increased for both vehicle sales and servicing
- The pre-owned car business is progressing well and expected to surpass revenue guidance
- Strong pipeline of opportunities for future growth
- Financial numbers show a slight decrease in revenue but an increase in profitability
- Gross profit, EBITDA, and PAT all show year-on-year growth

- Gross profit for H1 Fi24 was Rs 305 crore, compared to Rs 292 crore in H1 Fi23.
- EBITDA for H1 Fi24 was 104 crore, while H1 Fi23 was 116 crore.
- Profit after tax for the half year was 27.8 crore, down from 35 crore last year.
- Cash flow for the semi-annual period was Rs 52.6 crore, compared to 54.95 crore last year.
- The company's inventory has increased due to the start of MG operation, POC business, and festive season buildup.
- The company expects inventory to normalize in the current quarter.
- The company is focusing on streamlining operations and efficient cash management.
- Participants were invited to ask questions during the Q&A session.

- Sales of ETO3 and E6 models are going well, with 2,500 units sold so far.
- BYD seal product is expected to arrive in January with bookings starting around that time.
- Mercedes-Benz GLC supplies have started, but demand exceeds supply.
- The company will meet in December to discuss next year's numbers and hopes for good growth.
- After-sales business currently derives around 45% of revenue from collision repairs.
- The company plans to provide more detailed data and disclosures in future quarters.
- Pre-owned car business is profitable and on track to surpass revenue targets.
- The company aims to double its used car revenue next year.
- The margin on used vehicles is currently around 4%.
- The company has a strong pipeline for organic and inorganic expansion.
- Acquisitions will be made at the right value to avoid dilution of return on capital.
- The company is focused on achieving a good payback, IRR, and ROC for acquisitions.

- The speaker looks for a payback period of 4 to 4.5 years and does not want to pay more.
- They discuss potential revenue from indoor Bhopal and MG outlets, stating it will be around 100 crore for the year.
- The speaker mentions that revenue from Mahindra operations will start in the next quarter and expects around 200 crore annually.
- They have not utilized much of the 70-80 crore provision for inorganic acquisitions in FY24.
- Employee costs have increased by 11% year-on-year, but there was no one-time bonus. They have recruited new employees and made some cost adjustments.
- Other expenses have increased by 6 crore quarter-on-quarter, but they plan to tighten their belt and save costs.
- After-sales revenue is now 70% of total EBITDA, and they expect it to continue growing as they put more cars on the road.
- They plan to focus on a 4% margin for pre-owned cars initially and increase margins later.
- Mercedes sales in Gujarat have grown 75% year-on-year.

- Mercedes sales in Gujarat have grown 75% year-over-year in the last 2 months
- No new outlets have been added, but Mercedes has increased its penetration in the market
- The new car sales margin has dropped from 3.2% to 1.7%, but this is due to lower volumes and will normalize once volumes increase
- The inventory days will normalize to around 50 days by March
- Honda sales are expected to make up for the drop in the first quarter and close higher than last year
- Jeep sales have improved since September, especially with the introduction of the 4x2 compass
- Other brands like BYD, MG, Volkswagen, and Ashok Leyland are also performing well
- Renault outlets have been reduced to focus on premium and luxury cars
- Apprehension towards buying diesel cars in Delhi may affect Jeep sales, but the numbers are still decent
- Talks about an FTA between India and UK could result in lower duty structures for CBUs and CKDs, particularly for JLR

- The Indian government is offering incentives for manufacturers to import electric cars and invest in India over the next 5 years.
- This presents both risks and opportunities for the industry, as different regulations and competition from Chinese companies may impact the market.
- The after-sales business has grown at a 20% CAGR for the past 9 years and the company aims to maintain this growth trajectory.
- The after-sales business includes warranty repairs, annual maintenance, and collision work.
- The company plans to provide more granular details on the after-sales business in future reports.
- The EBITDA margin for the sales business is currently around 2.5% but is expected to be around 3% in the steady state.
- Mercedes, Mahindra, and MG are expected to be the driving forces for growth in the new car sales business.
- There are no restrictions on the company selling other high-end car brands alongside Mercedes.
- The revenue growth in the after-sales services business may increase as new businesses and car parks start contributing to revenue.

- The speaker discusses the growth potential of the business over the next 3-5 years, projecting a CAGR of 15-18%.
- They mention that the EBITDA margin for the after-sales business is currently stable at 18-18.5% but could improve if there is a shift towards white-labeled products and services.
- The speaker also provides a capex guidance for FY24, stating that routine capex will be around 10-15 crores, with additional investment for organic or inorganic growth.
- The conference ends with the speaker expressing determination to win and thanking the participants for joining.

