Market Cap of Schaeffler India - 48000cr
Value of Schaeffler’s AG’s Stake - 35500cr
Market Cap of Schaeffler AG - 31200cr (€3.47B)
P/S - 6.7 vs 0.21
P/E - 52 vs 6.15
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.
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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:
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In Q1’2024 vis-à-vis Q4, we saw a more than 10 % rebound in exports
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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
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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.
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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.
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On Hosur plant - We expect by the end of this year the entire project to be completed.
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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.
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Our localization percentage as of Q1 was at 77 % and last year it was at around 75 %.
(Disc.: Invested)
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