Onboarded Dixon this quarter. According to the management, this opens large opportunites for expanding into consumer durable segment. Steller quarterly performance. Great growth. Acquisitions on track. Hope it continues.
Disc. Holding. Biased. No recommendation to buy/sell
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Fall in the passenger vehicle sales and piling up inventories at the dealerâs end - can they impact SJSâs performance for this Q2. Any thoughts on this?
Also, is there any reason for PE not being re-rated in comparison to other auto-ancillaries (or other small cap stocks) stocks.
Disc: Invested
6 Likes
SJS excellent results.
More than 50% YoY.
Fully paid long term debt.
High cash generation.
Outperforming auto industry growth.
Grew standalone numbers too.
Won an export deal in consumer segment.
Export grew 50% YoY.
Margins also grew by 1%
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One of the first bad press Regarding SJS
For any fellow Value pickr based in Bengaluru, can someone find out current status
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@Gautam_Chopra please share complete report
This information comes directly from the recent SJS conference call and Q2-25 presentation. Itâs surprising how some stock analysts rely solely on quarterly calls to make buy or sell recommendations. There doesnât seem to be any in-depth research behind these suggestionsâtheyâre just echoing details from the latest presentation. So, take any recommendations with a grain of salt and make sure to do your own thorough research.
Disc - Invested
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Promoter K A Joseph pledged his shares for a capital of 25Cr and later revised it to 15 Cr.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/27467A1D_7083_4015_9621_6565FE6D174D_181500.pdf - 25Cr
https://www.bseindia.com/xml-data/corpfiling/AttachLive/D43C6444_E637_4B69_BE68_030E3B0FAEAB_200938.pdf - 15 Cr
How do we take it, as itâs for personal useâŚA red flag?
OR
His confidence in the business which made him to pledge rather than sell?
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Dixon results are quite impressive with significant increase in revenue. SJS added Dixon as their customer recently. Any idea on the percentage of revenue expected from Dixon?
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Hi All,
SJS had organized a plant visit of their WPI and Exotech plants in Pune, below are the plant visit notes:
SJS Plant Visit notes - Date: 28th Feb 2024
From management - Sanjay Thapar, CEO + Mahendra, CFO + Plant heads of WPI (Roy Matthew) and Exotech
Exotech Plant visit:
- Process:
- The process consists of injection moulding > chrome plating > painting.
- The process is complex â main complexity arises from (1) having chrome stick to plastic (needs to deposit multiple layers of chrome and metals), and (2) providing a clean metallic finish with variety of finish options to the customer.
- Change in nature of demand:
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Currently Indian customers are okay with Hexavalent chrome which is a hazardous process (final product is not hazardous), as company is moving towards targeting more European customers, the company has developed technology which gives chorme free plating;
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Currently in India Mahindra has started moving out of Hexa to chrome free plating;
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The company has all three capabilities â hexa chrome plating, tri chrome plating, non chrome plating
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Trivalentâs realization is 30% higher than hexa
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TVS earlier wasnât able to export in Europe because of Hexavalent chrome, SJS is now supplying to TVS and is now growing at 10% (TVS in Europe scale didnt get touched upon)
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Along with this, the company is doing multi shade/design based chrome plating products
- Relationship with Mahindra:
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Revenue share in Exotech: 50-60%; similarly 60% of output goes to M&M
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Dual tone wheel cover (done for others as well) requires masking and printing/painting hence higher realization
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Wallet share for chrome and painted interior 70%
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Overall SJS consol level, M&M is 14-15% of sales
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Currently supplying 75 part items to XUV700
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MaXX logo above is an example of cross selling, where the âMaâ (Exotech) is chrome plated and the XX is sticker (SJS work)
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Completed aero caps (aero-dynamic wheel covers) design from build to spec for Mahindra. Aero caps go into alloy wheel rims; kit value increased from 1000 to 2500 due to larger alloy wheels esp in premium SUVs
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Kit value with XUV700 ->1700, with 9E its 5000 vs 300-400 for polyplastik (their competitor for wheel cover plastics, working with Tata, Maruti) â this has been more thru premiumization rather than increase in parts
- New/other clients
- Geberiett 8 years, roca 3 years relations
- Tata Motors have moved from the earlier logo to their new logo, which has moved out of Exotech (chrome based) to WPI (IML product); SJS has 100% share for it
- Other clients include: Stellantis (which is more interior work), TVS, Whirlpool (Whirlpool order is 10Cr per annum for 5 years for overlays)
- BYD is in touch with the company
- The Mercedes Logo manufacturer that went bankrupt(Link), there is a RFQ process going on, SJS is also participating in it
- Stellantis is currently like a foot in the door, hopefully SJS can prove itself to penetrate further; Stellantis also opens up possibility to tap into GM, Ford etc
- John Deere another big client (among top3)
- Hyundai has onboarded SJS as a vendor, no supplies yet
- What changed post SJS takeover:
- Aggressive marketing since acquisition.
