Challenge has been company communication with Investors/Shareholder. In 2017 onwards, they abruptly stopped conf call, presentations, and the company is now a black box. Information on segments that they are working in only through AR, and since there is no mgmt interaction after Qtrly results, its very difficult to evaluate this stock.
Also my personal experience emailing the CS has not been good, with no response at all.
Nice overview of the Igarashi Motors Products, etc. Not sure of this was made by the company, but is on a creative co YouTube handle
Video of 2021, 29th AGM of Igarashi Motors India Ltd. held on 9th Aug 2021, 2:30pm.
AGM 2021 notes. There could be some errors.
Revenue mix in FY21 TAM- 68% (of this 80% ETC and rest EGR, WGA, VGT and CCV) , BLDC 5%, CAM and sub assemblies at 27%. FY20- TAM 63, CAM 32, BLDC 1%
Bosch is the leading customer- 50%. Continental is 17%, Borg Warner 13%, Crompton 6% (1% last yr), Interwai 5% Dellargo 3%
80% exports, 20% domestic. Expect it to be 67 -33 in next 3 years due to growth in domestic TAM and BLDC.
Igarashi raised stake to 75% with a clear long term strategic intent to build India business commensurate with new opportunities. Apart from integrated approach to business development for India operation, all sales were routed to Japan. The entire customer ownership and corporate ownership was taken over by Japan and hence sales were routed by Japan rather than the earlier sales office.
One-Igarashi Program: Launched for global integration of customer programming, design, R&D, procurement teams. Igarashi India has immensely benefited in the bundle buying opportunity. Thats why we have been able to stay upfront competitive with our customers and able to keep material cost down. We have also created footprint for global trade uncertainty. Increased focus by introducing Japanese Tier-1 companies whom we are working with right now and expect this to take 2 years for validation cycle. Support in R&D facility and customer related aspects.
Business segments
TAM penetration- Govt regulation BS6 has led to demand for actuator motors in powertrain, comfort and body systems. Our long presence in ETC segment made is a prefered choice for customers in expanding our products from ETC to EGR, WGA and VGT. Exports to China was 28% FY21 vs 22% FY20. This shows cost competitive advantage apart from quality and turn around time
One Igarashi program also extended our advantage on sourcing competitiveness. No direct competitors. Major players in the field are Johnson Electric and Moguchi (?inaudible) who are big brothers in the global forum
Margins on any new pdt will be in line with our steady state 16%
Market for 4W TAM- FY21 post COVID 17mn vehicle volume. Our actuator target market in this segment is close to 147mn (expected to go to 226mn by FY26), our market share with expanded portfolio is 12.5%. Plan to double revenue from actuator segment by FY26
we work with 8 customers and 25 programs globally.
Domestic TAM market expected to pick up in FY22- Launched 10 programs for top Tier 1 customers and few more launches in pipeline. Imports are main competition for domestic OEMs. Margins for domestic are in line with exports. Our global customers are also our customers in India as well. Apart from that Bosch, Dellorto, Pierberg, TEL, PVNA, UCAL and Fash are our customers.
4W size is 3mn and we have 31% market share. Expected to grow to 6mn by FY26. Targeting 50% share
2W OEM looking for changeover from carburettor system to Electronic throttle for 150cc segment. Sensing this opportunity we have also expanded out product portfolio for this. Market is 300k and we address 10% of the market. It is expected to grow with regulatory push to 2.7mn by FY26 and we expect a target of 50% market share by FY26. For 2W ETV there is no player right now, its more of import substitute for OEM so we will grab this. Already supplying to two Tier-1 OEMs
Market size today for induction motor ceiling fan today is 60mn, likely to grow to 71mn in FY24. BLDC market penetration is just 7% of 60mn ie 4mn in FY21. Expected to take leap and 25% penetration by FY24mn. Market size will be 18mn. Igarashi market share is 5% (of 4mn) with Crompton, expected to reach 20%. Volume that we are doing of 200k will go to 3.6mn, revenue from 27cr to 350cr by FY24.
BLDC motor is 1.5x more expensive than conventional induction motor with payback of 2 years from energy saving
30% market is addressed by unorganized.
Launched with Crompton. Last year 200k fans already populated on 3-4 model series and 12 variants. Working with 6 more customers- Havells, Usha, GM, Vguard, Sujata and Advance Fans for various BLDC projects. We are also working on mass adoption with EES for regulatory push. Margins are in line with normal DC motors, 10% PBT.
Developed hardware and firmware to achieve operation of BLDC fan with generic wall regulators on models available in the market. This has a huge potential because replacement cost is nothing. You only need to replace a induction motor fan with a wall regulator fan and you dont need remote for it. Expect to launch a product with a major market player in 2nd half of FY22. (What is this??)
