undoubtedly a great business run by capable people. The presentation clearly comes out as one prepared for investors. The detailing regarding the product, its uses will greatly help us in understanding the business with more depth.
Only concern is company using the expression “moat” six times in the presentation. 
The largest Electron Beam Welding Machine in the Western Hemisphere.
This one looks like 2 metals right after being welded together.
The above images are from this video by Dynetics/Leidos
Dynetics/Leidos’ website has a page for Defense.
Might be too far fetched but perhaps defence applications could be another potential optionality for the company in the future. Interestingly Shivalik’s latest PPT also talks about defence being a potential growth driver.
Shivalik first ever concall most things along expected lines. I am only capturing the things which were most interesting to me.
Thermostatic Bimetals are used Overload relays/ Bimetallic relays/ BMR. It used to protect the main equipment (a motor which is driving a pump or compressor).
This is a critical component because actuating of BMR trips the circuit and the equipment is saved (cost in lakhs).
There has been industry trend across OEM (Siemens, ABB, Schneider) for move away from BMR to Microprocessor based electronic relays.
Sharing Siemens catalogue price list for both BMR & Electronic relays (enclosed as PDF). These are procured on tender basis and one generally gets 30-40% discount.
Price list.pdf (224.9 KB)
If you buy a switchgear (A MCC panel), cost of BMR/electronic relays will be 3-4%. But electronic relays have huge advantage.
Industries are paying Rs 1000-2000 extra for electronic relays as it increases reliability for equipment worth lakhs.
My channel check says BMR demand is from two segments
However reported numbers of bimetallic segment does not show any gravity regarding this disruption. Growth in America market was 155%. Company is fully confident of growth and aiming for 600cr sales.
I was already impressed with their capability & performance of shunt division and now positively surprised with their bimetallic division growth.
Two questions, I shall try to ask management in next earnings call.
Another question could be If Bimetal Segment stagnate, Can the same plant be used for shunt Production of course with required ramifications?.
if yes then How fast ?
shivalik maiden concall transcript…
some observations:
there were mentions in several places about future prospects -
why bimetal is seeing such growth rates and why it will continue
how resistors applications in EV are still small and co is just at tip of iceberg in this
how even in resistors, apart from EVs, prospects are strong in the auto applications…
other applications as smart meters, energy storage etc are in addition to this…
how value is being added in bimetals by increasing the proportion of components vs plain strips…
how contacts is an extension of their product offering as it goes in the same switchgears where their bimetals are supplied…
how contacts can be a large volume business and that while it is a low gpm product today, how they are exploring to increase the margins by reducing material cost by making more value added products here…
how their overall cap util is 35% still…and how increase in volumes is like to atleast maintain margins, if not improve…
how they have been working with customers for many years, esp in usa, and how things are falling in place for them to take advantage of their efforts and investments going ahead…
how commercial supplies have been started for some components for some customers in some geographies and how they are like to increase penetration in these customers by supplying the same components to more geographies where these customers supply/operate in…
how with the same customers, they are in various stages, including seed stage, testing stage and commercial stage for various products…
to a q as to why they were not affected by semiconductor issue which the auto industry was grappling with till now, one answer was ofcourse the diverse applications of their products but also the fact that it was hinted that now that semi cond issues are behind and auto is like to resume its growth, shivalik will grow further with them.
how is their competitive positioning in india and at global level
how they derive low cost of manufacturing advantage from using machines built by themselves at 1/5th the cost…
how some wc efficiency has been derived from inventory management…
Some interesting facts -
10 Apr 23- Elon Musk starts following Indian PM on Twitter.
17-18 May 23- Tesla delegation of C-suite executives meeting with PMO, MoRTH, Niti Ayog, MoF.
29 May 23- Tesla may be a contender for India’s lithium reserves. This itself is a big positive for the entire EV space as it will increase widespread adoption as well as exports.
All bodes well for our company if Tesla enters manufacturing scene in India.
As per the above screenshot from Shivalik Bimetal concall, is it possible that this customer is Tesla?
Is it possible to sideline Vishay and be a direct supplier to Tesla?
Some of our experienced researchers on the company may like to comment.
As I was hinting, probably the positive reaction today was due to this news.
Shivalik management interaction on 12 June. Below are some of the takeaways
Shunts
Shunts is being made through EBW. Launched in 2015-16. We have been doing EBW through 2008-09. Earlier, used to manufacture CRD (colored picture tube component). That component was manufactured through EBW. Now current sensing shunts.
Applications are in energy meters, auto, energy storage. 70% is being used in energy meters. Meter can be tempered by anyone. But after using this, it becomes very efficient. Developed markets are adopting energy meters in a big way. This is a bigger opportunity. Even in India there are big announcements by govt. 25000cr (need to check this number) meters announcement within India. Old meters being replaced by new meters.
How is our readiness in terms of product approvals, customer relationship as new age applications scale: Meters are being supplied by Havells, Schneider. We are supplying resistors to them. Our readiness is there. We are already working with these companies on bitmetals. Developing countries have just started with smart meters manufacturing. In domestic manufacturing, we are the only ones. Our relationship with the domestic players is there due to bimetals and electrical contacts. We are supply shunts. We are also ready in terms of capacity. If there is significant demand, we have the space to expand the capacity in the 2nd facility.
**Edge in Shunts/ Can others enter into EBW based shunts: Shunts may be of many types – 20-25 types. Very small components. We are not manufacturing small ones. We are manufacturing metal alloy based components. That has moat technology. Diffusion bonding, EBW are key but that is not the only thing. It has to be combined with series of processes. This is the core know how of technology. Machinery is critical. We are good with machines. Have been able to build our machines. One of our Swiss customer visited us and was very impressed with machines. These machines if you purchase from vendor would cost 10x.