- Utilization was increased by entering into new clients (atleast for WPI), earlier utilization was ~50%
- Rejection rates were reduced from 25% to 15%; 10-15% is an acceptable industry rate
- Capabilities:
- SJS being a global supplier, is audited by international clients, and therefore the company follows the international standards while manufacturing which includes employee, process, sourcing, pollution, vendors etc; therefore scaling and selling to other countries will not be an issue from standard of processes wise
- To ensure that their IP is protected, they work with designers who work exclusively with SJS only
- With the current product offerings + cover glass the company can deliver higher revenues say 3000 cr as well, what is required now is to how to penetrate more (note 3000 was just a number pulled out of thin air by me, its not a mgmt given target or limit, idea was to understand till what revenue can current product capabilities can be scale)
- The company is looking at M&As which can help accelerate these relations, with the idea being that the target is approved by the OEMs so processes of registration is done; the target need not manufacture the same products, as SJS can handle it; what the company is looking at is that can the existing relations be sold the products that SJS has
- Capex:
- New capex of 100 cr
- Current plans project breakeven in 3-4 years
- Currently the land is under plinthing stage, by Q2 is should be up and running as PEB will take smaller time to ramp up
- Current land is 68K sqft, new land is 3L sqft
- Havenât lost orders due to lack of capacity, as they use outsource partners
- Cover Glass:
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Cover glass forms the last layer of the touch-screen display, it is glued to the TFT screen (which is a commodity).
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Current electronic display comprise of multiple layers, cover glass is the one that is more end-customer facing
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SJS is currently getting just the front end glass printing; the main RM will be imported, and then SJS is going to do the printing work; printing works could involve bending of the glass, printing such that there is no driver distraction, doesnât gets finger print smudges, anti glare etc etc
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The RM would be 40-50% of the revenues, there would be other materials which the product will use; on an overall basis, the margins would be similar to SJS levels. Glass comes from Japan/China/SK/USA etc. now with China being the largest.
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Currently orders with Vistreon are WIP and business would be scaled up
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Cover glass kit value for premium SUVs could be 4-5k per car or more with 40-50% value add; Pricing wise SJS product would be say 5% cheaper from the current options that customers have
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Cover glass manufacturing process
- Take glass, chemically clean, and strengthen it, do printing and do all layers on top such as laminations.
- Phase 1 - Laminating printed bent glass
- Phase 2 - printing and laminating bent glass
- Phase 3 - bending printing and laminating plain glass
- Reaching phase 3 will take 1 year or so. They will ramp up to full capacity in 3-4 years. Once phase 3 is done, gross margins can be 40-50%. Per unit selling price would be 2000-5000 depending on display unit size
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Vistreon, Continental, Marelli are the 3 large global companies that make the front dashboard / screen / instrument cluster.
- Other points:
- Electroplating is a complicated process involving many chemicals - first cleaning using chromic acid, then Palladium deposition, then Cu Ni Cr deposited
- Procurement guy at Tata is the same for both logo and chrome materials
- Machines in Exotech were from Ferromatik Milacron, a German Injection Moulding machine manufacturer
- For exterior parts ABS is used as substrate and for interior parts PCABS is used because it can withstand higher temperatures. (In the factory floor saw a lot of manual assembly of logos and parts and manual quality inspection which seems tough to automate)
WPI plant visit:
- Roy Mathew was the first employee of WPI and runs the business from Pune office. He owns ~10% stake in WPI. He primarily focuses on sales and new business development, with a secondary focus on smooth running of the plant.
