CE Info Systems Ltd Q2 FY2024 Concall Summary

Key Takeaways

• H1 FY24 delivered strong 27.7% revenue growth, with PAT up 31.2% YoY; management is confident in the trajectory and excited for H2, especially Q4.
• IoT-led business is scaling and improving structurally: margins reached 8.2% in Q2, up from 4% in Q4 FY23, driven by product mix and a shift toward subscription income.
• Map-led business margins hit 56.4%, benefiting from company-wide operating leverage; management prefers a year-to-date view and sees growth above mid-teens for years ahead.
• The consumer app crossed 1 crore Android downloads, trending #1 on iOS, opening a B2C monetization path via gadgets, subscriptions, and travel commerce, though material revenue will take time to build.
• What to watch next quarter: whether the H2 excitement converts into the order book needed to hit the 40% annual growth guidance, the pace of IoT margin expansion, and any further defense revenue.

Revenue Growth & Segment Performance

• H1 growth was broad-based: revenue rose 27.7% YoY, EBITDA grew 28.9%, and PAT grew 31.2%, with EBITDA margins improving 14 bps to 43.2% as operating leverage kicked in across all business units.
• Map-led business margins expanded steadily: from 50.2% in Q4 FY23 to 54% in Q1 FY24 to 56.4% in Q2 FY24, driven by operating leverage across the whole company, not just one segment.
• C&E segment grew 32% YoY on a year-to-date basis, though quarterly revenue is lumpy depending on contract type; map data, API, and SaaS contracts around BigTech and large Ecommerce tend to cause that lumpiness.
• Automotive OEM volume is growing faster than the industry, reflecting a rising attach rate of MapmyIndia solutions across cars, two-wheelers, and commercial vehicles.
• Land-and-expand is the core go-to-market motion: the company enters with 1-2 use cases out of 10-12, then upsells or scales usage; a State Road Transport Corp started with one use case and expanded, and a FinTech conglomerate using consumer maps now also uses the platform for enterprise territory planning.
• Receivables rose because September billing was heavy, but aging remains within the normal 60-75 day range and nothing is overdue.

Rohan Verma: "We achieved revenue this quarter, a few of them. And so that is an important market segment for us, we want to and we will do more. This is the beginning."

IoT Business: Scaling & Margin Trajectory

• IoT-led margins improved for the third straight quarter: from 4% in Q4 FY23 to 6.3% in Q1 FY24 to 8.2% in Q2 FY24, a combination of product mix choices, operational efficiency, and increasing SaaS income from positioning devices with subscription rather than selling hardware alone.
• The business is in an early growth phase and management still sees growth potential in the margin structure beyond revenue growth, though no specific timeframe or threshold for operating leverage was given.
• New OEM wins are expanding the IoT footprint: the first four-wheeler OEM signed for line-fit IoT supply, a bus OEM took a connected vehicle software platform, and an OEM customer adopted a shared mobility software platform as OEMs look to offer Mobility-as-a-Service.
• Enterprise IoT adoption is broadening: a large steel company signed for video telematics for mine vehicles, and large Ecommerce and cement companies are using IoT-led logistics optimization.

Rohan Verma: "I don't want to say till what time, till what level on what range, but obviously we still see growth potential in the margin structure besides growth in revenue for this Company, it's in early growth phase."

Competitive Moat & Market Position

• Management argues the moat is built on two decades of continuous investment: hundreds of companies have tried to make maps over 20 years, but the combination of data conversion, real-time updating, and deep tech to solve customer problems creates a barrier that very few have survived.
• On map data, the company sees itself as the only full-spectrum player: if there are others, they offer only very small slivers of the full offering.
• The Ola question was deflected: an analyst noted Ola is building its own maps and contributes an estimated 3-5% of revenue. Management said Ola continues to be a customer, called the contribution "lower than 1%," and declined to address Ola directly, instead pivoting to the general moat argument and saying they are watching closely whether such experiments become competition or are ultimately forgotten.
• Management declined to split A&M and C&E revenue under the map-led business or to confirm a quarterly run rate for C&E, leaving the mix opaque to investors.

Rakesh Verma: "I would not like to address Ola directly, it's not fair on my part. What I would like to address is anybody."

New Initiatives: Consumer App, Drones & Defense

• The Mappls app crossed 1 crore downloads on Android and 0.1 crore on iOS, trending as the #1 app across all categories on iOS and the #1 Maps app on Android; monetization via gadgets and subscriptions is underway.
• B2C monetization will take time to build: plans include upselling gadgets, products and subscriptions via the app, advertising and hyperlocal commerce, and integration with Kogo Tech Labs, a travel commerce platform where members pay a subscription for best prices on travel bookings.
• Defense revenue was achieved for the first time this quarter, marking the beginning of that market segment; management wants to and will do more, but gave no timeline.
• Drones represent a large multi-year opportunity: the company is supplying drones and providing drone-based solutions as a full package of Map, IoT and drone platform for urban development, tourism, real estate, manufacturing, and mining. Management declined to specify whether it will manufacture drones or only provide services.
• Calibrated investments will continue in 3D/4D Digital Maps Twin, automotive software, enterprise markets, the consumer app, and drones; the core business generates cash to fund innovation for the medium and longer term.

Margins & Investments

• H1 EBITDA margin improved 14 bps to 43.2% as operating leverage kicked in across all business units; the 40% margin guidance for FY24 is maintained.
• Investments in H2 could bring margins down, but operational efficiency also helps; management is balancing growth investment with margin discipline.
• Technical services outsource expenses declined this quarter, which varies depending on revenue project work and product investments; if in-house resources are insufficient, work is outsourced, and this quarter that kind of revenue might have been lower.
• A provision for inventory obsolescence of ₹2.1 crores was reflected in cash flow, not ₹21 crores as an analyst initially calculated; management corrected the figure after checking.

Guidance & Commitments

Key Metrics