Working on IoT- 2 projects already launched with Crompton, 2 in pipeline. 2 with Havells in pipeline.
Future launches in TEW and air coolers likely to be launched. Coolers this year, TEW next year.
Key players- Crompton, Atomberg, Havells Usha, Superfan in BLDC segment.
Competitors- Yash fans, atomberg, Superfan, Wonder fibromets, Tipco
Igarashi tech desk is also developing BLDC EV motors with drivers for e-2W and e-3W. Targeting to be component or sub-assembly supplier. Open to any contract manufacturing for controllers that might arise in the EV space. Developing our own e-2W and e-3W series between 3-10KW. We expect the design and validation to be complete in next 3 years
ESDM segment- Electronic system and design first supply has been approved by customer. Design and manufacturing of electronic products. This is mainly to meet our internal demand for BLDC fan motor controller electronics with capacity of 2.5mn. Working with Havells Orient V-guard Advance for supply of controllers. First supply is expected in current quarter. Phase 1 will be more focused to consumer electronic programs and Phase 2 for automotive EV controllers in next 3 years
Other points
Electronic parking break- Where are we in commercialization cycle? Common for both ICE and BEV technologyCurrently A sample evaluation is in progress. Commercial launch plan FY2023Market size expected 2.5mn in India, 30mn globally.Target customers- Mando, PVNA, HitachiMajor players- Johnson Electric, Mobuchi, CCL
CU is at 50% same as last year. So we can double sales in 3-4 years. Capex plans - dont see much except for maintenance and improvement/automation of lines. 40-50cr in next 3 years.
Margin used to be 19% during FY13-19. At that time we were charging customers for tech fee and toolings. We still see such opportunities. Last year margin was 14-14.5% but we see 16% on sustainable basis.
ROCE above 25% in next 3 years
Dividend can go up as situation improves
30% productivity improvement target
The AR for FY21 talks a lot about their innovation centre and various teams in place for research.
Hi everyone. Read the thread on Igarashi. thanks @pikrohit, for giving detailed notes of the AGM 2021:
Some questions that come to my mind are:
Why will Igarashi be able to increase market share in BLDC, which is currently 5% to 20%? How, because there are pioneers of BLDC-powered fans in India, like Versa drives and Atomberg who make own BLDCs? This becomes important, because BLDC is likely to be the main growth driver for the company in the face of terminal risk to their TAM business.
How much % of BLDC motors market is imported, as given the cost advantage, import substitution can be easier for Igarashi.
Whether Igarashi China, is actively involved in manufacturing of any type of EV Traction motors for the EVs there, since China has a mature EV market
If they claim to have fast growing segments like 2W - ETC, BS VI led growth in TAM and BLDC in Fans, ideally the mix towards Domestic should be much more than the 33% guided by FY24, as for the export sales we don’t know the destination of consignments and consequently the demand drivers for the export sales. So increasing domestic sales is more important. If we see the related party transaction disclosures, the exports have dropped from 80% in FY20 to 60% in H1 FY22.
Thanks,
Aman.
Disc - interested in the Company, but not holding.
It appears that Atomberg is really grabbing some large market share. They are a competitor and probably manufacture their own motors. Igarashi is supplying to Crompton and in talks with few other players as mentioned above. If they can get Havells then it can be good.
So far, igarashi consol numbers have been lacklusture. The thesis seems good on paper but is not reflecting in the numbers. I would wait for a pickup in numbers as its not easy to get info about the company.
Discl: Was invested earlier but exited. Still interested.
Sharing the note written for Advisory members about this stock sometime back.
Igarashi Motor India Limited is a Japanese MNC which owns 75% share in the company through another holding company. The company makes various actuators for automobiles and industry.
It is 75% owned by Igarashi Electric Works Limited, a small multi-national company (revenue US$ 300 million) based out of Japan. The Indian listed entity was sold by Igarashi in 2010 (after global financial crisis) to HBL Power Systems. Later it was acquired by Blackstone but within 2 years of acquiring, Blackstone sold it back to Igarashi, Japan at 2X valuation. In 2015, Igarashi bought back 53.84% and rest 21% was owned by P. Mukund, the erstwhile Managing Director of Igarashi, India. In 2019, Igarashi, Japan raised its stake to 75% when they bought back entire stake of Mr. Mukund at Rs. 238.70/-. So, effectively, the complete control of Igarashi India came back in hands of Japanese parent in October 2019, just before the onset of pandemic.
