Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sansera Engineering Ltd (BOM:543358, Financial) reported a strong start to FY25 with revenues of INR 7,439 million and an EBITDA of INR 1,275 million.
- The company saw healthy double-digit growth in both domestic and international markets, particularly in the two-wheeler segment.
- Emerging sectors such as non-auto, tech-agnostic, and HCV expanded by 34% year-on-year, with auto tech-agnostic products growing by 68%.
- The Aerospace and Defense segment delivered a top line of INR 256 million, with a 28% year-on-year growth, and new clients like Saab and Triumph Aerospace were added.
- Sansera Engineering Ltd (BOM:543358) has a strong order book of INR 16.9 billion, with 63% from international business, indicating robust future growth prospects.
Negative Points
- The company faced higher logistics costs due to issues on the international freight side, impacting overall expenses.
- There was a 20% degrowth in the Swedish subsidiary, affecting the consolidated growth figures.
- The demand for small cars in the domestic market is on the lower side, and the industry is experiencing heightened levels of inventory.
- One of the key customers in the two-wheeler segment reduced business, impacting the HCV segment despite overall growth.
- The EV segment is facing cost pressures, and the growth rate has slowed down compared to previous years, with some customers postponing their EV launches.
Q & A Highlights
Q: Sir, my first question is, if I just look at the continuous order book increases have been seeing, probably compared to the last year, we did about close to INR8.5 billion order, where in this time in the first quarter, the increases have been probably slightly softer than what we had for the entire year. So how do we think in terms of the scale-up, if we -- depending upon how your discussions are playing out, do you believe at an annual level, we will still be sort of having some of those numbers we have seen in the past? Or has there been any change given the global slowdown if you can share some thoughts there?
A: Thank you Siddhartha. We have a very strong order book and a strong visibility into a lot of projects that we are working on. Ours is not a quarter-to-quarter kind of order book acquisition, we work on long-term projects, both on customer addition as well as increasing product portfolios. And we are very, very confident that across all our segments, including aerospace, defense, our Swedish subsidiary and also our international business, we definitely would like to achieve a number which will be higher than the previous year's addition into the thing. There's a lot of visibility. We are working on a lot of projects. Of course, the timing of each of this varies because the customers take this in their own project timing. So -- but I'm very clear and we are quite confident that we will achieve numbers which are high -- which will be higher, if not equal to the previous year's order booking.
Q: Great to hear that, sir. Sir, second question is If I look at now the revenue side, earlier last quarter, we had said that we probably will still look to grow at least 20% this year on the revenue side. Do we still sort of assume that holds even after first quarter? Or you believe there is some change to that?
A: See, as of now, I do not want to jump into any immediate conclusion while our -- if you look at our growth, while year-on-year, we have posted on a consol basis, a growth of about 13%. But on a stand-alone basis, Sansera has grown by almost 16.8%, almost 17% on our product sales. We have had a degrowth of about 20% in our Swedish subsidiary. And very flattish kind of performance from our Fitwel, our another domestic, they grew by about around 2%. But if you really look at Sansera as a stand-alone, we have grown by almost 17% in our product sales category. While I would be cautious to say that international business is looking in the second half of this year especially the international business looks to be slightly worrisome, but overall basis, because of our increased productionization of all our new developments which have started giving us commercial revenue and also strong growth in two-wheeler sector, which is where we have significantly higher participation, I would still do not want to jump into any change in numbers, but we are quite cautious and we have -- we keep ourselves cautiously optimistic on this year's performance.
Q: I just have one question with regard to MMRFIC. So is there a manufacturing, what the value addition from Sansera side? Is it more to connect MMRFIC with, let's say, other customers? Or are we also going to get into the manufacturing of the semiconductor parts?
A: Yes, as far as their core competency is concerned, as we have previously told they are into pure play electronics and software, they are into manufacturing and designing and manufacturing of radars, millimeter wave radars. So as far as Sansera is concerned, we definitely would want to add value to their current capabilities. So while the Radar has got all the electronic elements, Radar also would have mechanical elements like a seeker radar would have antennas with [full chassis, the jingles]. All these things are part of our manufacturing process. So at an appropriate time when this gets into full March production and MMRFIC now with the backing of Sansera are looking at full radar integration, which would involve mechanical elements as well. So our interest and our contribution will be in this space. But along with this, going forward, we think that with our expertise, we will be able to give our customers full offering on both electronics and mechanical elements together. But this is more strategic for Sansera because apart from what support that we give them in terms of manufacturing expertise, we also bring in a lot of management bandwidth and financial sites so that they can participate in bigger projects and acquire such projects. So after our participation in -- or our investment in the MMRFIC, they've been able to set up a world-class cleanroom facility with a lot of manufacturing capabilities added into PCB manufacturing, very high-end cleanroom, where they have actually they have been able to attract a lot of interest, including defense and space sectors, we have been working on very, very interesting projects.
Q: So I had probably two questions. One was on the profitability front. So we have this medium-term target of reaching 20% in kind of margins. So if you just look at the historical numbers, we have not done that kind of margins earlier. So two, three years down the line, if we look at the key segments that we're indicating that we will grow fast. One is auto agnostic, where I think the margins are broadly similar range. Second would be aerospace. Now aerospace, again, two, three years down the line, should not be more than 8%, 10% of the book. So what are the levers that you're expecting which would help us in terms of margin? And secondly, on the aluminum forging side, so any indication you can give in terms of scale and profitability we can have in this particular business? And why are some of your competitors in the forging space are not willing to enter this aluminum forging segment yet? So yes, your thoughts on this will be helpful there.
A: Yes. Neel, I will take this call first and then maybe our CFO, Vikas, can add into add this thing. So of course, we clearly understand that while we have set ourselves targets on working towards 20% margin expansion, we very clearly understand that these are not going to come very easy. We need to have a clear strategy. As an organization, we have had clear strategy in terms of product expansion, in terms of segment expansion, in terms of a lot of productivity improvement programs through which we will work towards achieving this target. But as of now, if you really look at what are the key levers which are going to drive this, apart from what you said that focus on nonautomotive segments, which includes higher value addition sectors like industrial segment and bigger engines, aerospace, and off-road vehicles, where our participation is increasing, but we should also note a point that our international business where our margin profiles are higher compared to domestic, our order book consists of significantly higher international business share. So as we keep moving more and more towards
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