- Landmark Cars Limited, a company in the Indian auto industry, has experienced growth and profitability through partnerships with MG Motors and Mahindra and Mahindra.
- Revenue per transaction has increased for vehicle sales and servicing, and the pre-owned car business is on track to surpass revenue guidance.
- The company has a strong pipeline for future growth opportunities.
- Financial numbers show a slight decrease in revenue but an increase in profitability, with gross profit, EBITDA, and PAT all showing year-on-year growth.
- The company's inventory has increased due to new operations and seasonal buildup, but they expect it to normalize soon.
- The company is focused on streamlining operations, efficient cash management, and providing more detailed data and disclosures in future quarters.
- Sales of specific car models are going well, and the company has plans for expansion and acquisitions.
- After-sales business is a significant revenue source, and the company aims to double its used car revenue next year.
- The company is optimistic about future growth and expects revenue from new outlets and operations to contribute to overall growth.
- The Indian government's incentives for electric cars and potential changes in duty structures present both risks and opportunities for the industry.
- The company aims to maintain growth in the after-sales business and improve EBITDA margins through white-labeled products and services.
- The speaker expresses determination to succeed and thanks participants for joining the conference call.

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Ladies and gentlemen, good day and welcome to Landmark Cars Limited Q2 FY204 earnings conference call hosted by Monarch Network Capital.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during this conference call, please signal an operator by pressing star then 0 on your touchtone phone.

Please note that this conference is being recorded.

Rahul Dhani from Monarch Network Capital.

On behalf of Monarch Network Capital we are delighted to host the Senior Management of Landmark Cards with us.

Sanjay Thakkar, promoter and executive chairman, Mr.

Arunaman Thakkar, executive director, and Mr.

Sanjay, for his opening remarks, and then we move to Q&A.

Thanks to the Monarch team for hosting this call.

We are in midst of transformation in India.

Such transformation comes maybe once in one's lifetime.

There is a consensus among the world that it is India's time now.

The same sentiment is shared by the Indian customers who are finally loosening their purse strings and spending.

We operate in a segment where sentiments play a very big role.

Thankfully the customer sentiment is holding strong when the situation globally turns cautious.

I was in Munich recently for a global Mercedes conference and I can tell you that India was the star of that show.

The overall Indian auto industry grew at 5% year on year in the second quarter.

This is in line with most estimates As we are coming from a very high base now.

As I had guided in the last call, our partner OE's has started participating in this growth and we are covering up for the shortfall of the first quarter.

The sales numbers for Honda, BYD, Jeep, as well as Mercedes-Benz are increasing based on the new launches and better supplies.

Though I should add that the demand for Mercedes SUVs and top-end cars is still far in excess of the supplies and we have many months of waiting period here.

Let's see what were the highlights of the last quarter.

In the last quarter we partnered with 2 fastest growing brands in India, MG Motors and Mahindra and Mahindra.

The operations of MG Motors in Indore and Bhopal started in the month of August and is already profitable from the first month of operations.

The Goa operations of MG will soon start.

We are looking at starting it maybe end of this month as quickly as that.

Our Mahindra operations in Havara and the outskirts of Kolkata will start from the next quarter.

We have been focusing on increasing our revenue per transaction that we do.

May it be sale of vehicles or servicing them.

I'm happy to share that this razor-sharp focus is showing excellent results.

The average selling price of cars that we sell has increased 15% over last year to over 20 lakhs and the average service revenue has increased again by 15% to touch, to cross 26,000 rupees.

The EBITDA for after sales has jumped 30% year on year due to this.

You will also notice that the profitability has grown at 20% for after sales for the half year period.

We had spoken about building a unique pre-owned car business model and the third pillar of our profitability.

I am again happy to share that we have made very good progress in this.

We are well on our way to surpass our 100 crores revenue guidance for the year.

1 should remember that we are buying and selling only our brand of cars and the business is profitable.

We are aiming to double this business in the next year.

We have a strong pipeline of opportunities, both organic and inorganic, that we are exploring vigorously, many of them in quite advanced stages of discussion.

In our business, we shall see some lumpy growth based on new car launches, availability and success of the new car that are launched.

The after sales business is a predictable annuity type of a growing business.

And the POC business, the pre-owned car business, which is a sunrise business for us.

The combination of all these 3 make us confident about our future.

I am reminded about the words of William Wordsworth who said, bliss it was in that dawn to be alive, but to be young was very heaven.

I now hand over to Surendra to tell us some talk about some numbers of last quarter and the last half.

