Any current/future new fundraising through debt or equity?

Management indicated they are working on ideas at the promoter level to raise money, which would also help reduce promoter share pledging. No finalized plan or application for fundraising has been made yet. Due to current market volatility and COVID-19 uncertainties, no fundraising is expected in the next couple of quarters. The company prefers to wait for market stabilization before making any capital raising moves. The focus remains on organic growth and improving operational performance before considering external funding.

Any current/future capex/capital investment/strategic investment?

No major CAPEX planned for the next two years as the existing capacity is sufficient up to Rs. 850-900 crores turnover (Page 9). Past investments include capacity expansion around 2018-2019 to increase capacity by about 30% (Page 9). Investments made in Lava Cast foundry, in-house diaphragm plant, and a modern automated press facility with progressive tooling for assembly (Page 8). Some hindsight that investments could have been deferred to reduce interest cost, but these were strategic and aimed at meeting future demand (Page 8). Currently focusing on stabilizing operations and improving util

Future growth expectations in sales/revenue/volumes?

The company expects visible growth in OE medium and heavy commercial vehicle industry within a quarter or two (Page 6). Production is anticipated to ramp up with two shifts operational, targeting Rs. 50 crores per month turnover, which is around 70-75% capacity utilization (Page 7). Long-term export business for Lava Cast expected conservatively between 5,000 to 8,000 metric tonnes annually, helping de-risk cyclicality (Page 6). Tractor segment business expected to reach Rs. 50 to 75 crores in OE within three years, with additional aftermarket potential (Page 13). From Q3 FY21, busines

Future growth expectations in earnings/operating earnings/profits/EPS?

Setco Automotive is confident the worst period is behind and is well positioned for recovery as the economy rebounds. Q2 standalone operations expected to break even, with EBITDA turning positive at Lava Cast possibly by Q4 FY '21. The company expects a ramp-up from Q3 FY '21, targeting Rs. 50 crores per month turnover, reflecting approx. 70-75% capacity utilization. Earnings per share and EBITDA expected to improve significantly in the coming years as demand recovers and fixed cost savings are realized. Interest coverage expected to nearly double at Rs. 600 crores turnover due to stab

Current/ Expected Orderbook/ Pending Orders?

As of August 2020, the order position in the aftermarket segment has returned to pre-COVID levels. Original Equipment (OE) industry started picking up in Q2 FY21, with expectations of no year-on-year drop from Q3 onwards. Demand in Q2 expected to be around 75%-80% of pre-COVID levels, improving further in Q3 and Q4. Company is ramping up production, moving from one shift to two shifts by August 2020, ready to meet increasing demand. New orders in the pipeline include supply of casting to OEMs like Tata Motors and Ashok Leyland, though market slowdown delayed actual buying. For lava cast divisi

Setco Automotive LtdQ1 FY21Auto Components

Setco Automotive Ltd Q1 FY21 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹14.85Market Cap: ₹199 CrSector: Auto Components

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Order

N/A

Capex

0 of 4 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

The company expects visible growth in OE medium and heavy commercial vehicle industry within a quarter or two (Page 6).
Production is anticipated to ramp up with two shifts operational, targeting Rs. 50 crores per month turnover, which is around 70-75% capacity utilization (Page 7).
Long-term export business for Lava Cast expected conservatively between 5,000 to 8,000 metric tonnes annually, helping de-risk cyclicality (Page 6).
Tractor segment business expected to reach Rs. 50 to 75 crores in OE within three years, with additional aftermarket potential (Page 13).
From Q3 FY21, business expected to pick up significantly, with expected EBITDA positivity and breakeven in Q4 for subsidiary Lava Cast (Page 14-15).
Aftermarket share predicted to increase to approximately 70% of turnover due to its resilience compared to OEM (Page 7-9).
Capacity expansion up to Rs. 850-900 crores turnover potential without major CAPEX (Page 7, 9).

Margin guidance

Category 3

Setco Automotive is confident the worst period is behind and is well positioned for recovery as the economy rebounds.
Q2 standalone operations expected to break even, with EBITDA turning positive at Lava Cast possibly by Q4 FY '21.
The company expects a ramp-up from Q3 FY '21, targeting Rs. 50 crores per month turnover, reflecting approx. 70-75% capacity utilization.
Earnings per share and EBITDA expected to improve significantly in the coming years as demand recovers and fixed cost savings are realized.
Interest coverage expected to nearly double at Rs. 600 crores turnover due to stable contribution levels (~27%).
Aftermarket business, currently about 70% of turnover, is more stable and supports growth with higher margins than OE.
Investments in product diversification (e.g., tractor segment, exports from Lava Cast) expected to contribute to future revenue and profit growth.
Overall outlook is positive with steady demand recovery, cost efficiency, and strategic expansion supporting profit growth.

See what Setco Automotive Ltd management said on margin guidance — free account, 30 seconds.

Fundraise plans

Management indicated they are working on ideas at the promoter level to raise money, which would also help reduce promoter share pledging.
No finalized plan or application for fundraising has been made yet.
Due to current market volatility and COVID-19 uncertainties, no fundraising is expected in the next couple of quarters.
The company prefers to wait for market stabilization before making any capital raising moves.
The focus remains on organic growth and improving operational performance before considering external funding.

Order book

As of August 2020, the order position in the aftermarket segment has returned to pre-COVID levels.
Original Equipment (OE) industry started picking up in Q2 FY21, with expectations of no year-on-year drop from Q3 onwards.
Demand in Q2 expected to be around 75%-80% of pre-COVID levels, improving further in Q3 and Q4.
Company is ramping up production, moving from one shift to two shifts by August 2020, ready to meet increasing demand.
New orders in the pipeline include supply of casting to OEMs like Tata Motors and Ashok Leyland, though market slowdown delayed actual buying.
For lava cast division, an order for producing approximately 12,000+ tonnes (~50% of capacity) is expected.
Tractor segment orders expected to start around Q3 end FY21, with pricing fixed.
Overall company expects to reach about Rs. 50 crores turnover per month from Q3 FY21.

See what Setco Automotive Ltd management said on order book — free account, 30 seconds.

Capex plans

No major CAPEX planned for the next two years as the existing capacity is sufficient up to Rs. 850-900 crores turnover (Page 9).
Past investments include capacity expansion around 2018-2019 to increase capacity by about 30% (Page 9).
Investments made in Lava Cast foundry, in-house diaphragm plant, and a modern automated press facility with progressive tooling for assembly (Page 8).
Some hindsight that investments could have been deferred to reduce interest cost, but these were strategic and aimed at meeting future demand (Page 8).
Currently focusing on stabilizing operations and improving utilization rather than immediate new CAPEX (Page 11, 12).
Considering strategic moves and raising funds at promoter level to reduce pledge percentage, but no finalized plans yet (Page 10).
Expansion into tractor segment with new supplies expected by Q3 FY21; also growth in exports for Lava Cast business (Pages 6-7).

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Setco Automotive Ltd Q1 FY21 Earnings Call Analysis

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