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
Trackers: Company expects to diversify topline-> auto v/s rest in 60% to 40% ratio.
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
- Rating Agencies - ICRA / Fitch
- Management’s Outlook commentary - CNBC Tv18
- 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.
valuation is quite high - it seems to have discounted future growth… if sales dont increase price could correct.
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)
- 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
6538967846e7424ebdb32f73304b3480-18092023.pdf (654.5 KB)
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.