Sundram Fasteners (SFL), a leader in the auto engineering industry, plans to invest Rs 350-400 crore in various projects. With a promising EV segment order book of Rs 4,000 crore, the company is actively working to increase its non-auto contribution.
During a recent investor call, SFL's management discussed the company's performance and diverse business segments. The company reported its highest quarterly profit of Rs 132 crore in the March 2024 quarter, with domestic sales reaching Rs 846 crore.
Export performance rebounded strongly to Rs 385 crore, surpassing both the previous years' corresponding quarter and Q3 of the current year. Overall revenues, excluding other income, hit a quarterly high of Rs 1,294 crore. The company saw strong material margins, with EBITDA for the quarter at 17%.
Non-Auto Segment
SFL aims to increase its non-auto segment contribution from the current 30% to 50%. Management expressed confidence in achieving this goal through a strategic focus on wind energy, industrial fasteners, and off-highway applications.
Exports and Overseas Subsidiaries
The company's export revenue for 2023-24 was around USD 170 million, with expectations of reaching USD 200 million in the coming year. Management is cautiously optimistic about Q1, citing promising industry-wide numbers from SIAM for April.
SFL's UK subsidiary is poised for another strong year despite the European truck market slowdown. The Chinese subsidiary also shows promise, with practical business plans accounting for the country's economic slowdown. Both the UK and Chinese entities are expected to maintain their positive momentum.
EV Segment
SFL is investing significantly in new parts for the growing Plug-In Hybrid, EV, and ICE vehicle sectors. The company's order book for electric vehicle sub-assemblies has increased from USD 250 million to USD 425 million.SFL manufactures and supplies hot-forged and machined parts like bevel gears and pinions. The company also supplies battery coolant caps, fasteners, and multivariate shafts for the powertrain application. "SFL is also working on an electric water pump. So, all our technologies have application toward EV requirements," said R Dilip Kumar, the CFO of Sundram Fasteners.
Wind Energy
The company plans to double its wind energy revenue to around Rs 500 crore in the next 2-3 years. SFL expects higher export revenues in the second half of the year, potentially shifting the domestic-export ratio from 70-30 to two-thirds domestic and one-third export.
Capex Plans
CFO R Dilip Kumar outlined plans to spend Rs 350-400 crore on capex, focusing on the fasteners' division for export markets and powertrain components in a special economic zone for various hybrid and electric vehicle applications. These investment in non-auto and auto exports are expected to yield higher EBITDA, with the company aspiring to return to a 19-20% EBITDA margin, from the current 17%.