Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Schaeffler India Ltd (BOM:505790, Financial) received multiple awards for customer centricity and CSR initiatives, including recognition from TAFE and John Deere.
- The company reported a 9.2% year-on-year growth in revenue for Q1 2024, reaching INR 1,849 crores.
- EBITDA margin improved to 18.3% in Q1 2024, up from 17.9% in the preceding quarter.
- The company has successfully restructured its divisions to better align with emerging market trends, including the creation of an e-mobility division.
- Schaeffler India Ltd (BOM:505790) continues to invest in localization and capacity expansion, with a CapEx of INR 173 crores in Q1 2024.
Negative Points
- Free cash flow was negative at INR 25.6 crores in Q1 2024, compared to INR 177 crores in Q4 2023.
- Export revenue saw a decline of INR 20 crores year-on-year due to sluggish demand from Western and Asian markets.
- The tractor segment showed a 15% decline in Q1 2024 compared to the same period last year.
- Working capital increased to INR 1,352 crores, which may indicate higher inventory levels.
- The company faces challenges in maintaining consistent performance in the commercial vehicles sector, which has been muted.
Q & A Highlights
Q: Could you give some more color on how you see the ramp-up in exports going ahead?
A: We saw a more than 10% rebound in Q1 2024 compared to Q4 2023, driven by all regions. Europe has optimized its stock levels and started placing orders again. Additionally, efforts to acquire markets in Asia Pacific have fared well. The order book looks promising, and we plan to maintain this average through the year. (Hardevi Vazirani, CFO)
Q: Can you give some sense on the timeline for the e-axle business?
A: The e-axle project is progressing well and according to the committed timelines. Phased investments are on track, and we are starting to implement localization strategies. However, more details on the project cannot be shared at this time. (Harsha Kadam, CEO)
Q: What is the share of wind as a portion of overall revenues, and can we reach back to CY '22 levels in CY '24?
A: The domestic demand for wind equipment remains stable, while export demand, which constitutes 80-85% of the business, has seen a strong uptick, almost 70% growth in Q1 2024 compared to Q1 2023. The demand for gearboxes has particularly increased. (Harsha Kadam, CEO)
Q: Have there been any price cuts in bearing pricing in the past year due to stabilized commodity inflation?
A: Pricing is linked to commodity price movements. If prices go up, we try to recover costs from customers, and if they go down, we pass on the benefits. This applies to both automotive and industrial sectors. In the aftermarket, prices are generally increased annually to cover inflationary costs. (Harsha Kadam, CEO)
Q: What is the impact of the Vitesco acquisition on Schaeffler India?
A: Vitesco's acquisition is strategic for Schaeffler's venture into electric vehicle technology. In India, Vitesco operates as a private limited company. We are evaluating the functional integration of Vitesco into Schaeffler India, but full integration into the listed entity will take time. (Harsha Kadam, CEO)
Q: How is the pricing scenario in the railway segment with new wins?
A: The privatization of wagon manufacturing has led to fewer tenders and more technological partnerships. This allows us to offer better-value solutions. The demand for better-value products is increasing with modernization, positioning us strongly in the railway sector. (Harsha Kadam, CEO)
Q: Among the new products planned, which ones have the most significant market impact?
A: We are investing in both IC engine and electric vehicle technologies. We continue to upgrade existing products to meet new regulatory norms and pursue new business wins in both sectors. On the industrial side, infrastructure growth is driving demand for our products. (Harsha Kadam, CEO)
Q: When will the CapEx of INR1,500 crores over the next three years start reflecting in sales?
A: The CapEx is already partially reflected in our margins due to localization efforts. Investments are not only in capacity but also in backward integration and new plant setups. This helps sustain margins despite inflationary pressures. (Hardevi Vazirani, CFO)
Q: What is the progress on the Hosur plant?
A: The first hall construction is underway, and we are on track. New machines will be installed, and some will be moved from existing locations. We expect to start production next year, with the entire project completed by the end of this year. (Harsha Kadam, CEO)
Q: What efforts were made to increase exports in Asia Pacific?
A: Discussions with Asia Pacific management and efforts by industrial division colleagues in those countries have increased the order book. Southeast Asia imports products from us as they do not have local production facilities. This is a sustainable source of exports. (Hardevi Vazirani, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
