Was this a Hindrance in 22-23 for EV, Now back to Motivating levels for Govts ?
Or No One wants to Bet against China
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Find enclosed my queries on Financial for FY24:
1 Update on Sale of Investment Property, Page 148 mention that company has entered into agreement for sale with buyer and same is awaiting approval from DIC Solan. Please provide update. Also, what is sale realisation amount in Agreement to sale entered in July 2022.
2 Page 132, MSME Creditor around 3% while on Page 120 sourcing from MSME/small producers is 17.57%. Can you please explain this variance?
3 Page 126 Auditor Mentions ”However, for 1st quarter of Financial year 2023-24 at head office only, the feature of recording audit trail (edit log) facility was not enabled to log any direct data changes for the accounting softwares used for maintaining the books of account for the referred period.” Reason for same being not implemented during Q1FY24.
4 Page 147 Project in progress has Rs 67.28 Lakhs which are under development for more than 3 years. Any perspective when this projects would be complete and amount would be capitalised?
5 Page 156, Trade payable outstanding for more than 1-2 years Rs 8.12 Lakh, for more than 2-3 years, Rs 1.08 Lakh and for more than 3 years is Rs 5.13 lakhs. Any specific reason/dispute why they are not paid for such long period?
6 Page 166: Other region contribute Rs 5699.99 Lakhs sales during FY2024. How much is share of China in this figures?
Disclosure: Among my top 3 equity holdings in portfolio. My view may be biased due to my holding. I may buy/sell my holding without informing forum. Not A SEBI registered advisor. Not recommending any investment in the company
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Shivalik FY24 AGM Notes 26 September 2024 10:30 AM at Solan
Last year was sales growth slow but business was not “unexciting”. There were many new products which are under developments
The company is focussing to make manufacturing process to meet the best in the global market. As per one client, the development of manufacturing process and quality control tools/machine used by Shivalik are superior and better then what the client has been using inhouse. Automation/Robotics usage has increased flexibility of manufacturing process (previously only one product standard could be provided to machine, now multiple dimensions can provide to manufacturing machine which can result different dimension product simultaneously from single machine. Further, the data is collected online from the final output which assist company to understand problem area. Further, the robotic machine used in manufacturing filter out all product which are not matching the final dimension without human intervention resulting reduction in rejection rate/ product recall due to defective quality.
Part of reason of slow down in FY24 could also be attributed to Geo-political development. Previously, the company was working European and US client’s China team to provide support to new development. However, most of the players have now decided to shift development of new products to other geographies in proximity to their area of operation. That resulted in new team getting involved in development and also resulted 9-12 months delayed in new project implementation.
The company is also looking at passing on management of business to new generation. Mr. Kabir and Mr. Anand inducted in Board of Directors are executive directors. Mr Anand would look at business development and marketing while Mr. Kabir would be responsible for research, production and development of manufacturing process. Mr. Sumer would also be actively involved in Finance and managing relationship with Investor community. Mr. Sandhu who has been involved with inception of the company and currently chairman is likely to move out of Board of director. Mr. Ghumman would continue to be board and provided guidance to the new team.
Research efforts: The company has created a team of specialist to guide research efforts. Currently, there are four members which is likely to expanded further. The company is also looking at filing a new patent application from past efforts of its research team. They are also evaluating forward integrating and increase value addition in existing products, specifically in shunts. While, that is likely to increase the turnover, due to higher value addition, growth in margin is expected to higher than revenue growth.
The company has implemented new line which is likely to increase automatic (robotic) quality checks of 1.5-2 million parts per month. This new line is expected to commence production from November 2024.
Innovative Clad: The JV has now turn around. During FY24, the company accumulative losses were adjusted and it is likely contributed positively for future growth of the business.
Metalor MOU: The company was in discussion with Metalor for JV to manufacture new products in silver current. However, the subsequent discussion among the JV partners resulting in differing viewpoints on technology support and market access. As per Management, proposed terms by the JV partner were not match with Shivalik Financial expectation. While, discussion is still underway, Shivalik is cautiously optimistic and carefully evaluating finalisation of JV terms.
Growth driver: US and European EV Automobile industry is stabilised and they are expecting increased order during FY25 and FY26. Although, the EV demand is likely to revive, the management feel, that it would be still lower than FY22 peak achieved by EV industry in developed market. Smart Meter, Domestic EV/Hybrid, Domestic ICE shunt supply, Increased demand form Domestic Data Centre and increased share of higher value-added products (particularly EV shunts) would be main drivers for growth in medium term. While the market dynamics can delay stated goal of Rs 1600 Cr turnover, they are putting all efforts to achieve the stated goal.
Niche Engineering along which state of art technology in electronic industry would be key industry where company intend to develop new products beside current market. That industry all ingredient for high growth and company is very well placed with required skill set to take full advantage of the opportunity, in view of management.