A very good morning to everyone and a warm welcome to 1 and all attending the earning calls.

I would like to start by some operational metrics before getting into the financial number.

We continue to be the highest contributor in terms of volume for multiple OEMs and this translates into the meaningful number for all of our OEM partners.

In the half year gone by, we have serviced 1,58,000 plus cars and sold 307 used cars under the R new model of the used car trading.

In the car sold we saw an ASP increase, average selling price increase of 19% rising from 16,56,000 in H1-23 to 19,65,000 in H1-FI24.

Similarly, in the service, ASP also increased by 12%, rising from 22,500 in H1-23 to 25,280 in H1-24.

In the last quarter, our new car performance sale was around 866 crores across all our OEM partners, and after-sale revenue was rupees 211 crores.

As highlighted, this is extremely predictable business with repeat customer and once we hit the tipping point in certain OEM we are on the course to see tremendous growth.

The average selling price of cars sold in the quarter has gone up from 17,50,000 in the quarter Q2 FY23 to 20,18,000 in Q2 FY24, showcasing a growth of 15% year on year.

So our average selling price of car is continuously growing.

This rise in ASP on the back of higher sale of top-end variant being sold and shifting trend towards premium and luxury car due to higher disposable income.

Coming to the financial number, our total performer revenue for the quarter stand 1120 crore as compared to 1148 crore in the same quarter of the previous year.

This symbolizes a degrowth, marginal degrowth of 2.4% year on year.

Sequentially, the previous quarter's performer revenue was Rs.

This account for a growth of 20% quarter on quarter.

We have made up a lot of lost ground in the quarter.

Total pro forma revenue for H1 stand at Rs.

2054 crore as compared to 2179 crore H1 of the previous year.

Let's talk about the profitability now The gross profit for the quarter is Rs.

162 crore with a 14.5% margin on performer revenue as against the gross profit of Rs.

152 crore in quarter 2 FY23, a 6.5% higher than last year.

This year EBITDA stood at 57.1 crore for the quarter versus 63.6 crore in the same quarter of last year.

EBITDA margin clock in Q2 FY23-24 being 5.1% while the same in Q2 FY23 was 5.5%.

Similarly, PAT is stood at 20.5 crore with a 1.8% margin.

In fact, over 16.9 crore in the same quarter last year.

Now for the corresponding figure for the half year period, our gross profit for H1 Fi24 was Rs 305 crore as against 292 crore in H1 Fi23.

EBITDA for H1 Fi24 stood at 104 crore and the corresponding figure of H1FI23 was 116 crore.

Profit after tax of half year stood at 27.8 crore versus 35 crore last year for the same period.

Cash fat for the semi-annual period of is Rs 52.6 crore as against 54.95 crore in the same period last year.

This is clear evidence of our streamline operation and efficient cash management.

We are aware that Our inventory has gone up as on 30th September.

This is due to the starting of MG operation, POC business, festive season built up.

We have already seen downwards in the industry and hope to get to normalization inventory in the current quarter.

With this, I would like to hand over the call to moderator to open up floor for questions.

We will now begin the question and answer session.

Anyone who wishes to ask a question may press star and 1 on the touchtone telephone.

If you wish to remove yourself from the question queue, you may press star and 2.

Participants are requested to use handsets while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Participants, you may press star and 1 to ask a question.

The first question is from the line of Deepak Balwani from Unified Capital, please go ahead.

Hello sir, thank you for the opportunity.

Deepak can you please speak little louder, you are sounding little soft.

Yes, sir I just wanted to understand you know the volumes in our after sales business.

It's flat on a half yearly basis and in fact it's down in this quarter.

So just wanted to understand what is happening here.

And it's the answer in all is a combination of 2, 3 factors that we will see.

During the last year, we had our Renault operations, which we have shut in this current year.

So the number of cars, the small cars that we were servicing, some of them has gone away.

The second thing is that the after sales business also has a kind of a seasonality factor around it.

And the reason for that is that the cars that you sell in say good months like say a March or a Diwali, come for a 1 year service exactly after that, or a 6 month service is kind of timed that way.

So we believe that the numbers will increase in the second half of the year.

The other thing is that we have focused, we are focusing on getting more revenue from the services that we import.

We have taken as you know the car care product agencies, we are focusing on our own wide branded stuff, accessories and all that.

So once the volumes kick in, you will see a double impact of this going ahead.

But sir, the ASP increases that we have seen in both the vehicle sales and the after sales businesses should stay at these rates, right?

Is there any risk to these numbers coming down?

And if you can just explain what is driving these higher ASPs?