The company till 2019 was mainly a contract manufacturer and supplier for a sub category of Torque Actuator Motors (TAM) known as Electronic Throttle Control (ETC) or Electronic Throttle Valve (ETV). It is a low value critical item which helps in giving consistent output from engine irrespective of ambient temperature, altitude or payload. The business was mostly export oriented and only 20% revenue was derived from India. Due to myriad problems faced by Automotive sector, the company has done miserably over last few years. The chip shortage, delay in new program implementation by OEMs, commodity inflation, belt tightening by Tier 1 OEM vendors affected the company badly. But the automobile demand is unlike many other sector (like a hotel room or an airline seat) — It doesn’t disappear but gets delayed. So, hopefully, when supply situation normalizes, they will possibly start doing well.
But during this challenging period company developed many new electronic valve products in TAM segment, namely, EGR (Exhaust Gas Recirculation), WGA (Waste Gate Actuator), VGT (Variable Geometry Turbocharger), CCV (Coolant Control Valve) and few types of TAM for 2W segment. The uses of the electric motors are increasing in engine management for controlling emission and ensuring ride smoothness.
The other segment where the company is gradually bringing products to market after long cycle of testing and approval from Tier 1 suppliers and OEMs are in Comfort Actuator Motor (CAM) space. The small actuator motors work for seat adjustment, reclining, window shuttering, seat – belt alarm, HVAC management, tailgate opening / closing and similar rider comfort functionalities. The margin and revenue from these products are low now as full range is yet to be rolled out at scale. Also, the competition in this area is higher as criticality involved in these areas are low. But the company expects to increase its market share in both the above segments going ahead due to their large capacity and close association with Tier 1 suppliers like BOSCH (who buys 38% of total TAM and CAM motors made by Igarashi), Vitesco Technologies (16%), Inteva Products (10%), Borg Warner (13%), Dellorto (8%) and few others. Presently they utilise less than 45% capacity in both these segments. Peak utilization level is 80% and most capacities are fungible.
In 2021, they introduced Brushless DC Motors (BLDC) for ceiling fans. From 1st January 2023, energy rating for ceiling fans will be mandatory and BLDC motor reduces power consumption by more than 50% for fans compared to conventional induction motors. For higher end, heavier usage or fancy categories, increased cost is compensated in 2 years. They have already tied up with Crompton, Havells, Usha, V-Guard and few others. They already sold more than 7.5L fans over 2 years through Crompton and supply to others commenced recently. They are in advanced stage of discussion with Orient and Bajaj Electricals. These are imported from China and also made by few unorganized players. In BLDC motor segment, Atomberg makes their own BLDC motors and some other fan manufacturer may also start manufacturing it if the volume picks up. India sells almost 4 cr fans a year and at least 25% fans would be BLDC in next few years.
In other development, company is in last stage of development of two new categories, Electronic Power Brake Valve for 4W and complete Truck Opening and Closing Device (TOCD), which they expect in next 2 years.
The present financials, in our view, doesn’t reflect the full potential of the company and as the cycle turns, the margin will go back to minimum 15% level. It’s tough to reach the 25% + margin level of 2017 because in those years company sold high margin design and tooling for a few clients. Those opportunities are episodic and comes at peak of a cycle. When the cycle reaches its peak in next upturn, they may (or may not) reach that level. Our valuation is not basing on that.
They are also developing few products for EV segment but those are a long time away.
They route all their overseas sale through the parent company and pay 1.25% composite royalty on this sale. In return, they get complete technical, marketing and after sales support from the parent.
The company, in its recent AGM has said that they expect to reach minimum Rs. 1000 cr revenue latest by 2026 from present Rs. 551 crores and expect a margin of 17% and ROCE of 25%. They are having a net debt of around Rs. 40 cr.
Disclosure: The author is a SEBI Registered Investment Adviser (RIA). The stock has been recommended at a much lower price level to members of www.aveksatequity.com and author is also invested in the stock. Views may be biased. It is not an investment advice. Do your own due diligence if you plan to invest in this company.
Hi Aveek,
Very detailed and comprehensive note on Igarashi. Thanks.
I have also been following this company for the last 3-4 qtrs. Issue is that the company does not conduct any qtrly exchange with the investor community to share updates. So my only source of information is the quarterly results and annual reports and AGM. Have already dropped a few emails to the company requesting them to restart their old practise of having concalls for updates and management commentary, which they have acknowledged.
Anyways, coming to the last two quarter numbers they seem to hit the ~170crs topline number and barely managed to give a positive profit number. Now that the chips availability issue is mostly back to normalcy and the commodity prices stabilizing was expecting the company to give a much better performance and numbers for Q3 23. But think will have to wait a few more qrts for this to get translated.
What is your take / view after looking at the last couple of qtrs numbers?
Found a very detailed analysis of Igarashi Motors.
