Frontier Springs LtdQ1 FY24Auto Components

Frontier Springs Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Order

Yes

Capex

Yes

2 of 5 growth signals are positive.

Revenue guidance

Category 2

→Targeting Rs. 500 crores gross sales by FY26-27, up from Rs. 250 crores expected in FY25 and Rs. 150 crores in FY24.
→Current capacity supports up to Rs. 350 crores; further CAPEX will address bottlenecks to reach Rs. 500 crores.
→Ongoing capacity expansions in coil springs, forging, and air springs to meet demand growth.
→6-tonne hammer installation expected to add Rs. 15-20 crores revenue in FY25 and Rs. 50-60 crores from FY26 onwards.
→Air spring capacity currently meets 50% of Indian Railway's 7,000 coaches requirement, with plans to increase.
→Continuous inflow of orders with a robust order book of around Rs. 850 crores spanning coil springs, forging, and air springs.
→Confident in sustaining and gradually improving margins alongside volume growth.
→Growth fueled by Indian Railway's infrastructure expansion and new clients like Storm, ABB, and Siemens.

Category 3

→The company targets gross sales of Rs. 250 crores in FY25, up from around Rs. 150 crores in FY24, implying significant revenue growth.
→EBITDA margin improved to 15.34% in FY24, with management confident to maintain or improve margins in upcoming years.
→Profit after tax in FY24 grew by 79.42% to Rs. 12.99 crores, showcasing strong earnings growth momentum.
→New 6-tonne hammer installation expected to contribute Rs. 10-15 crores in FY25 and Rs. 50-60 crores in revenues from FY26 onwards, enhancing operating earnings.
→Management plans continuous capacity expansion post FY26 aiming for Rs. 500 crores gross sales by FY27, supported by incremental CAPEX of Rs. 10-20 crores to remove bottlenecks.
→EPS is expected to improve with volume growth and stable or expanding margins driven by product mix and new product introductions like air springs.
→No immediate dilution planned; liquidity enhancement only if a major growth project arises.

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→Currently, the management has no intention to increase liquidity or go to the market through public or rights issues unless they encounter a very good project requiring it.
→No current plans for fundraising via debt or equity unless a strategic need arises.
→The company is funding capacity expansion, such as the 6-tonne hammer installation and air spring capacity increase, through internal accruals and existing resources.
→No additional CAPEX is required to reach Rs.350 crores revenue; some CAPEX (Rs.10-20 crores) might be required to reach Rs.500 crores, expected after 1.5 years.
→The company already has adequate land and facilities; expansions will focus on bottlenecks rather than greenfield projects.
→No mention of new fundraising initiatives in the immediate future.

Yes

→As of the start of FY25, Frontier Springs has a strong order book valued at approximately Rs. 150 crore.
→Orders are continuously flowing due to ongoing tendering by Indian Railways, with around 4-5 new tenders daily for coil springs, forgings, and air springs.
→The company has an order book of about Rs. 850 crore in hand encompassing coil springs, forgings, and air springs.
→Execution timeline for orders is generally about 45-60 days.
→The order inflow remains robust, with around Rs. 60-70 crore in orders typically maintained, but currently elevated to Rs. 150 crore, enabling steady revenue ramp-up.
→New orders continuously replenish the order book, ensuring sustained order pipeline and revenue generation.
→Air spring orders have grown, with approximately Rs. 18 crore in revenue last year and Rs. 7 crore in the last quarter of FY24.

Yes

→Current CAPEX includes installation of a new 6-tonne hammer with a total investment of around ₹4 crore (₹2.5 crore spent so far).
→The 6-tonne hammer is expected to start contributing from Q3 FY25, adding ₹15-20 crore revenue this year and ₹50-60 crore from next year.
→An additional ₹10-15 crore CAPEX is anticipated between FY26-27 to address capacity bottlenecks and support growth from ₹350 crore to ₹500 crore revenue.
→This CAPEX will enhance capacities across coil springs, air springs, and forging segments, including coil spring machines, air spring machines, and CNC finishing machines for forging.
→Capacity expansion will be within existing land; no new land bank is required up to ₹500 crore revenue target.
→Air spring division capacity expansion of facilities and shed is underway, expected to complete in two months.
→Any further liquidity raising or market fund raising is not planned unless needed for a very significant new project.

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