Is it the harassment or have you taken increases in our services or?

So you are asking for the sales part or after sales part?

So as far as the sales is concerned, the vehicle prices that we are selling has been continued.

Within Mercedes-Benz, as you know, the top-end vehicles are selling more.

And again, I believe from January, there will be a kind of a uniform price increase.

This is what all the Indian manufacturers do.

So I think come 1st January and you will see a higher selling price of I think 100 out of 100 products that will be there in the market where this will play out.

Our product mix is also, as you see, we have kind of gone away from the smaller cars and are selling the more expensive cars.

Honda Elevate, which is again a meaningful number for us.

The average selling price is higher than the Jazz and the WRV, which went out of the consideration right now.

And As far as the after sales is concerned, I think I answered the question by saying that we have white labeled our own products, be it the annual maintenance contracts, extended warranty, our own kind of accessories which are there, plus the car care product agencies that we have done.

So there is a combination of a lot of effort that goes into our ecosystem.

In fact, maybe if we are having an investor's day, which we are planning to have in the next quarter, we will showcase to you the technology that we have built, the apps that we have built to kind of do it.

It's a little difficult to explain on the call, but once you will see it, you will feel happy about what the landmark has built.

And just wanted to understand as a company, do we have a thumb rule on, you know, the debt we want to maintain, the working capital debt and the inventory in our books that we want to maintain on an absolute number or you know in terms in terms of number of days so is there any thumb rule on these 2 numbers?

Yeah I mean I wish I would say that we have it it's a little dynamic Deepak this whole business and as Suhendra explained in his thing we are aware that our debt and the inventory has built up now that has built up for some 3 4 things which are which come see 1 is the seasonality factor So we came out of a Shraddh period in September and the festival season started only in October.

So there was an inventory buildup, new car launches like an Elevate, For example, the pre-owned cars that we started the business, which wasn't there last year.

But we are very, very mindful and we don't want to have more inventory and there will be a big focus on reducing this inventory and you will see some good results by December.

The industry works on a possibly 1 month or thereabouts of new car stock.

What we are reporting is also including our demo car which we could kind of separately show from next quarter just to kind of show this kind of a bifurcation.

Sure got it and so if you can just give a sense on how the BYD sales are scaling up, is there any clearance of the homologation that we have gotten it, that BYD has gotten it?

And also the supply challenges in Mercedes, has that eased down significantly or you know that will take some time to come in?

Yeah, so I will, I was in Munich and you asked about BYD, The thing is that now it is clear, globally it is clear that there are 2 like elephants in the room as far as the electric cars are concerned.

They are clearly the frontrunners in taking the poll position and we are happy that we have kind of partnered with BYD and are the largest partners in India.

It is a difficult thing to predict as to when the homologation happens.

We have been told that it will happen like as soon as this quarter.

The good news is that their consignments which were not coming are already coming and we are seeing the sale happening as it was happening earlier.

This has started from the month of August if I am not mistaken and the sale of the ETO3 as well as the E6 is going on pretty well within that 2 and a half thousand units in.

The BYD seal which is a fantastic product will be as of now from the information we have will be coming to us by January and the bookings of that will also start around that time.

So BYD timing is a little difficult to say it can happen anytime but hasn't happened so far.

As far as the Mercedes-Benz is concerned the GLC, the supplies has started the GLE has got launched only some 1 week, 10 days back.

The supplies are there, but what I can say is that the demand is far in excess of the supply.

So, what we are, we could have done better than what we are doing and I'm hoping that when we, the company follows a January to December kind of a year so we will go and meet them in the first week of December for the next year's numbers, for them next year, for us the last quarter.

And I'm hoping that the numbers will again show a good growth over this year.

I'd request you to come back for a follow-up question.

Next question is from the line of Abhisar Jain from Monarch.

Sir, just wanted to know in the after-sales business, we have this segmentation into 4 different parts and I just wanted to know that what percentage of the after sales business will be from only collision and repair services approximate?

Yeah, So actually we are getting some learnings as this is only our second, third earning call.

And every time we are wanting to improve on our disclosures, our presentation, the granularity of the business that we do And I'm hoping that by next quarter and the quarter after that, you will see more meaningful dissection of the data.

The dissection of the data will also include the high ROCE that the after sales business does.

So what is the capital employed over there?

As far as the accident repair is concerned, currently it is at around 45% of our service, the after sales revenue is coming from collision repairs.

There has been a big focus on increasing this business.

We have kind of gotten into a lot of innovative stuff built on tech and some innovative products.

Again, we'll be happy to showcase when we have our investor day.

