What is the source for this information that Sterling tools has 30% market share in MCU business.
Also does anyone have insights on which are the other key players in MCU manufacturing Business in India?
Does the company manufacture all the sub part of MCUs or just imports them and assemble it inhouse?
Hi ranvir, do you still hold this
who are competitors for MCU space
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Sterling Tools -
Q1 FY 25 concall and results highlights -
Revenues - 283 vs 223 cr, up 27 pc
EBITDA - 34 vs 27 cr, up 27 pc ( margins @ 12 vs 12 pc )
PAT - 18 vs 13 cr, up 38 pc
Company is the second largest manufacturer of fasteners and the largest manufacturer of MCUs in India. Has 04 manufacturing plants for fasteners and 01 plant for making MCUs
Results of SGEM ( their subsidiary that makes MCUs - Sterling GTAKE E-Mobility ) -
Revenues - 120 vs 75 cr, up 60 pc
EBITDA - 10 vs 6 cr, up 66 pc ( margins @ 8 vs 7.5 pc )
PAT - 7 vs 5 cr
Company expects that the EV penetration in the LCVs should improve once right products come to the market and that should happen shortly ( like it happened with E- 2Ws ). Company should be a big beneficiary via their subsidiary - GTAKE Mobility
Revenue contribution from top 10 customers in the SGEM is > 90 pc as the E-2Ws and 3Ws mkt is a concentrated market ( with top 4-5 players having lion’s share of the mkt )
Company’s current export share @ 3 pc. Company acknowledges it to be their weak link. They intend to take it up in future
Company has added Hyundai and Kia to their list of customers for their fasteners business. This should give a descent bump up to their base business
Have added E-3W customers to their GTAKE business. That should also help in ramping up their revenues by end of FY 25
Consolidated capex plan for FY 25 stands @ 55 cr ( almost equal split between Fasterners and MCU businesses )
In the EV segment, company aspires to sell additional range of products to their customers wef FY 26 - that should aid revenues in next FY
In the 2W - EV segment, OLA is their largest customer. Company is the single source supplier to OLA electric
An avg MCU costs aprox 8-12 pc of the cost of a two wheeler - depending on model to model
Company is the single source supplier of MCUs for all the 2-wheeler models that the company is supplying to ( this is a big deal - IMO )
Company aspires to be present in all aspects of power electronics and control electronics - as far as EV eco-system is concerned. That’s their ultimate aim and these are the areas where their new product line up will be coming from
Company has announced setting up of Greenfield capacity in India to make magnetic and electronic auto components in a JV with Yangin Electronics. Yangin is a major supplier to Kia and Hyundai Motor companies. Aim to generate a 200 cr/ yr kind of business from this initiative ( inside next 5 yrs ). A partnership with Yangin is expected to help company have firm visibility on orders from the Korean OEMs in India. Beyond the Korean OEMs, company will also target the Indian OEMs for these Electro-Magnetic components
EV business margins are likely to remain in single digits for the foreseeable future
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
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Hi…
Yes - I am holding onto this. Their business is doing well - specially the MCU business. Not sure if they have great technological advantages / other tall entry barriers in this business. However, they do enjoy good customer relationships and first mover advantage. That should be enough to build on from here
Disc : I m biased
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They are making the control units and buying + integrating them with the motors. Even that is a specialised job. And their customers have no complaints wrt the MCUs supplied by them
So - that’s where it stands
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`Yes, I have taken a position in the last two weeks. While there is no significant moat here, they have competitive strengths and add products through the JV route.
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Their biggest customer for MCU , Ola has plans to make their own MCU. Its the threat to the company
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What is the source of this news?
If the product constitutes 8%-12% of the value, OEM will eventually want to make it in house.
Is that a pattern we can expect as the industry matures, and the company will keep loosing out customers as they become big in size and volume?
this is the only news I see from Ola.
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Sterling Tools | Financial Results
Management Commentary
EV Industry Focus & Localization: The company is expanding in the EV components market and pursuing import substitution through multiple strategic partnerships:
a. MOTIVELINK (formerly Yongin Electronics, Korea): Manufacturing magnetic components for EVs & electronics in India.
b. Kunshan GLVAC Yuantong (China): Manufacturing HVDC Contactors & Relays in India.
c. Zhejiang Meishuo (China): Producing Latching Relays for energy, industrial grids, and white goods.