Disclosure: Shivalik Bimetal is among Top 3 holding for me. My view may be biased due to my investment. I am not suggesting any investment action. I am not SEBI registered advisor. I may increase/decrease/exit from my investment in the company without informing forum. There may be communication error from my side.
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Was there any discussion on further stake dilution in the AGM?
Although the conviction of so many AMCs seems positive for the stock sentiment as it has undergone a decent consolidation and time correction.
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This is pretty strange though. I do remember promoters saying that they are not thinking of any further dilution post the sale of their stake I believe couple of months back but seems they again have done it.
While I have always believed in the promoters this is something I find it difficult to digest. While enough have been discussed about the good and the bad of the stake sale of promoter — my only point is — This does increase the supply and thus makes it a bit difficult for the stock price to go up since all the buyers who wanted to buy and because of which the price would have gone up are now done buying via promoter selling and not from open market.
Discl. - Not holding and no activity/trade done in last couple of months. Studying.
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How does that change in FY25? Geopolitics are more or less the same in FY25 as it was in FY24, infact its worse. Escalated tensions in middle east, Red Sea crisis, slow growing Europe/ USA and global EV slowdown?
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Amar Engineering and Angad Estates are promoter entities who have sold down stake on 27 Sep 2024. This does not inspire too much confidence.
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Thanks @dd1474 for the prompt notes back for VP community. Wish more & more folks follow your example of bringimng everyone on the same page, quicker
From what was shared by SBCL Management in initial remarks and in the more detaiuled Q&A that followed, let me share key takeaways from my side - that move the needle the most, in my book. Please NOTE, I have liberally added my own connect-the-dots (italicised) interpretations to what I heard.
Shivalik Bimetal AGM 2024 Sep 26 Key Takeaways from a medium term perspective
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Notwithstanding where the Auto/EV Market (SBCL business mainstay) revival stands, SBCL has invested in fructifying other growth drivers to start delivering within the next 6months to a year, that will start bringing in significant contributions in the medium term.
a) Forward integration to Current Sensing PCB modules (new factory will cater to this and other such value added segments as these will require a different set of processes/automation than components/strips) (interestingly this has been a customer-driven demand for long)
b) India Bimetals should be a big driver of growth in the medium term in tandem with the exploding growth in datacenters and energy storage requirements. Switchgear segment will move the needle here. Schneider and ABB relationships are going strong. Schneider Electric to invest Rs 3,200 crore to make India manufacturing hub
c) US Bimetals set to come back in a big way given the massive incentives underway in the US for setting up huge industrial capacities (destocking is mostly done, consequently power & energy management solutions demand exploding). Eaton 2024 Partner Conference Product Roadmap
d) Larger higher-value Shunts. [forget the newer applications context, will get clarified from others present, meanwhile refer Point #5, #6 below]
If 2023 AGM/Mumbai meet excitement communication was around new EBW Shunts relationships (other than Vishay) scaling up, 2024 AGM excitement in SBCL Team certainly is in above 3 segments by my reading. Request VP domain experts like @GourabPaul and others in the wider investing community to help do more diligence, and share back here at VP
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Hella and Continental relationships NOT scaling up. This is not related so much to EV slowdown as to Supplu chain getting shifted out of China. SBCL was hitherto dealing with program managers from China and the entire validation process there; now with the supply chaion shifting back to Europe(?) SBCL had to start dealing afresh with an entirely new set of program managers/validation process. A likely deferment of 6-9 months. FY26 should start seeing traction back
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Metalor JV is a non-starter. Business Case being jointly worked out by SBCL & Metalor does not indicate financial viability given the conditions of the technology sharing/licensing segments proposed by Metalor. SBCL had wanted to get into advanced segments (over & above what is achievable thru hitherto Checon tech) to address the massive US Opportunity.That big bump up in mid-term revenues isn’t happening now.
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Smart Meters will continue to see good growth. On widespread skepticism of non-viability of Tender quotes/awarded so far, SBCL pointed out that this affects Smart Relay manufacturers more, and hasn’t seen margin pressures coming down to shunts. To be taken with a opicnh of salt, as sustainability would depend on viability for all vendors/sub vendors?
