Frontier Springs - has departed, whats the next destination?

[Niraj_Punjkaran]

First Concall by the company…My Notes (Invested and biased)

Air Spgs - Key Product

Used in passenger, metro coaches, Loco
Last yr IR demand was 3k coaches, CFY 5k, NFY onwards 8k per yr
TAM from NFY INR 600-800 Cr,
Only mfr in the country (03 current suppliers to IR, new entrant will take 2.5-3 yr to get RDSO approval)
Competitive Edge : Tech collaboration with conti with NIL rejection rate (others alligned with Chinese, with relatively lower quality), more than 70% sourcing is indigenous and hence qualifies for 'Make in India"

Earnings Projection :

CFY : 150-160 cr (up from 100cr)
Nxt yr : 200 cr
500 cr by 2027

Segment Rev :

CFY -Air springs 20 cr, Coil Springs-60Cr, Forging 70 cr
Diversification from Railway Biz
Entering def due to better margins
New defence order likely from BEML
Nxt area will be Tractors

Capex:

Total capex of 10-12 cr from int accurals
5 cr for air springs, bal for 6T hammer (forging)
Company to remain debt free
No further capex reqd to scale to 500 cr topline

Cap Utilisation:

Coil springs 70%, forging 50-60%, Air spgs- just started

Air spg capacity: Current 120 coach set per month ( 4 spg per coach= 480 spgs per month), being enhance to 800 spgs per month (capex - 5 cr), rev potn of 12 cr per month (144 cr potn per yr). This vertical started recently, will contribute 15-20 cr in CFY, VB coach per has 4 air spgs + 16 Coil spgs

Forging Outlook:

Expecting significant incr in forging (key area for diversification from railway biz)
Adding 6 T hammer
6T Hammer - trial prodn in Jan 24, comm prodn in NFY Q1
Rev profile : Currently 50-50 split for wagon:coaches, in future 70: 30 for rail: def
Significant growth targetted through forging in future

Mkt Share:

Dominant posn in mkt for both Air and Coil Sp
Can bid only upto 20% for air spgs, this is a limiting condn, likely to over come this nxt yr under push for ‘Make in India’, Bal 80% with other mfrs
FSL is 3rd or 4th mfr approved by RDSO

Replacement Mkt:

Coach/ wgn life 22-23yr
Spg gaurantee for 5 yrs, need replacement after that
Spgs are fungible across various mfrs
3 open bidding cycles/contracts thru life cycles

Quality:

Rejection Rate - NIL for air spgs (condn for RDSO apprvl)
1% for Coil spgs

Order Book : Current 69 cr done, bal 80 cr in CFY, continously receive orders from all wgn and coach mfrs. Will do 200 Cr NFY

Margins expectation (consolidated basis):

15% in CFY, NFY tgt 0f 15-18%
Coils -14-15%
Forging - 12-14%
Air Spgs - 22-23%

Misc:

Per wagon Rs 50K loading, pricing power exists, high demand from wgn mnfrs
Exports happening indirectly thru bombardier/siemens/Alstom Metro sales

Pl do supplement for better understanding

[ganesh_bastwadkar]

To understand the management plan to execute the growth of 50% to 60% higher compared to previuos year and almost doubling the revenue in next year up to Rs200 cr and 5 times revenue by FY 2027, one has to listen the concall land the Question and answers session.

The management sounds confident.

[Niraj_Punjkaran]

PRESS AND MEDIA RELEASE
Kanpur, January 06, 2024
FRONTIER SPRINGS LIMITED AWARDED & 52.20 CRORE ORDER FOR AIR
SPRINGS SUPPLY
Frontier Springs Limited, a leader in the manufacturing and supply of Coil Springs to
Indian Railways for more than 40 years, is thrilled to announce the **award of a significant **
**contract valued at approximately * 52.20 crores. This order, a milestone in the **
company’s history, involves the supply of 894 sets of air springs.
Commenting on the order win, Kapil Bhatia, Managing Director, said:
The **new plant set up of Air Springs in collaboration with Contitech Germany for which the **
trails were under way got If’s approval last month; received major orders of this scale
yesterday and it certainly paves the way for more in the future. Our team is fully prepared
and confident in delivering these air springs. We are optimistic and anticipate that orders
will keep coming our way. **We are scheduled to supply quantities on a monthly basis, **
aiming to complete the order by the end of this calendar year."
This order is a significant step in Frontier Springs Limited’s journey towards becoming a
prominent player in the supply of Air Springs to Indian railways. It strengthens our position in
the market as a reliable and quality-driven supplier.

1466dab2-598c-424c-9909-703bbdc25e4e.pdf (bseindia.com)

If you heard the concall, the mgt was reluctant to give details on Order wins and Order Book…i see this as another positive…this order is in addition to the mgt picture painted in the concall (20 cr for air spgs in CFY)…so would it be fair to assume they will certainly meet their guidance for the CFY and NFY?

Comments invited pl.

Disc- invested and biased.

[rajpanda]

Decent set of nos. with even greater update. Mgmt. is still optimistic about achieving it’s FY24 target of 150 cr. revenue.

Recent budget had declared conversion of 40k conventional rail bogies to ‘Vande Bharat’ standards. This produces a substantial opportunity for Frontier.

6k ton hammer in forging division will start contributing financially Q225 onwards.

Disc: Invested. No transaction last month.