Future Strategy: Sterling Tools aims to explore new growth opportunities, sustain performance through organic and strategic initiatives, and align with Atmanirbhar Bharat for a self-reliant EV ecosystem.
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Screener transcript notes are progressively getting better with better LLMs and curated prompts
Sterling Tools Ltd (STL) – Q4 & FY25 Concall: Detailed Analytical Note
1. Financial Performance Overview
Record Revenue Milestone
- The company achieved a significant milestone, crossing INR 1,000 crore in consolidated revenue for the first time (FY25: INR 1,038 crore, +10.6% YoY).
- Standalone revenue grew by 6.2% YoY to INR 652 crore; PAT up 10.5% YoY.
- Adjusted consolidated EBITDA increased by 13.8% YoY to INR 132.4 crore, with margins expanding to 12.8% (vs 12.4% in FY24).
Margins and Profitability
- Standalone EBITDA margin at 14.5% for FY25 (vs 14.7% in FY24).
- Management highlights that on a like-to-like basis, operating EBITDA margin has improved, “probably 15%+ in FY25.”
- PAT growth on standalone basis at 10.5% YoY; consolidated PAT up 5% YoY to INR 58.3 crore.
Capex and Balance Sheet
- Capex of INR 59 crore in FY25, primarily for SGEM facility upgrades, capacity enhancement, and new product segments.
- Net debt-free position: “We have a INR 12 crore surplus cash.”
- ICRA upgraded long-term rating to AA- (Positive) from AA- (Stable).
2. Segmental & Subsidiary Performance
SGEM (EV Components Subsidiary)
- Strong revenue growth in SGEM, but Q4 saw a sharp drop due to the loss of Ola Electric as a major customer (Ola in-sourced MCUs for Gen 3).
- Q4 consolidated revenue degrew to INR 206 crore (from INR 270 crore in Q4FY24), primarily due to lower SGEM revenue.
- SGEM’s Q4 expense run-rate is ~INR 6-7 crore/month, with royalty expenses directly linked to revenue.
Revenue Mix
- FY25: 63% Fasteners, 37% EV Components.
- Management expects a significant shift: “Long-term priorities are to have 50% revenue coming in from non-fastener businesses” by 2030.
3. Industry & Market Commentary
Sectoral Headwinds
- Auto industry slowdown in Q4FY25: PV industry grew marginally, CVs were negative, only 2-wheelers showed “substantial growth.”
- Q4 typically muted for 2-wheelers; Q4FY25 saw lower production at OEMs.
- Steel price reductions led to top-line impact due to provisions for price reductions with OEMs.
Customer Dynamics & OEM Integration
- Loss of Ola Electric: Ola in-sourced MCUs for Gen 3; STL continues supplying for Ola Gen 2 (small, declining volumes).
- Management notes the risk of OEMs in-sourcing, but also points out that “Ola is an extreme situation,” and most OEMs (e.g., Bajaj, TVS, Hero) continue to outsource key EV components.
- “As and when the volumes build … all these OEMs will need not single sourcing … even if it’s in-sourced, they will need at least 2 or 3 sources of vendors going forward.”
4. Strategic Initiatives & New Product Development
Product & Segment Diversification
- STL is actively pivoting from being a pure-play fastener maker to a diversified auto component supplier, with a strong focus on EV and power electronics.
- - New products announced in FY25:
- Magnetics (in partnership with Korean company, targeting Hyundai-Kia)
- High-voltage relays (JV with Kunshan Guoli, China, facility in Bangalore)
- Magnet-free / rare-earth-free motors (partnership with Advanced Electric Machines, UK)
- “Bulk of our future investments coming in non-fastener businesses, new age businesses where a lot of the components are for the EV industry.”
Power Transmission & Electronics
- Power Transmission: 100% subsidiary (Sterling Tech Mobility Ltd) being set up with INR 50 crore investment, technical collaboration with Kunshan Guoli (China). Facility expected to be operational in Q3FY26; revenue target of INR 200 crore by 2030 for this segment.
