Key highlights from Schaeffler India Ltd (SCHAEFFLER) Q3 FY23 Earnings Concall
Management Update:
- [00:04:30] SCHAEFFLER said the cement sector saw strong traction in 3Q23, likely due to the government’s infrastructure push. Steel also saw a revival in 3Q23, while mining began to see stronger traction as well.
Q&A Highlights:
- [00:28:47] Ankur Shah of HDFC Life asked about the outlook on exports over the next few quarters, and how is the company benefiting from the relocation of manufacturing into India. Satish Patel CFO said that SCHAEFFLER has a strategy for exports that focuses on the localization of products to countries with strong technology and cost competitiveness. Schaeffler has been successful in increasing its exports despite the global economic downturn.
- [00:32:18] Ankur Shah with HDFC Life enquired about the region-wise exports. Harsha Kadam MD said that SCHAEFFLER do not have disproportionate ratios between the regions. The company added that its exports are fairly balanced, with no single region significantly outperforming the other.
- [00:33:04] Ankur Shah from HDFC Life asked about the capex number for CY23. Harsha Kadam MD said the company has invested about INR500 crores in 2022 and plan to invest a total of INR1,500 crores in the next 3 years. The investments will be for relocations, capacity expansion for exports and domestic business growth, particularly industrial business.
- [00:34:51] Ankur Shah from HDFC Life asked about some insights on the reach and new products in the auto aftermarket, and the growth expected there after a strong CY21. Harsha Kadam MD answered that SCHAEFFLER is launching new products such as batteries, wiper blades, shock absorbers and dampers to keep up with the transition from BS4 to BS6, and extending its reach to all across India. SCHAEFFLER believes automotive aftermarket is an area where it can do more.
- [00:41:16] Vimal Gohil at Alchemy Capital asked if the industrial sector’s flattish performance over the last 3 quarters can be attributed to wind, and when is wind expected to pick up. Harsha Kadam MD replied that wind accounted for 10-12% of the company’s revenue in 1H23, but demand dropped drastically in 2H due to economic sanctions imposed on Europe. It remains to be seen how the situation changes in the future.
- [00:44:46] Vimal Gohil of Alchemy Capital asked about the progress of commissioning the Tamil Nadu plant, that was signed in 2021 and is expected to make futuristic automotive products. Harsha Kadam MD said that the company recently got the final allotment of land. SCHAEFFLER have already started work on the project and expect to have it completed by the end of next year. Investments have already been made and more details will be shared once the plant is operational.
- [00:49:08] Mukesh Saraf from Avendus Spark asked about the localization levels the company is at currently and the target. Harsha Kadam MD replied that SCHAEFFLER is developing a customer initiative and localization is on the cards, but it won’t happen this year.
- [00:50:30] Sonal Gupta with HSBC Mutual Fund enquired that given the FX volatility, if there will be FX gains or losses in other operating income or expenses. Harsha Kadam MD answered the company has very little negative adverse impact due to FX during the year as it mainly uses INR currency, and have a natural hedge with exports. SCHAEFFLER also have a structured hedging policy which helps mitigate volatility.
- [00:55:05] Mahesh Bendre at LIC Mutual enquired about the plans of INR500 crores per year for next 3 years. Harsha Kadam MD said that SCHAEFFLER is focusing its capex on two new plants near Hosur and Savli, as well as expansions in its existing plants in Talegaon and Maneja.
- [00:56:12] Mahesh Bendre at LIC Mutual also asked about the current capacity utilization across factories in India. Harsha Kadam MD replied that Maneja plant utilization is 85-90% while automotive plants utilization is 75-80%.