- CLIENTS: Tata, Maruti new dzire, renault, ifb, Mahindra, VW, Legrand (2nd largest, 25% revenue contribution) , Godrej
- WPI utilisation at present is 60-65%, new shed is already in place and machines installed and working. Hence no other new capex is in progress.
- IMD involves joining/embossing patterns on the plastic mould while IML means fusing two layers of different colors and producing the final product; benefit is that the product life is longer, as patterns can fade, be scratched while IML will stay on longer
- IML manufacturing process:
- Screen printing is done on polymer sheet (ABS, PMMA ETC) based on customer artwork
- After that high pressure thermos-forming is done to make the profile shape. Two types of thermoforming are there
- Vacuum forming â Simpler process where the male die sucks the film to form the die shape, usually handles only one colour film
- High pressure thermoforming - this is more evolved which can handle multiple colours and a more complex form can be built
- After thermoforming, trimming is done. There are 3 kinds
- Simple trimming is done using die punching
- More complex trimming is done by robotic arm or 5 axis milling machine
LEAD time to approval is 1.5-2 years. Develop tools, do 6-8 months of testing; SJS had tried to do it in-house in 2018 for Whirlpool, but werent successful, therefore WPI acq made a lot of sense for them to get access to the tech
Screen printing - has a learning curve for each project. 3% to 20% rejection, factored into costing.
- In IMD, the film only transfers the design to the plastic mould and the film is not part of the product itself. In IML the thermoformed film gets fused into the product during moulding. IMD is used for higher volume lower complexity mass manufacturing - mostly used in CA segment (But washing machine panel with buttons we saw was IML, not IMD). IML is more complex and used mainly for auto.
- Tata 50% of wpi revenues; other big customer is Legrand
- Wallet share: M&M 100% for EV as well as tata; other models of m&m are moulds simple
- IMD vs IML revenue can be 2x
- IML 2K color product involves fusing two layers of different color or transparency to give one single product
- IMD used for more volume; IML requires multiple steps and therefore lower throughout
- WPI seems very proficient in 2k moulding â this is where 2 different resins are moulded simultaneously in the moulding machine. This is used to create auto IML parts with input/display logos often found in premium SUVs.
- 2k moulding machine capacities range from 200MT-1000MT (Chinese machine FCS FB-280R)
- Wherever display buttons exist, the resin behind needs to be transparent and different from rest of the body, hence 2K moulding needed
- The TATA design head moved to M&M, and he bought the new product design philosophy, given SJS relation with Tata, it has now been able to crack M&M for these products
- IAC dashboard products vs WPI why one canât do the otherâs product:
- Technically either of the company can do the other personâs product
- IAC is more in to large dimension dashboarding, so for SJS to do that product would be higher capex; generally the product sees lower value add, so might not be justified for WPI
- For Lumax/IAC aesthetics is not their core area, therefore there is a skill gap
- Competition: ST/RM know of only Motherson who does IML/IMD/IMF, estimate their scale to be less than 5% of WPI.
Q&A with the CEO:
- Vectors for growth â premiumization ; better lifestyle needs driving demand; SJS products costs about 1500 for SJS to manufacture, 5000 it sells to OEMs, with those better aesthetics the OEMs can charge 50K extra to customer
- Large untapped opportunity exists in winning global business. Especially IML products are truly world class.
