Fresh Edits Oct 7 SBCL AGM 2023 (from my scrambled Notes)
Why/How SBCL will stay ahead of Competition?
PRODUCT MIX (examples)
SHUNTS MIX
- Wider shunts - typically 6000 Kg/shift volumes - drives Topline
- Narrow Shunts - thinner - typically 100 Kg/shift - drives more of the bottomline
We are always moving towards more value-added
BIMETALS MIX
- earlier we were doing 100 % strips (no components/value-adds)
- now 70% value-added; 30% is bare strips
- Bimetal strips can command in a range of 2000-6000-10000 Rs/Kg depending on application requirements
BIMETALS INDUSTRY CONSOLIDATION
Few players. Manufacturing is migrating more and more to low cost destination countries like India. Good size of the global bimetals market is addressable by SBCL, so can SBCL start commanding higher margins?
Don’t forget 95% of our bimetal customers (mainly Switchgear) are mature global customers. Someone like a Schneider will dictate prices; SBCL may be sole vendor to majority of such customers but we have to be price takers. With higher volume off-takes, we are challenged with productivity discounts every year.
SBBCL (EARLIER JV CONVERTED NOW TO 100% SUBSIDIARY
On why it was NOT scaled up earlier
The partners were conservative. Now we are free and we will expand. The new plant is coming up. The biggest opportunity lies in the US market - which is addressable to us now (earlier barred). There are of course lot of other competitors. It will be lower margins than our primary shunts/bimetals segments but with higher asset turns, AND we would like to target as our addressable market ONLY where we can maintain 15% kind of Operating margins, so we should do reasonably well there.
CHINESE COMPANY BATTERY/BMS/SHUNTS ENTERING EU (specifically BYD)
Already supplying. Commercial Supplies to BYD have started for their China requirements !!
(this cannot be tom-tom-ed, for obvious reasons)
PATENTS (ring-fencIng people/knowhow risks crossing over, with Competition trying to enter)
They have at least 3 patentable process/products!
Mgmt acknowledged currently this is an issue and will now be addressed with the setting up of a dedicated R&D cell with folks accountable for outcomes. There is someone who will take these forward and make sure to chase down all requirements/documentation getting filed properly; sometimes these can be very cumbersome and take up to 6 months of consistent follow-ups.
CAPACITY UTILISATION
18-20% kind of annual increase in utilisation is foreseen from existing.
Of course more automated lines for EBW and SMDs will be put up based on order flows
FREE CASH FLOW
On a leading question from an analyst that SBCL is on course to generate 600-800 Cr of Free Cash Flows over next 6-7 years, Management did confirm they have done majority of Capex and are confident of maintaining margins, so yes they are on course for that barring any major geo-political fall outs. Details here
DIVIDENDS
On being asked if therefore they will be looking to return more to shareholders Mgmt confirmed the intent and a dividend policy is likely on the anvil for the Board to consider