The Radar systems can be used in the automotive segment. TI sells these to all the top automotive players in the world. Being an insider (I work at TI) I know how much sought after such tech is.
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Thats exactly the question, Sansera doesnt have any expertise in manufacturing of radar, and may be lack of knowledge, I am assuming that the base materials would be more semiconductors than pure Steel or Al metals (where Sansera has forging and machining skills); so what is the value add that Sansera brings to the acquisition apart from existing relations is not clear.
As MMRFIC starts manufacturing these products, would Sansera get into manufacturing of these products (if yes then a big +ve), or would the company end up O/S it to some one else (then the benefits of manufacturing and value addition would not accure to Sansera)
@Ashutosh_Sancheti can you provide inputs on what goes into manufacturing of these Radars, are these metal based or more semi-conductor based, and do you see Sansera having existing capabilities to manufacture these products
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Hey. I second your thoughts, and this remains an evolving piece. Considering the sum they paid, the acquisition appears to be a masterful move. However, what SEL does with this entity will be a key monitorable.
Based on some reading, I have found certain possibilities, albeit with a limited understanding of sensors and mechanical integration.
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Mechanical Integration and Customization:
SEL can manufacture sturdy housings/enclosures to protect radar sensors from tough conditions. They could also help with thermal dissipation and create custom mounts, brackets, and frames. I am uncertain about the extent to which this will require precise engineering. -
Durability/Robustness and Cost-Effectiveness:
Using their expertise in forged and machined parts, SEL can make components that handle vibrations, shocks, and temperature changes, ensuring the radar systems are reliable for the long term. They could also help in reducing costs through efficient manufacturing operations. -
Regulatory/compliance support:
SEL’s deep understanding of automotive standards could accelerate commercialization/acceptance. -
Integration with Vehicle Systems:
SEL can help precisely machine parts that connect MMRFIC’s mmWave radar systems with other vehicle systems, like braking, steering, and infotainment, for smooth integration.
These are Semiconductor products. Sansera doesn’t have any offering in terms of expertise (tbh there would be handful companies who can offer any kind of expertise in our country). As long as management of Sansera understands that they don’t have the knowledge to take technical decisions and leave the running to the professionals, it is best thing.
Setup of manufacturing of semiconductor chips is close to impossible for Sansera. It can setup specialized manufacturing of COTS solutions for RF & mmWave products which would be at a much higher level of expertise compared to what let’s say Dixon is manufacturing. Even if it outsources the manufacturing, the majority of the value add would remain with MMRFIC as the IP carries value here. MMRFIC’s products are of MIL standards and not commodity products.
Semiconductor and PCB based, COTS solutions.
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- Q1 FY25 revenue was Rs. 7,439 million, up 13% year-over-year
- EBITDA was Rs. 1,275 million with 17% margins
- Domestic and international businesses grew at healthy double digits
- Highest ever quarterly domestic revenues achieved
- Focus on expanding into non-auto, tech-agnostic and xEV segments
- Setting up special process facility for aerospace to enable higher value-added business
- Signed MoU to acquire 55 acres for future greenfield expansion
- Investing in automation for Swedish operations to improve profitability
- Strong growth in 2-wheeler segment driven by rural economy
- SUVs performing well in passenger vehicle segment
- Some softness seen in European passenger vehicles
- Slowdown in EV adoption rates in Western markets
- Targeting 20% overall revenue growth for FY25
- Expecting 30-35% growth in aerospace revenues
- Non-auto, tech-agnostic and xEV segments projected to grow 40-50% CAGR
- Commissioning new 4,000-ton press to expand product portfolio
- Exploring opportunities in chassis and suspension aluminum components
- Rs. 4,500 million CAPEX planned for FY25, mostly brownfield expansions
- Working towards 20% EBITDA margin target in medium term
- Swedish subsidiary margins expected to reach 11-12% by FY26
- Aluminum forging business margins improving but still below targets
- Some delays in aerospace orders from a key customer
- Logistics issues leading to higher international freight costs
- Potential slowdown in international business in second half of FY25
- Strong order book of Rs. 16.9 billion provides revenue visibility
- Growing opportunities in EV exports as OEMs face cost pressures
- Increasing content per vehicle in premium motorcycles
- New business wins in Swedish subsidiary to improve profitability
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DYNAMATIC AND SANSERA ENGINEERING INK LONG-TERM DEAL TO PRODUCE COMPLEX COMPONENTS FOR AIRBUS A220 DOOR PROGRAM
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My Notes reading the concall and research :
Board of directors of Sansera Engineering Ltd. approved a fund raise of up to Rs 1,200 crore
Board Approved investment/CAPEX in MMRTFIC ( 20 CR )
MMRTFIC is a research, product development and manufacturing entity that builds sub-systems and systems for next-generation radars by leveraging machine learning with artificial intelligence for mm-wave sensors with hybrid beam-forming capabilities.
Domestic side, healthy upsurge in demand, especially on the 2-wheeler side
2-wheeler segment has been driven by driving rural economy and its positive monsoon effects.
