Sansera Engineering

[ChotuKatappa]

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

1. 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
   

   

2. 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.

3. 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
   

   

4. Trackers: Company expects to diversify topline-> auto v/s rest in 60% to 40% ratio.

Financials

Company’s Products

Risks:

1. 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.
2. Accounting Red Flags: I haven’t checked. I liked the management and betting on my instincts for their honesty so far

Relevant Links:

1. Screener
2. Rating Agencies - ICRA / Fitch
3. Management’s Outlook commentary - CNBC Tv18

Disclaimer:

• I am Invested from quite low levels (PF sizing here). Safe to assume, I have interests here.
• This is not a recommendation advice. Please do your own research.

[Aarti]

valuation is quite high - it seems to have discounted future growth… if sales dont increase price could correct.

[ChotuKatappa]

Q1 FY24 Results

• YoY - 24% Sales / 30% PAT growth
• YoY order growth from EV segment
• Haven’t gone through the concall yet . Incase anyone goes through, please update

[ChotuKatappa]

Excerpts from Concall Q1FY24

• Demand is coming from off-road segment
• New client: Cummins
• 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
• Large military contractor for U.S.A

Source: Wikipedia and RTX website

[VALUE2017]

Q1 FY 24 SANSERA ENGINEERING LTD

[manojmph]

6538967846e7424ebdb32f73304b3480-18092023.pdf (654.5 KB)

ICICI Securities:

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.

[ChotuKatappa]

Update: "Company has made a total investment of Rs. 19.54 Cr (26%) in CleanMax Enviro Energy Solutions Private Limited (CleanMax) "

Find more details on notification - HERE

Found this info for CleanMax

[DrHarshilRohit]

Axis Bank acquires stake in Sansera. Stock will most likely shoot up in coming weeks. Good news for us minority stakeholders.
Disc- Invested, 5.3% of portfolio

[DrHarshilRohit]

Good growth yoy
Disc- Invested, 5% of portfolio.

[acuite2024]

Investor presentation Feb 2024- Key takeaways

Q3FY24 Takeaways:

Despite being a sluggish quarter, the company reported highest ever Q3FY24 revenues (up 27% at Rs 713 cr) and EBITDA. The growth was broad based across all the segments- Auto ICE, Auto-Tech Agnostic & xEV, and Non-Auto. Net profit for the quarter was up 55% at Rs 48.4 cr.

The Auto-ICE segment is benefiting from the premiumization play in the auto industry with higher content per vehicle. In fact, SEL witnessed highest ever quarterly revenues in the 2W-Motorcycles segment primarily on account of premiumization.

In terms of sub segments in the Auto ICE category, revenue mix stood at 36% (Motorcycles), 6% (Scooters), 23% (PV) and 10% (CV).

In terms of geographies, domestic revenues (69% of sales) were up 27%, while international business (31% of sales) grew at a higher pace of 32%.

For 9mFY24, revenues and profits were higher by 20% and 25% at Rs 2066 cr and Rs 141 cr respectively. In terms of revenue mix, Auto-ICE segment accounted for 76%, Auto Tech agnostic- 7%, xEV- 5% and non-auto- 12%.

It continues to see higher business from new customers and expects the growth momentum to continue with an order book for new business at Rs. 2 bn, which is spread across segments. It received incremental orders of Rs 700 cr in 9mFY24 and its order book as on Dec 2023 stood at Rs 2040 cr (Domestic 41% and global 59%).

It has a wide portfolio of products across 80+ product categories catering to 96 auto and non-auto customers across 27 countries.

The electric mobility segment (xEV), SEL is witnessing strong growth. Revenues jumped from Rs 7.2 cr in FY22 to Rs 82 cr in FY23. For 9mFY24, sales stood at Rs 88 cr. It has 16 clients in this segment (10-2w, 4-PV, 2-CV). Net debt as on Dec-23 stood at Rs. 6.2 bn (Net debt/Equity -0.47), ROCE-16.6%, ROE-14.4%.

It has 17 manufacturing facilities (including 1 in Sweden) and a team of over 500 engineers. Its technology strength lies in the manufacturing of complex and critical precision forged and machined components which enables it to cater to global OEM’s. In the non-auto segment, it has its focus set on Aerospace and Defence segments.

SEL has a strong track record of growth. During FY13 to FY23, revenues grew 16% CAGR, while the growth in PAT was higher at 20%. Going forward, the company intends to change its revenues mix to 60% (currently 76%) from Auto-ICE segment, 20% from Auto-Tech agnostic segment and xEV segment (currently 12%) and 20% from Non-Auto segments (currently 12%).

As a strategy, SEL aims to consolidate and increase its market share in the Auto ICE segment. For the Auto- Tech agnostic and xEV segment, it plans to further strengthen its foothold in the business and leverage its existing capabilities in select product segments like aluminum forged components. Through its non-auto business, it plans to diversify into other categories with a view to increase its addressable market. It is also open to the idea of exploring inorganic growth opportunities.

Key demand drivers/trends in the Auto ICE segment:

-Faster engine upgrades
-China + 1 theme
-High focus on light weighting

Key strengths in non-auto segments:

-Strong relationship with top aerospace OEMs as well as with their Tier 1 Suppliers
-Multiple growth opportunities in Defense driven by Government’s thrust on Atmanirbhar Bharat

• Large order wins in Aerospace vertical

FY23 revenues-Rs 92 cr. At full capacity utilization- revenue potential of Rs 350 cr.

[abhishek_sinha]

Came across a 7y old video that explains their expertise and history. Do watch it
Making It Big Season 7 Ep#5 Sansera Engineering (youtube.com)

Looks an interesting business.
Revenue has grown from 18 to 800+ cr. b/w FY01 and FY 2016 (27.4% CAGR)
Optionality - A&D : Co has already made significant progress here.

Noting down some quick observations

1. Co has come a long way from being a basic part supplier to T-1/cocreator
2. There is a lot of emphasis on tech and automation
3. Driven by technocrat promoter + professional management

Disclaimer: Not an advice. Invested in family and client accounts.