SCHAEFFLER - Schaeffler India Limited Share Price

In the Q1 CY '25 earnings call of Schaeffler India Limited, management provided a positive outlook, reflecting strong revenue growth and effective operational strategies. The company reported a revenue of INR 2,110 crores, up 14.1% year-on-year and 1.3% quarter-on-quarter. EBITDA reached its highest at INR 407 crores, with a margin of 19.3%, compared to 18.8% in the previous quarter. Profit after tax increased to INR 265 crores, bringing a margin of 12.6%.

Management highlighted key performance indicators, emphasizing strengthened customer relationships reflected in an improved customer survey score of 8.62, up from 8.41. They addressed the macroeconomic context, noting India's GDP growth forecast at 6.5% amid moderated inflation. The automotive sector showed robust growth, particularly in the production of 2- and 3-wheelers at 6%, and commercial vehicles saw a minor uptick. The tractor production surged by 19%, indicating a rebound in demand.

Looking ahead, management emphasized a strong pipeline in both automotive and industrial segments. They reported significant business wins in clutch systems for commercial vehicles and an uptick in the renewable energy sector, particularly wind energy. The company recognized challenges in certain sectors but underscored its commitment to localization, increasing production in India to 76%.

Schaeffler is strategically moderating capex, investing INR 82.5 crores this quarter, anticipating further growth once demand stabilizes. Exciting prospects in e-mobility were highlighted, with orders for e-axles contributing to future growth potential. Overall, the management remains committed to delivering double-digit growth, backed by enhanced operational efficiencies and a balanced revenue mix, with approximately 40% from the industrial segment and 33% from automotive OEMs.

Questions and Answers from the Q&A Section of the Schaeffler India Q1 CY'25 Earnings Conference Call

Question 1: Saumil from Kotak: "First, on exports, could you give us some more details as to any particular geographies which have done better? How sustainable is this trend?"

Answer: Hardevi Vazirani: "The export increase is mainly attributed to Asia Pacific, particularly Southeast Asia, Japan, and Korea. We are focusing on these markets. The main contributor remains industrial bearings. The order book looks stable, and while traditional geographies haven't shown significant recovery, we expect to maintain current performance levels if the geopolitical situation improves."

Question 2: Saumil: "In terms of the Indian markets, are you seeing a recovery in government or private capex spending?"

Answer: Harsha Kadam: "Yes, we've seen an uptick in demand, particularly in renewable energy and construction equipment sectors due to government infrastructure focus. The raw material sector is also improving, contributing to our growth."

Question 3: Mukesh Saraf from Avendus Spark: "Has the e-axle order we discussed before started now, and does the EUR 300 million order remain the same?"

Answer: Harsha Kadam: "Yes, we've started series production for the e-axles following customer delays. We remain optimistic about future demand, and the EUR 300 million order pertains to the project's lifetime."

Question 4: Mukesh Saraf: "Is your business in the railway segment focused more on freight or passenger?"

Answer: Harsha Kadam: "Our strength lies in the passenger wagons and locomotives, specifically for metro trains. We still have work to do in the freight segment."

Question 5: Saif Sohrab from ICICI Prudential: "Is Schaeffler India leveraging Vitesco's portfolio in India?"

Answer: Harsha Kadam: "Yes, both entities are leveraging each other's strengths for a better value proposition, particularly in electronics and software for the IC engines and electric mobility applications."

Question 6: Sonal Gupta from HSBC Asset Management: "You mentioned a moderated capex. Is this due to domestic versus global demand?"

Answer: Hardevi Vazirani: "The reduction isn't due to demand, as we saw double-digit growth. Instead, it's a focus on capital efficiency after previous significant investments, with our main plant in Shoolagiri expected to be operational soon."

Question 7: Vimal from Alchemy Capital Management: "What can we expect for full-year capex based on Q1?"

Answer: Hardevi Vazirani: "We expect capex to slightly exceed our Q1 run rate as the situation evolves, particularly focusing on capacity and capital efficiency."

Question 8: Rakesh Jain from Axis AMC: "The nature of growth in exports"”can we expect this to continue?"

Answer: Hardevi Vazirani: "The growth in exports is expected to be recurring, largely driven by sustained demand and not relying on inventory buildup in other countries."

These answers provide insights into the current performance and future outlook of Schaeffler India across various segments and markets.