- Power Electronics: Focus on onboard/offboard chargers, DC/DC converters, magnetics, relays, and high-voltage DC contractors.
- Magnetics: 4 lines planned (high-frequency transformers, EMI filters, common mode chokes, inductors) for use in EV chargers, DC/DCs, and power electronics.
Technology & Customer Engagement
- Strengthening tech center in Bangalore for self-developed MCU and other power electronics.
- High customer stickiness targeted due to long product validation cycles: “A lot of these products … require long testing and validation times with our customers.”
- Management emphasizes first-mover advantage in import substitution and “Make in India” initiatives.
5. Customer & Market Penetration
EV Segment (SGEM)
- Customer pipeline: >30 customers at advanced stages (awarded contracts or advanced testing) across 2W, 3W, LCV, HCV.
- “Non-2W” (3W + CV) share in SGEM expected to rise significantly: from ~10% in FY25 to ~40% in FY26.
- SGEM unit volumes: FY25 ~500,000 MCUs; Q4FY25 ~40,000 units (vs 100,000 in Q4FY24). Ola accounted for 60-70% of volumes.
- ASPs: 2W MCUs INR 3,000–12,000; 3W >INR 10,000; LCV INR 40,000–60,000; HCV up to INR 4 lakh (for multifunction units).
Fastener Business
- Focus on PV and CV segments; SOPs with Hyundai starting this year, Mahindra emerging as a growth customer alongside Maruti.
6. Forward Guidance & Management Outlook
Near-term Headwinds
- FY26 will be a “down year” for revenue, driven by the loss of Ola Electric as a customer: “We expect our revenue numbers to be down … even at FY27, we may not be back to FY25 numbers.”
- Management is not providing revenue guidance but is clear that diversification strategy is in play, though it will take time to bear fruit.
Medium- to Long-term Growth Drivers
- Targeting 50:50 revenue split between legacy (fasteners) and new businesses (EV, power electronics, magnetics) by 2030.
- “Bulk of the growth will come in on a large basis in these new businesses … revenue will start kicking in larger volumes FY27–30 onwards.”
- New business ROCE target: “25%+” over the next five years.
Strategic Positioning
- STL is positioning itself as a first-mover in import substitution for EV components, power electronics, and magnetics.
- “We are trying to build a future-proof organization, which is giving growth to us for the next 10 to 20 years and getting ready for the way the industry is changing.”
7. Key Risks & Challenges
- Customer concentration risk: Heavy reliance on Ola Electric in SGEM, now partially mitigated by diversification but impacting near-term numbers.
- Industry cyclicality: Dependent on auto industry volumes, which have shown volatility.
- OEM integration risk: Some OEMs are in-sourcing (e.g., Ola), but management expects dual/multi-sourcing as the industry scales.
- Long gestation for new products: “Revenue increase may seem slow in the beginning. But once the testing validation is done, the volume growth ramps up quickly.”
8. Notable Management Commentary
- On Ola Electric: “Ola was an extreme situation … as and when the volumes pick up, all these OEMs will need dual sourcing, minimum to support the lines and the markets and customers.”
- On new product strategy: “These are not random partnerships or ventures. This is a clear strategy … to enter into the power electronics space and to backward integrate into the components that go into power electronics.”
- On future revenue mix: “Long-term priorities are to have 50% revenue coming in from non-fastener businesses.”
- On import substitution: “We are trying to identify product lines where there’s import substitution, Make in India initiative, and more importantly, where we have the first-mover advantage.”
9. Conclusion: Investment Case Evolution
- STL is executing a significant transformation, shifting from a legacy fastener business to a diversified auto component supplier with a strong EV and power electronics focus.
- Near-term headwinds are evident (notably the loss of Ola Electric), and management is candid about FY26 and possibly FY27 being lower-revenue years.
- The company is investing in new product lines (magnetics, relays, power electronics, magnet-free motors) with long validation cycles but high future stickiness and margin potential.
- Management is confident in the long-term, with a clear strategy for import substitution, customer diversification, and technology leadership in the evolving Indian EV ecosystem.
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