PV side, SUVs continue to do well. However, demand for small cars is on the lower side. The industry is also seeing heightened levels of inventory.
• Precision Engineering: Sansera’s precision engineering is a common strength across all sectors they serve.
• Emerging Sectors: Success in non-auto, tech-agnostic, and xEV sectors.
• Growth: These emerging sectors expanded by 34% year-on-year this quarter.
• Auto Tech-Agnostic Products: Achieved a top line of Rs. 712 million with a 68% year-on-year growth.
• xEV Business: Grew by 29% year-on-year to Rs. 421 million, despite a reduction in business from a key 2-wheeler customer.
• EV OEMs: Facing cost pressures, leading to optimism about export potential.
• Non-Auto Business: Grew by 16% compared to Q1 FY '24, with strong double-digit growth in all subsegments except Agriculture.
• Aerospace and Defense: Achieved Rs. 256 million in revenue, growing 28% year-on-year. Added new customers like Saab and Triumph Aerospace. Expected CAGR growth of 40-50% over the next 2-3 years.
• Off-Road Segment: Generated Rs. 302 million in revenue, with a focus on increasing wallet share in North America.
• Agriculture Sales: Recorded Rs. 161 million in revenue for the quarter.
• Industrial and Marine Engines: Seeing significant traction, expected to contribute meaningfully to the non-auto category.
• Auto ICE Segment: Revenue grew by 7.2% due to strong growth in the 2-wheeler segment and increased content per vehicle.
• Order Book: Stood at Rs. 16.9 billion as of June '24, with 63% from international business and 37% from domestic orders.
• Capacity Utilization: Current facilities operating at 65-70% utilization, with peak utilization up to 80%.
• CAPEX: Planning Rs. 4,500 million in FY '25 for brownfield expansion projects at existing facilities.
• CAPEX Allocation: 40-45% of CAPEX will go towards tech-agnostic and non-automotive segments.
• New 4,000-Ton Press: This will be fully commissioned by the end of H1, expanding the product portfolio in higher capacity engines and aiding in lightweight and aluminum components.
• Future Opportunities: Potential for chassis and suspension components on the aluminum side.
• Aerospace Expansion: Board approved adding a special process facility to the existing machine facility, expected to be fully utilized by FY '27.
• Land Acquisition: Signed an MOU with the government of Karnataka to acquire 55 acres for greenfield expansion.
• CAPEX Plans: Further investments will be made in line with Board approvals, with updates to follow.
Financial Performance during the 1st Quarter of FY '25:
• Revenue Growth: Revenue from operations increased by 13% to Rs. 7,439 million this quarter.
• Domestic and International Business: Growth came from both domestic and international markets.
• Highest Quarterly Revenues: Achieved the highest ever quarterly revenues on the domestic side.
• Gross Margin Expansion: Gross margin increased by approximately 2 percentage points, from 39.9% in Q1 FY '24 to 41.8% in Q1 FY '25, due to a favorable product mix.
• Employee Expenses: Increased due to annual salary hikes.
• Other Expenses: Semi-variable expenses increased with sales.
• Logistics Issues: Higher international freight costs impacted expenses.
• EBITDA: Stood at Rs. 1,275 million, up from Rs. 1,144 million in the same period last year.
• EBITDA Margins: Remained stable at 17%.
• Depreciation and Amortization: Increased to Rs. 400 million for the quarter due to continuous CAPEX and capacity building.
• PAT Margin: Maintained at stable levels.
• Profit After Tax (PAT): Closed the quarter with Rs. 501 million PAT.
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Strong Order Book: The company has a robust order book with significant visibility into ongoing projects.
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Long-Term Focus: They focus on long-term projects rather than quarter-to-quarter order book acquisition.
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Confidence in Growth: They are confident of achieving higher order numbers than the previous year across all segments, including aerospace, defense, their Swedish subsidiary, and international business.
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Project Timing: The timing of project completions varies based on customer schedules, but overall confidence remains high.
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Revenue Growth Target:
• Siddhartha Bera asked if the company still expects to achieve a 20% revenue growth for the year, as previously stated.
• B R Preetham responded cautiously, noting a 13% year-on-year growth on a consolidated basis and a 16.8% growth in product sales for Sansera on a stand-alone basis. -
Performance by Segment:
• The Swedish subsidiary experienced a 20% decline.
• Fitwel, another domestic segment, had a flat performance with around 2% growth.
• Sansera’s stand-alone product sales grew by almost 17%. -
Outlook for International Business:
• Preetham expressed concerns about the international business outlook for the second half of the year.
• Despite this, he highlighted strong growth in the 2-wheeler sector and new developments contributing to commercial revenue. -
Value Addition from Sansera to MMRFIC:
• Sansera aims to enhance MMRFIC’s capabilities in electronics and software, particularly in radar manufacturing.
• Sansera will contribute to the mechanical elements of radars, such as antennas, chassis, and gimbals.
• The goal is to offer a comprehensive solution combining both electronics and mechanical elements. -
Strategic Importance:
• Sansera’s support includes manufacturing expertise, management bandwidth, and financial oversight.
