Sundram Fasteners has a 40% market share in domestic fasteners market.
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- About the company
- Journey Since Inception
- Board Members
- Shareholding Pattern
- Product Portfolio
- Product Segment
- Cost Structure
- Financial Parameters
- Management Key Highlights
- Strengths & Weaknesses
(A) About
Sundram Fasteners (SFL) was incorporated in 1962. It is a part of the $5 billion TVS Group, headquartered in Chennai, India. The company has also established a track record of leadership over 40 years. It is engaged in manufacturing critical high precision components such as fastners, power train components etc for the automotive, infrastructure, windmill and aviation sectors.
Company has also entered into several technical collaborations with international business houses like Neumeyer (Germany), Sinter Metal werke (Germany), General Motors (USA), Dura Automotive Group (USA), etc to ramp up its exports which is 30% of its FY23 revenue.
(B) Journey
(C) Board of Director
(E) Shareholding Pattern
(F) Product Portfolio
- High Tensile Fastners – Wind Energy Fastners, Automotive Fastners, Engine Fastners Aerospace and Aviation Fastners, etc.
- Cold Extruded Parts – Gear blanks, Transmission shafts, Cams, etc.
- Hot Forged Parts – Bevel Gear & Pinion Family, Hub and Gen 3 bearing hub rings, etc.
- Power Trains components – Turbine and output shafts, Clutch hub Sun Gear Shafts, etc.
- Pumps & Assemblies – Water pumps, Oil pumps, Mechanical Fuel, feed pumps.
- Radiator Caps – Metal Caps, Nylon Caps.
- Power metallurgy – Rotors and gears, Synchronizer hubs, bushes and structural parts, etc.
(G) Revenue Segment
(H) Cost Structure
(I) Financials
Company has grown its revenue at 7.55% in past 10 years, while PAT grew at a CAGR of 15.24%. Moreover, company’s has reduced it Debt to equity from 0.9x in 2014 to 0.2x in 2023.
(J) Management Discussion & Concall Highlights
Growth Drivers
- Government strong infrastructure push under the Gati Shakti (National Master Plan for Multimodel Connectivity) initiative logistics development and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth.
- CV industry is poised for a healthy growth and there will be adoption of alternate fueal usage also.
- Medium & Heavy Commercial Vehicles (M&HCV) industry is backbone of Indian Economy and is also undergoing technological up-gradation through the implementation of Real time Driving Emission (RDE) Norms forms April 2023.
- Furthermore, company is spending capex of Rs 350 Cr (80 Cr to be spent in FY23 in the Pondicherry plant) over 2 year for expanding capacity to manufacture wind energy fasteners.
- Company aims to ramp up its non-industrial business that manufactures fasteners for infrastructure projects like railway bridges and also for metro infra.
- In aerospace and defence industry company is divesting into aerospace and defence, which is also expected to take 2 years for full scale ramp up as these sectors usually have long lead times.
Diversification to further reduce Cyclicality
Company is diversifying its business by manufacturing fasteners and components for non-automotive industry such as infra, renewable energy, defense, aerospace and steel mill. Company has also been sucessful in increasing non automotive exposure from 17% in FY19 to 31% in FY22.
Meanwhile company has a long term target to achieve 50% of its revenue from non-automotive components by scalying industrial fastners and aftermarket sales.
Capex
Company is expected to incur a capex of Rs 1000 Cr b/w FY23-25, to add capacity across existing business lines for wind energy equipment related fasteners and also the new US based EV OEM’s.
Concall Highlights
- The company’s domestic sales contribute 70% of the revenue while Exports contribute 30% of the revenue, In the domestic sales segment 58-60% comes from OEM while 10-12% comes from Aftermarket.
- Further the domestic sales for the quarter grew by 7% both in OEM & After Market segment.
- Tractor sales grew by 7% and was affected due to unseasonal rains and unever distribution of rains. Further management expects sales to remain flat for FY24.
- Meanwhile in export side company is facing demand challenges with key customers but expects that Q3 and Q4FY24 will be better than Q2FY24.
- Moreover, as RM prices are stable and the freight prices have dropped, management expects the EBITDA to improve going forward.
- However, as of now company order book stood at Rs 4000 Cr.
(K) Strengths & Weaknesses
Strengths
(i) Leading market position in the fasteners segment, diverse product portfolio, and wide geographical reach
Sundram fasteners also continue to dominate the domestic fasteners market accounting for a sizeable market share. Meanwhile its revenue mix is healthy, with domestic sales (including OEMs and aftermarket) accounting for ~70% in fiscal 2023, and exports bringing in ~30% (including subsidiary operations).
(ii) Healthy operating efficiency
Sundram Fasteners has maintained strong focus on processes, quality improvement, and also to cost reduction, apart from continuously improving productivity. Implementation of industry-wide best practices, such as Total Quality Management, other internal automation measures, and improve operating efficiencies help products meet the rigorous standards of the clients.
Weaknesses
(i) Working capital-intensive operations
Due to the large number and different sizes of products manufactured, inventory levels are higher, relative to its peers in the automotive component space.
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References: Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.
Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.
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