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Schaeffler Q2CY21 call highlights (Rating: NOT RATED) - YES Securities

Posted On: 2021-07-25 07:19:25 (Time Zone: UTC)

New order wins in industrial/exports and healthy PV outlook to continue drive outperformance

- Revenues declined -6.4% QoQ to Rs12.3b outperforming underlying auto/industrial segments led by new order wins, increased after market sales and higher exports at 14% sales (v/s 8%). Mobility/industrial contributed 78%/22% to sales.

- EBITDA margins expanded 30bp QoQ to 16.9% led by cost control, RM inflation recovery and favorable mix. PAT at Rs1.28b (-8% QoQ).

Call highlights

- Exports (14% of sales) - New projects in APAC is paying off in terms of new orders. Intention is to spread beyond APAC to RoW. New products will get added to Schaeffler India and cost (due to localization) + product competence should help exports growth.

- Industrial - Aftermarket grew 8% QoQ. Railway (~5% of sales) and Wind segment grew well due to new wins and increased localization. Gaining traction in steel/mining segments too.

- EV - Schaeffler global have strong EV 2W products and in Europe have started manufacturing EV PV motors and would like to apply this knowledge in India. Schaeffler India is working with EV 2Ws on project basis for certain EV products.

- Content per vehicle - Current supply is Eur40/vehicle and target is to push up the number led by increased participation in gasoline PV (which has gone up to 70% v/s 60%), LCVs and LHB coaches from railways.

- Capex - CY21 target is Rs2.5b with higher amount in 2H v/s 1H (~Rs0.9b).

View - We believe Schaeffler to get benefitted from i) Healthy demand outlook for automotive, specially in LCVs/PVs due to its strong presence ii) Sustainable performance in industrial division and iii) New order wins in exports. However, RM headwinds are expected to impact margins in the near term. Stock currently trades at 30.9x of FY23 bloom consol EPS. Not Rated.

Shares of Schaeffler India Ltd was last trading in BSE at Rs. 6568.55 as compared to the previous close of Rs. 5821.15. The total number of shares traded during the day was 21892 in over 6950 trades.

The stock hit an intraday high of Rs. 6882.8 and intraday low of 5843.6. The net turnover during the day was Rs. 141010017.

Source: Equity Bulls

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