As seen in the Structure of the company - both the company and holding company of the schaeffler family are debt ridden and there’s serious refinancing coming up as early as March 2024 and cost of debt has clearly shot up in Europe.
Schaeffler Is currently taking MORE Debt to buyout (complicated cash + stock merger) Vitesco & it seems to be for bailing out their holding company.
Schaeffler India has been actively doing other Roadshows too.
They did a factory visit on 7th DEC for Indian investors/ mutual funds/ analysts / brokerages.
This Really SHOCKED ME (I believe there’s a lot of secrecy around manufacturing processes in this industry)
Are Indian Investors so scatterbrained that they’re paying such crazy valuations to the Indian listed subsidiary? or am I really missing something special?
Whirlpool has announced they will trim their stake from 75% to 51% in Whirlpool India
Timken sold off 10% stake in Timken India.
I think a LOT of MNCs will follow this trend.
Results were flattish to slightly positive, but the share has shot up after the concall. Some of the positives to emerge were an uptick in exports, progress on the Hosur plant etc. But most importantly (and I am guessing here), the market is enthused by the creation of a new E-Mobility Division and the possibility of Vitesco “integration”. Of course, the management did not explicitly link the two, but one has to read between the lines.
Some highlights from the concall:
In Q1’2024 vis-à-vis Q4, we saw a more than 10 % rebound in exports
On Wind sector - Our export is not directly towards wind, we sell domestically to the wind producers, and they export it. Coming into Q1’2024, what we have seen is a very strong uptick compared to the Q1’2023. Within wind, we are beginning to see strong demand for gearbox that are getting exported out of the country as of now
Pricing in aftermarket - In aftermarket invariably to cover the inflationary increases, we do increase prices. All component manufacturers increase the price every year and the automotive aftermarkets and the industrial aftermarkets is the only sectors where we follow this rule to increase the prices every year unless it is a strategic approach not to increase the prices by the organization.
On Vitesco integration - Right now, as I’m speaking, we are evaluating the functional integration of Vitesco into the Schaeffler portfolio. However, the full integration of Vitesco within the Schaeffler India Limited listed entity would take some more time as we will have to do a thorough due diligence as well as do a lot of groundwork before we venture in that direction and as of now, I’m not in a position to reveal the time plan for this.
On Hosur plant - We expect by the end of this year the entire project to be completed.
A couple of sectors that we have seen strong demand coming up in the first quarter, one, obviously wind, we already talked about it, the second one is the two wheelers which we classify under the industrial division. We’ve also seen a strong demand coming in the power transmission sector, which is fundamentally the gearboxes as well as electric motors that are manufactured in the country.
Our localization percentage as of Q1 was at 77 % and last year it was at around 75 %.
Q2 and Q3 have registered lower production numbers for CV and the passenger vehicle production too seems to have slowed down and is expected to continue at a slow pace in the coming months as well
While the export business continues to remain lower than expectations but on a yoy basis at an annualized level it still remains decent
In terms of capex the company has invested Rs 206 crores for localization and enhancing the manufacturing base
The cumulative capex for 9 month period of 2024 is around Rs 550 crores which is higher than last year
Participants
Avendus SPARK
Equirus Securities
Nirmal Bang
Kotak Bank
LIC Mutual Fund
AM Investments
UTI AMC
Unique PMS
QnA
The homologation and validation process is done by customer and a number of vehicles are under testing currently with the e axle product of the company and the launch of these vehicles is expected in Q1 of CY 25
For exports the drop was witnessed only in European region and bearings and industrial solutions business in Europe have seen challenges
The export business continues to do well in South East Asia, China and America
The after market business and exports bring in much better margins than the rest of the business
The Greenfield plant in Hosur is on track and it will start production as per earlier plan. Earlier It will produce products for the transmission system and eventually new products will be added
The festival season in October and November sees better vehicle sales but this year that does not seem to be the case, the inventory level with dealers is as high as 80 days but even with better sales number that would mean liquidation of the inventory and might not lead to production figures at automobile companies picking up
The wind energy business, railways business, infrastructure division have done better during the quarter
The industrial automation and power transmission sector have not done as well as was expected
Bearings is about 60% of the business currently and non bearings are at 40% of the product mix
The efforts continue behind localization of products in India and with the new plant at Hosur this process will continue. Since the older plant cannot add any more machinery this will be done at the new plant in Hosur
A large part of wind equipment manufacturing happens in Europe and in spite of the wars that are continuing it seems the inventory has liquidated there and companies have found a way of executing the projects due to which demand from wind equipment and gearbox manufacturers continue to be quite good
Chinese competitors in the wind equipment space have started to come in but are currently quite small
Koovers was a strategic acquisition in the ecommerce space, which is quite different from the traditional business that the company has been doing. It being a startup it needs to be run differently and focus is on scaling up the operations and expanding the footprint of that business. When it was acquired it was present in two cities and now within one year it is now present in 12-13 cities
The investments in the new plant at Hosur are to the tune of Rs 300 crores
This is about the German parent, but a very interesting development, nevertheless. For the first time probably, Schaeffler will showcase a hybrid scooter that it has developed in partnership with a scooter manufacturer.
Hi I’ve just started tracking this space and wanted to get some inputs from the more experienced people out here. I compared the 3 parent companies and SKF seems to be by far the largest and most profitable (vs Schaeffler and Timken). However performance within India has favoured the other 2. Schaeffler globally infact is suffering losses while India business seems to be thriving. I am not able to fully reconcile this difference and also it creates a worry that eventually India might replicate global concerns?
Schaeffler India showcases Advanced Mobility Solutions at Bharat Mobility Global Expo 2025
Note:
Visitors can experience the company’s advanced solutions and engage with its
experts at Hall-1, Booth: E5, Yashobhoomi, Dwarka, New Delhi, from 18th to 21st
January 2025.
