Also Just to highlight
Have checked promoters background from various Unlisted small players in Precision engineering background who runs 1-2 furnaces in Gujarat saurahstra
As per them the promoters are as clean as they can be
Disclaimer - Invested position size above
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Just to make sure, you are talking about promoters of Galaxy or SKP?
Both SKP and Galaxy bearings
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Sir, your views on Q3 results Fy24?
- Interesting insights from galaxy bearing founder stating that expansions plan, key customer , revenue bifurcation
- Link :https://youtu.be/ygyf4W54XCU?si=HqRRh6ihyK-ztMuq
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Quaterly results not upto the mark. Quaterly result of other listed peers were too under pressure for Q4, due to low demand in exports. Any updates are welcome.
Galaxy announced a fair set of numbers today and seems to be making significant progress on the CAPEX front (CWIP up to 26 Cr for March ending, out of their assumed CAPEX of Rs. 35 Cr).
Providing a summary for everyone on this thread (and myself to refer back to):
Background: company was founded by Mr. Vinod Kangsara (passed away in 2019) - current main promoters are his wife (Indiraben Kangsara) and daughters (Shetal Devang Gor and Tuhina Bera) - who now seem to be NRIs and arenât actively involved in the business operations. CEO is Mr. Nitin Santoki - who seems to be Rajkot based with a strong presence in the industry (no information on his shareholding). It seems that Mr. Nitinâs family has other companies in associated fields of the industry (common in auto ancillary businesses, wouldnât consider it to be a corporate governance issue - refer to the link for Adico group below).
Catalyst/Trigger: Change in management post 2019, might have triggered a new approach to the business(speculatio). Dr. Devang Gor who is a Chair at the Department of Radiology in a leading healthcare network in Pennsylvania, USA was appointed on the board in August 2019 after completing an Exec MBA from Temple University (potentially to groom him for this role?).
Key business trigger seems to be a new product development as mentioned by Mr. Nitin in his interview (https://www.youtube.com/watch?v=ygyf4W54XCU&t=1s) - where they are manufacturing roller bearings with a hub casting attached. This saves their customer the time, effort and the cost of otherwise attaching the hub casting separately to the product.
It seems another competitor offering a similar product is Orbit Bearings (also Rajkot based), who has grown significantly by being the first taper roller bearing company to manufacture these bearings with a hub casting (Cylindrical Roller Bearings | Truck Axle Bearings | Taper Roller Bearings | Truck Hub Bearings | Orbit Bearings India Pvt. Ltd.). Orbit Bearings has scaled significantly and did a revenue of Rs. 624 Cr in 2022 with a PBT of Rs. 151 Cr. Orbit has a capacity of 10 Million pcs per annum, and itâs interesting to note that Galaxy has decided to set up a plant which takes their total production capacity to 9.5 Million per annum (in Phase 1)! Other smaller competitors also seem to be equally profitable (Turbo Bearings does a Sale of 99 Cr with a PBT of 27 Cr).
Has anyone studied the bearing industry in greater detail to check how they compare with SKF, Timken, Schaeffler?
https://www.adicogroup.com/international/group-of-companies.html
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Few info based on CEOâs 2024 YT video during Delhi Expo and 33rd AGM video:
- Exports share ~75%
- Clientele includes Tier 1 / 2 suppliers to OEM as well as distribution players - for their private labels; OEM / Tier 1&2 (~25%) and After market private labels (~75%) are focus segments
- CV esp. heavy vehicles come up as prominent segments
- Auto is 60%, Agri 15% and Industrial 15% (based on AGM inputs)
- Focus geographies - Germany, Italy, USA, Turkey and UAE
Additional info from Timken concall - exports had one of the worst quarters with 15% share vs ~30% share during good times. Heavy vehicle segments really struggling with exceptions being rail road and South American market. Even India / domestic market had railways and industrial segment driving growth.
While MNCs like SKF, Timken along with Rolex had very healthy Q4FY24 with topline and margin expansion leading to serious re-rating - Galaxyâs flattish Q4FY24 results (YoY basis) DO NOT seem that bad in light of exports and heavy vehicle headwinds. Sharp QoQ uptick, high inventory levels (might be attributable to Red Sea in case they have exposure to related geographies) and upcoming capex (phase 1 potential commissioning in Jun / Jul) suggests that upcoming quarters may be worth watching out for.
Disc: Have exposure with recent purchases within last 30 days
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Further deep dive into Orbit Bearingâs numbers: Managerial Remuneration is 22 Cr which means weâre talking about an opportunity in a 27% PBT Industry.
They did a gross margin of 42% (FY23) and a pre tax RoCE of 20.30% (FY23) and 26.20% (FY22) - post managerial remuneration.
Cash Conversion Cycle seems to be 298 days for FY23 - which is whatâs dragging RoCEs down despite such high margins.
Property Plant and Equipment was only 89 Cr in FY23 which means they have fixed asset turns of over 7x.
This is similar to Galaxyâs numbers where on a gross block of 20 Cr they do a revenue of 127 Cr.
Not to get ahead of ourselves but assuming a Fixed Asset Turn of even 5x (assuming land is more expensive now) - they should be able to add another 175 Cr of business with Phase 1 of this CAPEX. If we go by the capacity theyâve added, it should take them closer to Orbit Bearingâs numbers (who has a capacity of 10 Million).
Disclosure: invested in my own and other family accounts, views may be biased
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