Entry barriers on the type of shunts that we make: EBW is not easy. It comes to us because of bimetals experience. There are other processes also. Capex cost for machines is very high. We have our own machines. Takes long time to perfect the technology. Customer approvals also take time. Getting one big customer can take 2-3 years. Initial quantity is also small. Shivalik is an international brand now in terms of manufacturing. Many shunt manufacturers are our customers as they may take certain other types of shunts with us for ex Vishay or Permanent Magnets.
Risk of subsitution with another product. Hall current sensors vs shunts.
Current sensors are not efficient for automotive and energy meters. Efficiency of the product is not same. Not feasible in auto. Higher currency flow is needed when you start the engine.
Do you intend to manufacture relays: Customer had asked us to manufacture relays. These were getting imported. We didn’t have capacity then. We enforced Permanent Magnets to manufacture relays. It had capacity and assembling experience. Our relation with PML is good. We work closely. Would you want to go there in future? No. There are other big manufacturer of relays. Let the others manufacture. They will take shunts from us.
TAM for Shunts
Market size is $200-$230m today. We have taken certain estimates. It is also based on customer feedback and market study. TAM can grow 3x by 2030.
Energy storage – Quite optimistic about this application.
Energy meters technology is yet to evolve. Our calculation for market size is conservative.
Automotive: 1 car may be using more batteries later on. 1 BMS may have 1 or 2 shunt resistors. Will be placed on 4 nobs of batteries.
TAM is based on organic growth that we can do today.
New products in the value chain: We are open to backward or forward integration. but nothing on the table that I can talk right now.1600cr revenue target - when do you see that. We can achieve that by 2030. But tomorrow if the end industry growth is signficant, then it can be achieved earlier also in 5 years. What they need to do to get to 1600cr by 2030 - If shunts grow by 25% CAGR and rest of the business grows by 15%, company can get to 1600cr revenue by 2030.
Bimetals
Growth was significantly higher in FY23 than historical growth rate. Reasons? Seeing market share gain. Some player exited the market. China + 1 is also helping. Growth seems sustainable but shunts opportunity is bigger.
Margins when we get to 1600cr. We can improve PAT margins by 200-300bps. Looking to maintain the margins in the near term. Margins in last few years increased due to op leverage, power and manufacturing expenses, automation.
Promoter has plan to trim the stake? No plan as of now. Will share the plans in future if that is the case.
Disclosure: Invested. Tracking position. No transaction in last 15 days or post management interaction.
If they Boast so much about heir Machines, Is there a Market for These Machines as well apart from Captive use.
or they don’t want competition in Core Business ?
or There is Constraint on Infra about Machine Manufacturing ?
or This vertical is not explored ?
Smart meter orders start flowing in -
Genus Power Infrastructures - 3rd July 2023 media release here
HPL Electric & Power Ltd. (HPL) - 4th July 2023 media release here
Tata Power Company Ltd - 5th July 2023 media release here
Hi, is the stock not currently overpriced?
Even if we use aggressive estimates shared by management and assuming similar profit margins and a future PE of 30X (assuming growth slows down), still the stock price CAGR would be 12-13%.
I am still a learner, so any critical feedback is much appreciated:
| 2022 | 2023 | 2029 | |
|---|---|---|---|
| Revenue | 324 | 470 | 1600 |
| Expenses | 361 | ||
| Op Profit | 109 | ||
| Op% | 23.19% | ||
| Other Income | 11 | ||
| Interest | 7 | ||
| Depreciation | 11 | ||
| EBT | 102 | ||
| Tax% | 23% | ||
| Net profit | 55 | 78.54 | 267.4 |
| Profit margin% | 16.98% | 16.71% | 16.71% |
| EPS | 9.6 | 13.6 | 46.5 |
| PE | 49.8 | 14.6 | |
| Future PE | 30 | ||
| Future price | 1394.0 | ||
| Share price CAGR% | 12.71% |
The way demand for shunts is going to skyrocket with so much electronics and electrification on, the projected revenue target of 1600 Cr is expected to be achieved earlier. Just check the projected smart meter orders, and it’s not only in India, the US has similar thing lined up in near future @10-11%CAGR for next 5-6 years. With Green Hydrogen ramp up and battery storage kicking in, the requirement for BMS shunts will further increase. The mgt has also projected further margin expansion in account of the incr revenues.
The electronics component in autos is increasing and the shift to EVs, govt policies for auto are all growth drivers.
With that being achieved in earlier timeframe your EPS CAGR will be higher, and since the stock is almost a monopoly and with assured growth at sustainable rate, the PE multiple of 50-60 may become a norm for it, for sometime till growth rates start to drop.
The kind of progressive yet secretive management team we have in the company, we don’t know yet what bright plans they have for the future. So such credible management team is a big positive and FII/DIIs may soon home on to the company.
Disclaimer- Invested and biased.
Do you expect the upcoming semiconductor business in India to benefit the company?
Analysing any company with a single ratio is fraught with dangers. Its imp to understand the business dynamics, sector outlook and have a view.
Disclosure : Among my top 5 stocks with avg buying price of Rs 325.
Hi All
Is their any impact of floods on the Shivalik Bimetal Operations.? Their are floods in Solan also.
Hi Guys/Gals
Just digressing here a bit. Saw something belatedly, only today @Needl feed of Shivalik
Shivalik shares sold 26 May by TSL Holdings, where Shivalik Promoters are Directors
Can we check how Screener.in can capture this type of transactions as well?
(expectations are always high! how did Screener miss this 
)
PS: Personally on the (one-off?) share sale itself, I am neutral; some or the other promoter entity does have genuine requirements from time to time and/or also enjoy some fruits of labour down the line