- Discussions on larger play display going in, might happen in a couple of qtr
- Looking at m&a next year happy with the tech, what is needed for faster penetration
- New areas:
- Godrej new customer looking at exports in CD
- For Godrej and IFB they are supplying IML parts rather than just overlays. Overlays are being supplied to Whirlpool. Overlay + moulded part = IML part. LG, Samsung also using overlays to keep costs low in India
- Maruti has started using IML for new DZire (for dashboard)
- New programs: IML interiors, looking to enter into assembly currently doing components,
- Assembly - vendor consolidate and product kitting
- e.g. they supply an overlay which is to be put in a plastic housing and a PCBA. He is thinking how much of the end customerâs pain can he take away by assembling these parts? This would save cycle time on OEMâs assembly line and increase throughput. So basically, for some products they want to become a Tier 1
- Supply products to legrand dealer points, without routing thru legrand
- Assembly - vendor consolidate and product kitting
- Acquisition is to look at accelerating the relationships
- NA for auto ,SEA for consumer durables are geo and segments of interest
- Hyundai: Breaking into Hyundai: Working with Koreans is not easy. They donât even give you an appointment. Even if you are highest quality and/or cheapest. You need to hire a Korean person and slowly try to cultivate a relationship. We have started a small relationship in SJS standalone.
- Godrej new customer looking at exports in CD
- WPI tooling margin volatility is mix related
- IML varies from 200-5500 per SKU realisation
- Penetration is low in PV, maruti more conservative now going to up their game, maruti late comer but catching up fast; tata 13-14% market share, Tiago/harrier/safari are full, still mkt share can be 5-6% (SJS would have 80-85% market share)
- Hyundai,Kia are not using IML in India. But using in korea
- Market can grow to 40-50% penetration with kit value of 1000-2000 vs current 3-4K, becoming a 300-400 cr revenue
- IMD 100-300 per SKU realization (gear knob, center stack, for CDs eg Legrand SJS supplies IMD switch plates)
- Most bullish on 4W
- Chrome business is resurgent
- Exports
- IML
- COVER GLASS
- SJS is Tier 1 with auto OEM except instrument cluster, ie negotiations of rates happens with OEMs, while billing might happen to another vendor
- Pitching for IME products
- Globally also itâs in early stages, may be 2 years away
- Mercedes doing some conceptual prototypes
- Can be 1.5x IML
- Look and feel/curve will improve as instead of a hard/flat PCB, there would be an electric film which allows curves, can save weight also (might be minimal)
- How export capabilities being developed
- Stellantis is a new tech , not price driven; SJS is brand owner
- Marketing is handled out of India and have appointed sales representative (South America, Turkey, Korea, Europe)
- Decal is a fringe product in exports focused in India and asean
- Exports is $4B market and we are doing only INR 60 Cr.
- When 2W ev hits 20% kind of scale then displays would increase enabling a faster growth
- Cover glass
- Iml
- What keeps you awake at night
- Quality issue is something that keeps awake at night;
- While there is a standard test to check quality, at the client end the tester/buyer doesnât follow it, and looks at the product manually and decides on whim
- The company is investing in developing/hiring a big QA team which manually looks at the products for quality assurance
- Some big announcement in next qtr wrt results may happen
- Meeting Walter Spain CEO for discussing next steps
- Wrt Walter Pack, India is cheapest location, which can produce products in line with quality standards
- While negotiating the terms of the deal, SJS wanted to keep India and Asia as a play, which it got; currently exports are not much into Asia ex-India which is yet to be monetized
- SJS was also clear that there were certain products of Walter Pack which was not in the roadmap for 3-4 years, so had let go it
- WPS relationship is on sound footing. WPI can independently service customers in India according to Roy Matthews but many domestic customers (TaMo, M&M) demand to know what global supply credentials the company has etc. because IML products go into their most premium models â so having the partnership is helpful for SJS
- CEO bandwidth :
- More on org/cultural development and interacting with mega accounts; the current business CEOs take care of growing the business
- Dixon is telecom and CD; telecom is IML and stickers
- Price was negotiated by end OEM but supplies into Dixon. This business can grow but SJSâs concerns are the low margins of Dixon and hence pressure on SJS pricing
COMPETITION (not discussed in the meeting, but desktop research):
Meeting notes contributors: @nirvana_laha and myself
Disclosures: Both of us are invested in personal capacity, as well as in client accounts.
DISCLAIMER: These are meeting notes, dont take it as a recommendation to buy or sell.
40 Likes
Divyansh! Thank you for this info..
Do we know if SJS is also supplying anything for the new Mahindra EVs BE6 and XEV9? Thanks!
@Markmaker yes they are supplying to the new line of EVs of Mahindra, refer above; they are supplying to both the EVs
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