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China Market presence. It’s a complicated, very different market. Some strategic alliances/relationships are in place. Going forward a lot will happen here. Margin pressure expectations may be unfounded. Interestingly trying to be in segments NOT entirely dictated by price. More value-added than just the shunt, working on a specialised component to position the product there for applications where certain electrical parameter variations are very large, consequently accuracy levels desired are much much tighter. Product has been in development for over a year
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Advanced Robotics/Programmable Configurations. Earlier Lines had to be dedicated to bulk requirements of Customers; Small batches coudn’t be taken up much, as that would lead to efficiency losses. Now the 2 new lines (in the owrks for over 1 year, will be launched in November 2024) set up are completely adaptable to changing customer requirements. Completely unmanned, checked by Robotics, within 8-10 hours line can be set up, checked, calibrated, and guaranteed to deliver the 1.5 to 2 ppm (parts per million) defect requirements; includes lot of cleaning lines as safety levels requirements (ASIL?) have gone up beyond just current sensing in automotive applications [@GourabPaul your job to crack
] End of Line packed by Robotics. This is probably the biggest differentiator that Shivalik has brought to the table table now vis-a-vis entrenched competition in the eyes of big Tier1/OEMs for future engagements/customer stickiness, as it can continue to deliver at lower costs, smaller lead times?. -
Home-grown Systems Assembling DNA. This is what sets apart SBCL and they will continue to dominate cost leadership in (larger automotive BMS) Shunts. SBCL (nay Kabir Ghumman) continues to shock us and top customers into awe and admiration. Not just in setting up this advanced a fully automated robotics line, but in assembling together all this in-house through an array of disparate vendors - Optics specialists in high-res cameras to specialists in Robotics, to database building to learn from defects repository and training using ML/AI to alert against potential defects !!
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Cold Bonding Diffusion Process improvements. Significant chunk of bonding shifted to this now. Self correcting, reduced chances of errors. [@GourabPaul please help demystify, as quoted]
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Strips vs Components share. Bimetals 20:80, Shunts 50:50; Implications on margins/value-addition expectations
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New Products. Some completely new. Some are next-level Shunts. Working with at least 3 companies on their futuristic product components.
Meanwhile request others like @chaitanyapatel @sammy11 @jayeshshroff to add their perspectives too, so we do a more complete job of SBCL AGM 2024 coverage.
Disc: Invested
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Promoters are changing from the Sandhu family to the Ghumman family. They have already reported to exchanges as well.
This is not a sign of worry. Is there something else I am missing?
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I think this is part of their Strategic Shareholding Changes - context above.
Sorry my bad. I didn’t check that. In screener it’s clear.
Huge market sale of shares worth about Rs 160 Cr by promoters (Amar Engg, Angad Estates, BS Sandhu & Associates and Ultra Portfolio Management) which they reported to the exchanges today. This is different from inter-se transfers.
Hope this will remove any overhang on the stock price.
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Thank you @Donald @dd1474 on the wonderful notes on Shivalik. I will try to simplify the technical aspects in the upcoming days. However the above quote has grabbed my attention. Forward integration to current sensing PCB modules can be done in 2 ways
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You take the OEM requirements on the current sensing modules and then bid with your prototypes, once you get approval the product goes to mass production. You effectively become a Tier 1.
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The other option is that you become a contract manufacturer for a Tier 1 , who based on your capability and pricing is not only buying your shunts , but asking you to fit it inside a PCB module and then send for further assembly. ( This could also be due to complicated and compact shunt design) .
For me point 1 is not too attractive as they would end up competing with their customers like Hella and Conti. Shivalik does not have the technical capability or experience to deal with an OEM directly.
Point 2 is very attractive as they are moving from a shunt design and manufacturer to a shunt system supplier . If they execute this well, one day they might as well have an in house current sensor module. Such position also allows Shivalik to go up the value chain and become more like Issabella Hutte in the current sensing space.
Disc: I have worked in this space in my previous job and hence I am extremely biased.
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Assuming it is a customer ask, it is safe to assume there’ll be strict manufacturing/ testing requirements.
What are the typical approval timelines for such integration, does it go for years as most of these are design once and run without any change for atleast a decade kind of stuff.
As far as my very little knowledge goes, even an existing end-customer uses a similar/same current sensing PCB module across models, so what they use today was designed/integrated atleast a decade earlier and seldom if ever changes.
Thanks @GourabPaul
It is quite clear this is a customer-driven requirement, has been for a few years. As explained by Management earlier they had no time to puase (from ramping up on shunts/bimetal supply). Now with the demand-pause, the timing is right for forward integration, and SBCL has gone into execution mode on this.
Given that there is confidence of significant commercial sales within 6 months to 1 year, one should easily connect the dots on which options are likely being pursued. Sometimes young investors forget the fact that this is a business/management which has achieved a global market share of 10-12% in EBW Shints against tremendous odds and decades of effort; give them credit that they have enough wisdom to play to their strengths and do what is right!
[SBCL maintains they only pursue segments where they can enjoy significant technology-process-led competotive advantages; that’s like ingrained in their DNA]
Having said that, I remember one of the hesitations earlier (2 years back) to plunge into current-sensing PCB modules was Mgmt’s assertion that the design-approaches from Tier1/OEMs were a bit fluid and that they would like to bite, only when sure. @GourabPaul this is something you may like to pursue and make us more educated. Hella and Continental are among the likely Tier1s, so studying their design freeze, might give us some clues?
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Geopolitical risks pushing global oil prices beyond $80 per barrel with major potential upside risk , EVs will gain mainstream focus once again. Shivalik is clear beneficiary of this trend as can be seen from stock price action in last few days.
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