Key highlights from Schaeffler India Ltd (SCHAEFFLER) Q4 CY21 Earnings Concall
Management Update:
- One of the milestone that the company crossed during the year was the signing of the memorandum of understanding with the government of Tamil Nadu for its new project plant expansion at Hosur.
- In the automotive aftermarket and industrial the company reported strong double-digit growth when compared to the same period last year. However, the exports had a phenomenal growth with QonQ growth of 61.6% and YoY growth of 70%.
Q&A Highlights:
- Vimal Gohil from Union AMC asked about the drivers for very strong gross margins. Satish Patel CFO said that for margins, there were two contributors. Firstly, improved mix; better performance of revenue in exports and significant good performance in aftermarket and distribution businesses. And second was the pooled realization of quarter of the countermeasures in 4Q21.
- Vimal Gohil from Union AMC also enquired about the opex run rate of more than INR200 crores for 4Q21 which increased from about INR170 crores two quarters back. Harsha Kadam CEO said that some of the expense are in the outside services area where the company had 13 services actualized in the last quarter. There are no specific reasons relating to increase in the expenses.
- Priya Ranjan from HDFC Mutual Fund asked about the broader mix what was the contribution from four wheelers, trucks and two-wheeler side in the current fiscal year ’21. Harsha Kadam CEO said the company takes its automotive business into engine business, transmission business in those sort of segments. For two wheeler, it’s about 8% to 9% of the total business. And industrial within two-wheeler is double of that, 16-18%.
- Priya Ranjan from HDFC Mutual Fund also asked about the export growth of 70% and if it’s sustainable going forward. Harsha Kadam CEO said the company’s strategy has been clear right from the beginning of making a lot of investments coming into India only for export, primarily coming on the back of the cost competitiveness that is in India, and also the knowledge and intellectual capabilities that are there. Next 5 years, certainly, the company is going to continue to make more investments, bring more products and products are getting shifted from European plants to Indian plants and that is going to continue.
- Sonal Gupta from L&T Mutual Fund asked about the CNG shift, if it will have any negative or positive impact on the company’s business. Harsha Kadam CEO replied that the company does not see any negative effects for the products that it makes, which go into these applications. There could be some customization require in some of the products, which will be addressed as they come up.
- Mukesh Saraf from Spark Capital asked about the outlook for the railway segment. Harsha Kadam CEO replied that in Q4 of 2021, some tenders did come up. The company saw almost a 9% growth in the railway sector compared to 3Q21. But the company does have some gaps in the product portfolio. And currently, SCHAEFFLER’s products have very long homologation lead times. However, the railway business will start to play a bigger role in the entire realm of things.
- Shyam Sundar from Sundaram Mutual Fund asked if the export business portfolio would become INR1,000 crores, INR1,200 crores kind of an annual portfolio pre say. Satish Patel CFO said that as far as exports the company would focus on investing for the products, which are export driven and actually required to be focused for the exports. So the capex goes definitely for exports. But equal focus for capex is also for the domestic requirements.