About
40+ years old manufacturing company that makes precision engineering components for automobile and non-auto industries.
In automobiles: Serves almost all major OEMs
In non-auto: Serves defense and aerospace industry - working on entering electronic sub-systems
Promotor: Mr. Sekhar Vasan - IIT / IIM Alumni (read here) CEO: Mr. B. R. Preetham (has always been here - LinkedIn)
What’s interesting about Sansera
Stickiness of customers: They have been working with almost all major OEMs. Interestingly these relationships last quite long.
a) In 2W segment: Over 18 years of relationships with leading 2W players such as Bajaj Auto Limited, Honda Motorcycle, and Yamaha Motor India.
b) With Maruti Suzuki India Limited for 30+ years, and with Fiat Chrysler Automobiles for 10+ years
Largest domestic supplier of connecting rods: Has a market share of 2% to 3% for connecting rods for light vehicles (PVs dominantly) and CVs globally.
Strategic Investments and Capex: Company has been doing significant capex. Also, exploring opportunities in electronic systems and autonomous driving sub-systems.
a) Investment in MMRFIC Tech Pvt Ltd. This company is being by ex-Texas Instruments engineers. This company seems to be involved in making electronic subsystems used in defense/telecom/security. (source: employee profile)
b) Company has setup a new facility for aerospace and defense. This should start showing results from FY24. Management expects a CAGR growth of about 25% to 30% in aerospace for the next three years. This facility was built much before the time management initially quoted
Client Concentration: Top 5 customers used to contribute over 50% to its topline during 1HFY22. However, the company has been diversifying this and it has fallen from over 70% in the last 7-8 years.
Accounting Red Flags: I haven’t checked. I liked the management and betting on my instincts for their honesty so far
Order book: Rs. 16.9 billion as on 30th June 2023 v/s 13.3 billion as on 31st March 2023
Cx Stickiness: Received Platinum award from Raytheon Group which is the second highest award in their group (imo, genuinely seems like a difficult to get award)
Guidances:
Targeting to grow 2x than industry - 20% growth, 20% EBITDA, 20 ROCE
Aerospace sector: ~50% growth. A recovery in performance should happen in upcoming quarters
MMRFIC: Need another 18 to 24 months
Debt: Expect overall debt to be between 680 to 700 by year-end
Expect degradation of working capital cycle - due to international market. EBITDA margins could slightly improve
Look for End of Q3 (I am assuming Q4): Plan to add capacity in US could be finalized. Company is already supplying to GM/Tesla and now cummins
***** The below section isn’t from concall ****
About Raytheon Group and the award
American multinational aerospace and defense conglomerate
One of the largest aerospace and defense manufacturers in the world by revenue and market capitalization, as well as one of the largest providers of intelligence services
Targeting 20% RoCE amidst executing growth capex
We interacted with the management of Sansera Engineering (SEL) to get mid-year update on its business execution
and outlook ahead. Following are the key takeaways: 1) Revenue is on course to meet the target of ~40% growth in exports in FY24, including ~50% growth in aerospace segment; 2) supplies to Triumph and Harley for the newly launched indigenised models would add to 2W segment revenue growth along with continued premiumisation of overall 2W market; 3) EBITDAM is on track to be at 17-18% in FY24 and inch up potentially higher in FY25 driven by the rising mix of exports/aerospace; 4) despite capex of INR 2.8-3bn p.a., SEL is confident of crossing ~20% pre-tax RoCE by FY25. We retain BUY on SEL with an unchanged target price of INR 1,133, implying 20x FY25E earnings.
