Popular Vehicles and Services Limited — Investor Meet, 22-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

1. **Financial Performance:** Popular Vehicles & Services reported a Q2 revenue of INR 1,500 crores, demonstrating a 7.3% decline YoY. New vehicle sales volumes fell by 8.7% to 12,890 units, as declining average selling prices (ASP) impacted revenues. The EBITDA was INR 59 crores, down 35% YoY, resulting in an EBITDA margin of 3.9%. Net profit plummeted 76% to INR 7.6 crores, with a margin of 0.5%. For H1 FY25, total income remained flat at INR 2,800 crores, with a net profit of INR 13 crores, a 67.5% decline YoY.

2. **Future Outlook and Growth Drivers:** Management emphasized a cautious outlook, projecting overall revenue growth of 5-6% for FY25. The focus remains on expanding outside Kerala where the contribution has reduced to 61%. They are optimistic about premium vehicle sales, especially with expected launches like the new Dzire and Honda Amaze by year-end, anticipating recovery in volumes.

3. **Order Book and Operational Updates:** The footfall initially surged but led to mixed conversion rates, with inquiries up 26% for Arena and nearly 50% for Nexa. Challenges in the small car market persist, but luxury segments, particularly Jaguar Land Rover, grew by 40% in H1. Strategic expansions in Maharashtra and ongoing service improvements are expected to enhance revenues.

4. **Analyst Q&A Insights (Detailed):**

- **Revenue and Profitability:** Analysts expressed concern over the declining profitability. Management noted they are adjusting discounts and controlling inventory to maintain margins.

- **Market Position and Competitive Landscape:** Questions revolved around competitor dynamics and management reiterated their focus on established OEMs like Maruti and Honda, emphasizing opportunities in the premium car market.

- **Operational Challenges or Risks:** Analysts queried about supply chain challenges, particularly for JLR, to which management acknowledged anticipated normalizations in Q4.

- **Capex and Capital Allocation:** There is a rationalization of manpower and overhead costs, although management confirmed a cautious approach to New showroom openings amid prevailing market conditions.

- **Strategic Priorities and Long-Term Vision:** Despite current challenges, management reassured long-term growth targets remain unchanged, with a 15-20% growth plan for their service business.

5. **Market or Regulatory Updates:** Operating under steady conditions despite inventory tightness from OEMs, particularly Maruti. Plans are in place to reduce inventory levels by the end of December.

6. **Strategic Focus Areas:** The emphasis is on premiumization and network expansion, balancing organic growth with potential acquisitions amidst a cautious market environment.

7. **Investor Insight:** Given the recent financial performance, concerns over profitability, and moderate growth expectations, the company appears to present a ‘hold’ position. Increasing efficiency in operations and enhanced service revenue streams may provide potential upward adjustments, albeit risks abound in the current market landscape.