And we will be reporting more granular data going ahead.

And sir, in fact, I wanted to also take an idea on the approximate capital input, which you just mentioned that you may start disclosing it, but just considering that almost like 45% of our outlets are in the repair and the workshop mode, would it be safe to assume that the capital employed also would be in that proportion or it will be higher in after sales per se of the total capital employed that we have?

See the it's a difficult question to answer broadly What we had done while we were like a few months back where we were doing a unit economic study, what we had figured out is that the ROCE on a very ballpark number, but let the exact numbers come, I don't want to stick my neck out but was in the region of around 50 50% upwards so once I give you that you will have a better sense and we will try to do it very quickly.

Sure sir understood okay and so the next question was on the pre-owned car business by the way congratulations on on a great scale up there that we see in the H1 of this year I can what I can see sir from the PPT is that we have sold around 300 odd cars with the GMV of around 45 crores so this is for the H1 right and and this you're not accounting in the new car sales or is it like accounted there and then you're calling it out separately here we are calling it out separately so is it included sir in the new car sales already

yes it's included and we are putting at a separate number in the presentation as well

okay so as of now 300 cars this that we have done is for the h1 right

so 300 car what we mentioned is our new model where we are buying and selling

that is the thing we also do back-to-back that's that's where we get the commission.

So just to take an idea since you mentioned that this this business on its own also is profitable, though of course it might not be at the right profitability level because of the scale.

Because this business has been there with us for quite some time, but now we are seeing the scale of we are looking excited about it we have done some interventions as you mentioned in the earlier calls also so how should we think about this business are over A35 year perspective given how the industry sizes on an RFX and beyond versus the base size of the industry.

So if you could give some idea, that would be great.

So this unique business model has been enforced at Landmark only this financial year onwards, where we had taken a target of 100 crores of revenue to be achieved and we are, I think, well on our way to surpass that number in this financial year.

The model, just to recap for people on this call, is where we are only focusing on the buying and selling of used vehicles which are of the brands that are represented by Landmark.

Also We are not investing in additional manpower or other fixed costs like showroom facilities.

We are using our existing facilities and manpower to do the sale and purchase of these used vehicles of our own brands.

Currently, we are at approximately 4% of a margin on these used vehicles that we are seeing.

As Sanjaybhai said, we are looking at doubling our used car revenue next year, while following a similar model that we are doing right now.

And we are confident that this is what we will do.

And once we have received a larger scale, then we will press the pedal on increasing our margins as well.

Yeah, and just to kind of say that this margin is kind of a net margin that we get.

For most people when they talk about a higher margin of 7, 8%, they need to take out the cost of manpower, the infrastructure cost, as well as the customer acquisition cost.

For us, the customer acquisition cost is also 0, and every other cost is practically negligible.

So that's the differentiator in our business model.

So we should surprise everybody on the upside.

We are kind of saying that it will double next year, but it should go bigger than that.

And so just the last bit, in the PPT, we have also mentioned that we do have visibility on a strong pipeline for both organic and inorganic expansion.

While organic I understand because you have had new tie-ups with NG and M&M and which can see traction in my view but on the inorganic side so I would like to get a little bit more clarity of what kind of opportunities or the size of outlets either by number or by absolute acquisition cost that you are looking for to do in the next 6 to 12 months.

So what has happened is that we do follow a mix of both of these and sometimes with the same OEs, the acquisition also kind of comes in.

So the Indore and Gopal, though was a new 1, it started off as an inorganic thing.

The Goa MG also happened by way of an inorganic thing where we took over the assets and the locations of the existing dealer partner.

What I can say is that we are right now focused on buying something at the right value.

We do not want to overpay on kind of acquisition because we don't want it to be dilutive of our ROC.

The growth is something which is with a lag.

I am not the happiest for the first quarter, but we believe that we are well on our way to kind of go beyond this past year.

And the pipeline, as I can say, is strong.

I am not in a position to share more numbers now, but I think every period you will find us doing something meaningful.

So when you said that you look at the right payback or IRR or ROC, what kind of payback do you generally for opt for in a range?

4 to 4 and a half years is what we look at.

And that's what we will be sticking to and not wanting to pay anything more.

Thank you so much sir for answering all queries and best wishes and look forward to your investor day sir.

A request to all the participants, please restrict to 2 questions per participant.

Next question is from Vasudev Banerjee from ICICI Securities.

So, first question for Surenvi, as last time we discussed that potential revenue from indoor Bhopal, MG outlets, full year will be what?

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Landmark Cars Ltd Q2 FY24 Earnings Concall