Frontier Springs LtdQ3 FY23Auto Components

Frontier Springs Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 1

Fundraise

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 2

→Targeting ₹160 crore sales in the current financial year, with ₹70-80 crore achieved in H1 and expecting the balance in H2.
→Expecting around ₹15 crore revenue from the Air Spring segment in FY24, growing to ₹50 crore by FY25.
→Total revenue aimed at ₹500 crore by FY27, supported by growth in coil springs, forging, and Air Spring segments.
→Forecasting 20-25% annual growth rates post FY24.
→Capacity utilization currently at ~60% for forging and ~70% for coil springs, with air spring capacity fully free and ready for expansion.
→Forging segment expected to grow faster, targeting ~45% share of ₹500 crore revenue by FY27.
→Conservative approach in estimates but confident to capitalize on new markets including defense and exports.
→EBITDA margins are expected to improve to 15-18% as revenues scale.

Category 1

→The company aims to achieve ₹500 crore revenue by FY27, growing from around ₹160 crore in FY24.
→EBITDA margin is expected to improve from around 15% in FY24 to between 15-18% in the coming years.
→Air Springs segment, with high margins (23-24% EBITDA), is expected to contribute significantly, targeting ₹50 crores revenue by FY25 and ₹150-200 crores market size in two years.
→Forging segment, currently ~30% of revenue, is growing rapidly and expected to reach 45% share by ₹500 crore revenue mark.
→Coil spring segment operates at ~15% EBITDA margin, with capacity utilisation around 70%.
→Modest CapEx planned to support growth but expected to be limited beyond current expansions.
→Company expects continuous order inflow, particularly from Indian Railways and defense sectors, supporting earnings growth.
→EPS reported highest ever in recent quarter, reflecting improving profitability trajectory.

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→The company is currently funding its capital expenditure entirely through internal accruals, with no plans to take on bank loans or financial institution debt.
→There is no mention of any new fundraising through equity in the recent transcript.
→CapEx of around ₹11-12 crores is planned, including investments in the Air Spring Division and a new 6-tonne hammer in forging, all funded internally.
→Management emphasized they are capable of managing growth and expansions through internal resources, avoiding additional debt load on the company.

Yes

→Current order book is full for the financial year, targeting ₹150 to ₹160 crores in sales for the year.
→As of Q2FY24, around ₹70 crores have been executed, with ₹80 crores expected in the remaining half of the year.
→The company mentioned continuous tender inflow from Indian Railways, wagon builders, and others, ensuring order book replenishment.
→Orders worth approximately ₹1.5 to ₹2 crores faced dispatch delay due to inspection changes but are now regularised.
→The company expects continuous order inflow and execution, with no significant order backlog pending beyond the current financial year.
→Orders for air spring segment expected to increase by ₹15 to ₹20 crores.

Yes

→Current CapEx of around Rs. 11-12 crore is underway, primarily for expanding Air Spring division and forging capacity.
→Air Spring division CapEx includes Rs. 7 crore already spent and Rs. 5 crore planned, aiming to raise production capacity to 200 coach sets per month.
→Investment in a new 6-tonne hammer in forging segment costing around Rs. 10 crore.
→CapEx funded entirely through internal accruals without additional debt.
→These investments will support ramping up production and revenue growth, targeting Rs. 500 crore top-line by FY27.
→Expansion to be completed by end of this fiscal year or early next.
→Future CapEx requirements expected to be minimal, mostly small amounts for internal requests.
→Strategic focus includes diversification into defense components and aligned with Indian Railways and ‘Make in India’ initiatives.

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