Here are the questions asked in Inderes analytics platform from Otto Pukk, the President and CEO of Incap Group regarding the Q1 results, and answer for these questions.
1. Indian factory and corona situation
The coronavirus pandemic situation did not affect our Q1 figures. Nevertheless, the pandemic still poses some risks to our operations especially in India, where new restrictions have been implemented and may need to be continued and extended to limit the spread of the virus. At the moment, our Indian production facilities continue to operate despite the lockdown in the state of Karnataka. We monitor the situation closely and follow the instructions provided by the local government.
The health and safety of our employees, suppliers and customers continue to be our priority. Therefore, Incap will vaccinate all employees in India that would like to be vaccinated, and the operation has already started in week 15.
2. Component availability
The EMS market demand has continued strong, but as the investments in component supply capacity are lagging this situation is affecting the component availability globally. We were able to manage the situation quite well in the first quarter and there were no major delivery delays impacting our customers. That said we have also had some orders pushed out due to the shortages. We continue to carefully monitor and manage the situation. We have also anticipated the situation and already increased our stocks where it has been possible. Overall Incap has a diverse customer portfolio and product mix. this makes us less vulnerable than a company only manufacturing one or a few products.
It is customary in the EMS market that the material price increases are transferred to customers.
3. M&A plans and valuation
We continue to look at M&A cases that are healthy business, represent a strong cultural fit and offer potential for geographical expansion. After the rights issue and subsequent loan repayment, our financial position is strong, which sets us up for our growth strategy and new investments in both organic and inorganic growth.
Valuation multiples seem to vary case by case in the market.
4. Existing vs new customers, China
In our 2020 financial statements release we said that we had begun the year with a strong order book which will support our growth targets. Orders from existing customers have increased, particularly in India and the ramp-up of the factory expansion has proceeded faster than planned. Deliveries have grown, which has had a positive impact in the first quarter.
Markets are active in all Incap’s production facilities in four countries. We are receiving many requests for quotations from new customers and negotiations are ongoing with them. Demand for electronics supports the activity. It is also visible in the requests for quotations that Incap has received that demand is shifting from China and other Asian markets.
5. Capacity at the factories
We constantly estimate the need to invest, and we have been able to quickly respond to capacity needs. Incap’s flexible operational model enables us to quickly react to changes in the market.
6. Orderbook size and predictability
We have better visibility in terms of Customer Forecasts and more longer-term orders, increasing demand for electronics. the need to ensure product availability and to mitigate risks thru longer planning cycles drive the longer visibility. However, we expect when the component availability issues are cleared that visibility will be shorter again.