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Analyst Meet / AGM
24-Oct-24
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Conference Call
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Schaeffler India
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Subsidiary KRSV to achieve break even by end of 2026
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Schaeffler India conducted a conference call on 24 October 2024 to discuss its financial results for the quarter ended September 2024. Harsha Kadam, MD&CEO of the company addressed the call:
Highlights:
The company has continued to receive many awards from customers and business partners in Q2FY25. It was recognized with five Awards from Toyota for zero defect products, Skoda, Volkswagen, ELING WG group, excellence in CSR, ESG leaderships and Institute of supply chain management etc.
The automotive industry production numbers have shown some sluggishness. Overall production declined 2.5% in Q3CY24. The passenger vehicles segment has shown de-growth of 0.7% in Q3CY24. The commercial vehicles production declined 16%. The tractor segment is showing an uptick with about a 3.2% growth in Q3CY24.
The two and three wheeler production registered a strong growth of 13.9% with the electric vehicles showing growth due to penetration and higher adoption rate.
Now indications are that the sluggishness in the passenger vehicle segment is likely to continue for some more time.
Business highlights
Sales revenue has remained flat in Q3CY24 on a qoq basis while increasing at double digit pace of 12.1% over a year ago.
Automotive segment has shown some sluggishness in demand, while the industrial segment has shown very strong traction coming primarily in the renewable energy, wind energy, railways, two wheelers, raw material sectors etc.
The company was able to deliver a sustained profitability performance with improved performance on the working capital side which helped to register a positive cash flow of Rs 100 crore with an EBITDA of Rs 382 crore.
On capex strategy, the company has consistently continued to invest every quarter and invest judiciously in the areas with growth opportunities visible and the company will continue to follow the strategy going forward.
The company has garnered a lot of new businesses in the automotive technologies segment.
In aftermarket business, the new products have begun to get good traction in the marketplace, at acceptance level. The company will continue its strategy to bring more products as the vehicles come back for servicing so portfolio expansion as a strategy remains strong.
The company has garnered some new businesses in industrial Solutions and bearings and it was a strong quarter in terms of creating a pipeline of business continuity which bodes well for the succeeding quarters
Financial highlights
Automotive technologies grew 8% over the preceding quarter and improved 10.7% over the same period last year.
Vehicle Life Solutions registered a negative 2.3% over the preceding quarter but posted 7% over a year ago.
Industrial Solutions registered a 5% growth over the preceding quarter and a 13% growth over the same period last year.
Exports business continues to remain at a lower level than expectations and it registered a 14.6% negative over the preceding quarter but it recorded 17% growth over a year ago.
For the nine months ended September 2024, automotive technologies grew 10.4%, vehicle lifetime Solutions 5.5%, bearings and Industrial Solutions at 15.2% and export business 7.5%.
The company expects to continue to register a robust free cash flow into the company.
The company will continue to focus on new business development which has always been imperative and the working capital management and cost management is a priority.
The exports saw the drop only in the Europe region in Q3CY24, while the company had put efforts on Asia, China and America to grow.
Aftermarket business brings in better margins and exports.
The company has witnessed decline in the EBITDA margin on account of the employee increments, while the margins were high last year on account of onetime incomes booked last year.
The company endeavors to continue to grow in double digits and focus is on being very agile and get more business opportunities
The company has a good balance between bearing portfolio and non-bearing portfolio at 60-40.
The company would focus on the distribution part of business which is a very important part of growth strategy to be in the double digit growth rate.
The company is seeing a strong demand both for the wind equipment manufacturers as well as for the gearbox manufacturers.
Capex
The company has invested Rs 207.6 crore in Q3CY2024. Capex as a percentage of sales is much higher at 8.5% when compared to last year 7%. The cumulative capex for 9MCY24 is at Rs 536 crore compared to the 410 crore spent last year.
The Hosur green field project is on track and the company will start to manufacture early next year producing products initially at a component level primarily for the transmission application. The investment for Hosur plant is around Rs 300 crore.
Going ahead, the company will step back a little bit and ensure that it realizes all the benefits of the capex.
KRSV Innovative Auto Solutions
KRSV Innovative Auto Solutions registered a pretty strong revenue growth to Rs 43.9 crore in Q3CY24 and Rs 103.8 crore in 9MCY24. The company sees the growth momentum picking up in this new venture. The company is yet to break even and there are clear action plans drawn up on expanding the reach in the marketplace and connecting with customers pan India.
The company has started to open up many more dark stores and hubs so as to enable the customers to access the products on the platform.
Over the last one year since the time of the acquisition the company has expanded to close to 12-13 new cities. The company is now building up the organization structure.
The company had planned to break even on earnings by the end of 2026.
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