• This support enables MMRFIC to participate in larger projects and attract interest from sectors like defense and space.
• MMRFIC has set up a world-class cleanroom facility for PCB manufacturing, attracting significant interest. -
Profitability and Growth Targets:
• Neel from Valuequest Investment Advisors asked about the medium-term target of 20% margins and the growth potential in key segments.
• Sansera’s key growth segments include auto agnostic and aerospace, with aerospace expected to contribute 8-10% of the book in 2-3 years.
• The discussion also touched on the potential scale and profitability of the aluminum forging business and why competitors might be hesitant to enter this segment.
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Sansera Engineering Limited Q2 FY25 Earnings Conference Call Briefing Doc
Date: 12th November 2024
Attendees:
• Mr. B.R. Preetham – Executive Director and Group Chief Executive Officer
• Mr. Vikas Goel – Chief Financial Officer
• Mr. Praveen Chauhan – Head Corporate Strategy
• Mr. Rahul Kale - Chief Operating Officer
Overall Performance: Sansera reported strong Q2 FY25 financial and operational performance despite challenging market conditions. Revenue increased by 10% year-on-year to INR7,634 million, driven by growth in Auto ICE and tech-agnostic/xEV segments. EBITDA margin improved to 17.4%. The recent QIP of INR12,000 million has significantly strengthened the balance sheet.
Key Themes & Highlights:
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Sectoral Performance:
• Auto ICE: Continued healthy growth, driven by the 2-wheeler business (21% year-on-year growth). PV business declined by 8% year-on-year due to export market softness.
• Tech-agnostic & xEV: Fastest growing segment (53% year-on-year growth) driven by ramp-up of orders from a large North American EV customer.
• Non-auto: 20% year-on-year decline due to weakness in off-road and agriculture businesses. Expect improvement in coming quarters with a stronger monsoon and new order execution for stationary engine and HCV customers.
• Aerospace: Under pressure due to customer headwinds, but demand remains robust. Expect gradual production recovery and growth trajectory resumption. -
Order Book & Growth Strategies:
• Order book stands at over INR20 billion, with 60% from international markets. Strong order intake of INR3.2 billion during the quarter, driven by both auto and non-auto sectors.
• Expanding capabilities with a new manufacturing facility in Harohalli, Karnataka, to accommodate new forging and machining lines.
• Expanding Pantnagar plant for low-cost manufacturing.
• 60% of future capex allocated towards new-age components in tech-agnostic, xEV, and non-auto segments.
• Expanding professional team with key hires in leadership roles.
• Strategic MOU with Dynamatic Technologies for producing high-friction parts for Airbus A220 aircraft door assemblies. -
Financial Highlights:
• Gross margin expansion of 1.3 percentage points to 41.3% due to improved product mix and efficiency projects.
• EBITDA margin of 17.4%.
• Interest cost higher sequentially due to higher debt and discontinuation of interest subvention on export credit. Expect reduction with QIP proceeds being used for debt repayment.
• Capex investments of INR2,937 million during the first half.
• Net cash positive post QIP. -
Future Outlook:
• Maintain positive outlook on 2-wheeler and tech-agnostic/xEV segments.
• Expect recovery in PV and non-auto segments in coming quarters.
• Continue focus on margin expansion through product diversification, cost control, efficiency improvements, and volume growth.
• Target 40%-50% CAGR growth in aerospace and defense over the next 2-3 years.
• Exploring strategic acquisitions and geographic expansion opportunities.
Key Quotes:
• On growth drivers: “Broadly speaking, beyond land and building, we intend to spend more than 60% of our future capex towards new-age components in tech-agnostic, xEV, and non-auto side.” (Mr. B.R. Preetham)
• On margin levers: “So these are two levers that we have. The third lever is the volume expansion on an overall basis and a higher capacity utilization, which will probably also materialize over a period of time.” (Mr. Vikas Goel)
• On aerospace outlook: “We continue to hold a positive outlook on aerospace and defense. And definitely, again, as I reiterate, that the company intends to grow by 40% to 50% CAGR in this sector for the next 2 to 3 years with a strong outlook on the order book.” (Mr. B.R. Preetham)
Key Questions & Answers:
• Significant order book increase in non-auto segment is driven by aerospace, semiconductor equipment, and agri sectors.
• QIP proceeds will be used for debt repayment, strategic acquisitions, geographic expansion (including a US assembly plant), capability building in forging and aluminium, and investment in deep technology startups.
• Expect margins to expand in the medium term as new business initiatives mature and cost optimization measures take effect.
• Peak revenue potential for the aerospace and defense segment is now INR325 crores to INR350 crores, including semicon.
• New orders in the semiconductor equipment segment are recurring in nature.
• Expect revenue share from the aerospace and defense segment to increase to 5.5%-6% in the next 2-3 years.
Overall, Sansera’s management expressed confidence in the company’s future growth prospects, driven by a strong order book, new business initiatives, and a strengthened balance sheet.
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