SCHAEFFLER - Schaeffler India Limited Share Price

Management Outlook:
Schaeffler India's management remains cautiously optimistic for 2025, acknowledging challenges but highlighting opportunities from stabilizing geopolitical conditions (e.g., softening tensions in Europe) and domestic industrial growth. Key expectations include:

1. Double-Digit Growth: Aim to sustain double-digit revenue growth, driven by new business wins in automotive (e-mobility, hybrid systems) and industrial sectors (automation, construction, railways).
2. Export Recovery: Anticipate export demand recovery, targeting quarterly export revenue of ~INR 300 crores if European markets stabilize.
3. EV & Technology Focus: Leverage merged capabilities with Vitesco (electronics, software) to expand EV offerings (e-axles, battery/thermal management) and BS-VI aftermarket products.
4. Industrial Sector Strength: Expect continued growth in wind, rail, and construction equipment sectors, supported by government infrastructure investments.

Major Points Highlighted:

• Financial Performance: Delivered 11.8% YoY revenue growth (INR 8,076 crores in CY'24) and maintained EBITDA margin at 18.5%, despite market volatility.
• Dividend Payout: Increased dividend to INR 28/share (45% payout ratio), reflecting confidence in cash flow management.
• Capex Strategy: Moderate capex to ~INR 400"“500 crores annually, prioritizing machinery over infrastructure; focus on capacity utilization from prior investments.
• Localization: Achieved 76% localization; targeting 80% to reduce import dependency.
• Segment Performance:
  • Automotive Technologies: 11.3% growth (CY'24), driven by transmission products and EV-related wins.
  • Bearings & Industrial Solutions: 14.3% growth, led by wind (15"“20% of segment), railways, and industrial automation.
  • Aftermarket (VLS): Muted demand due to liquidity crunch but expanding BS-VI product range.
• Koovers Platform (KRSV): Scaling PAN-India presence; revenues grew to INR 158 crores (CY'24) but EBITDA-negative. Break-even expected in 2"“3 years.
• Risks: Food inflation, weak commercial vehicle demand, and export market volatility remain concerns.

The management emphasized operational efficiency, cost control, and customer-centric innovation to navigate uncertainties while capitalizing on India's infrastructure and mobility trends.

Question 1:
Harshit Patel (Equirus Securities):
"Sir firstly, could you give us an update on the e-axle project, have we started commercial production of this? And where are we in the localization journey of this particular solution?"

Answer Summary:
Localization of e-axle production has commenced in phases, with machinery installation underway. Commercial production awaits customer product launches, expected soon.

Question 2:
Harshit Patel (Equirus Securities):
"You mentioned rationalizing capex due to muted demand. What are capex plans for CY'25 and CY'26? Will there be moderation?"

Answer Summary:
Capex will moderate slightly (10"“20% lower than the ~INR 500 crore/year average of the past four years). Focus shifts to maximizing returns from prior investments.

Question 3:
Harshit Patel (Equirus Securities):
"Could you share the CY'24 revenue mix for Bearings & Industrial Solutions (B&IS) across segments like two-wheelers, EVs, wind, railways, etc.?"

Answer Summary:
B&IS revenue mix (domestic): Wind (15"“20%), Rail (5"“10%), Industrial Distribution (30"“35%), Two-Wheeler/Off-Road (20"“25%).

Question 4:
Krupa Shankar (Avendus Spark):
"Exports picked up but remain below prior peaks. When will they normalize to ~INR 300 crore/quarter?"

Answer Summary:
Exports (~60% to Europe) could reach INR 300 crore/quarter in 2025 if geopolitical stability improves. Current capacity supports this target.

Question 5:
Krupa Shankar (Avendus Spark):
"Explain segmental reporting changes impacting Automotive Technologies' decline and B&IS growth."

Answer Summary:
Auto bearings were reclassified from Automotive Technologies to B&IS, causing apparent shifts. Both segments delivered double-digit growth post-regrouping.

Question 6:
Pramod (Incred Equities):
"What is the turnaround timeline for KRSV (Koovers)?"

Answer Summary:
KRSV (Koovers) to break even in 2"“3 years. Focus on scaling PAN-India footprint and expanding product offerings to boost revenue.

Question 7:
Himanshu Singh (Baroda BNP Paribas MF):
"Why did Vehicle Lifetime Solutions (aftermarket) decline? How will BS-VI products help?"

Answer Summary:
Aftermarket demand muted due to OEM prioritization, liquidity constraints, and shifts to OEM service networks. BS-VI product expansion aims to regain traction.

Question 8:
Sonal Gupta (HSBC AM):
"What drove Automotive Technologies' growth amid weak industry volumes?"

Answer Summary:
Growth driven by new product launches (e.g., heavy-duty clutches), regulatory-driven engineering (CAFE/TREM norms), and e-mobility investments (e-axles, sensors).

Question 9:
Ankur (HDFC Life):
"Can Schaeffler sustain double-digit auto growth amid flattish industry outlook?"

Answer Summary:
Yes, via new business wins, regulatory-driven product upgrades (ICE/e-mobility), and differentiation in systems/sensors.

Question 10:
Himanshu Singh (Baroda BNP Paribas MF):
"What is the localization % target?"

Answer Summary:
Localization at 76% (Dec 2024), targeting 80% mid-term. Focus on scaling domestic production value.