Any current/future new fundraising through debt or equity?

There is no explicit mention of any current or planned fundraising through debt or equity during the call. The company is sitting on a lot of cash compared to CapEx needs and working capital. Preference for utilizing cash surplus is for M&A opportunities in powertrain agnostic products, but only if it meets strategic fit and correct valuation. No fixed timeline for any acquisitions or major investments. The company is focusing on dividend policy enhancement rather than immediate equity or debt fundraising. They are working on upward revision of dividend payout policy with a more predictable ba

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

Sharda Motor Industries plans to utilize its surplus liquid reserves for strategic growth. Preference is given to mergers and acquisitions (M&A) in powertrain agnostic products. The company is conservative and long-term oriented regarding M&A, seeking the right strategic fit and value without a fixed timeline. There are many interactions happening related to potential M&A opportunities. Additionally, there is a focus on building smaller businesses internally, such as suspension systems. No radical diversification is planned; the focus remains within core competencies related to the automotive

Future growth expectations in sales/revenue/volumes?

Sharda Motor aims to maintain or increase market share in passenger vehicles (PV) and light commercial vehicles (LCV), especially in the domestic exhaust RDE segment. Expansion into the 3-4 liter commercial vehicle market is underway, with new product development targeting this segment. Focus on becoming a top 1-2 player in the domestic tractor market, leveraging upcoming emission norms (TREM4 and TREM5). Export business is a new growth area, mainly targeting the U.S. market with a growing pipeline of RFQs and expected gradual volume growth. Suspension and EV segments show promising developmen

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

Sharda Motor Industries expects continued growth driven by new product introductions and market expansion, particularly in LCV, passenger vehicles, and tractor segments. Focus on capturing market leadership in the domestic tractor market and expanding exports, especially in emission systems for smaller tractors and gensets. Gross profit growth outpaces market volume growth, indicating rising content per vehicle. EBITDA margins expected to remain at double-digit levels (10%+), supported by favorable product mix and productivity gains from RDE products. Potential tailwind of 10-12% EBITDA per ve

Current/ Expected Orderbook/ Pending Orders?

The company has robust order books indicating positive momentum, especially in the light commercial vehicle sector (Page 4). International business development is progressing with a good pipeline of RFQs (Requests for Quotation) and initial small pilot orders expected to grow over time (Page 12). New opportunities are opening up in the 3-liter to 4-liter commercial vehicle segment, which is a fairly large market with potential orders in sight (Page 10). Emerging markets such as agriculture (tractor emission systems for TREM4) and construction equipment are also opening new order pipelines for

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Sharda Motor Industries LtdQ3 FY23Auto Components

Sharda Motor Industries Ltd Q3 FY23 Earnings Call Analysis

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

Price: ₹849P/E: 15.3Market Cap: ₹5.0K CrSector: Auto Components

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Sharda Motor aims to maintain or increase market share in passenger vehicles (PV) and light commercial vehicles (LCV), especially in the domestic exhaust RDE segment.
→Expansion into the 3-4 liter commercial vehicle market is underway, with new product development targeting this segment.
→Focus on becoming a top 1-2 player in the domestic tractor market, leveraging upcoming emission norms (TREM4 and TREM5).
→Export business is a new growth area, mainly targeting the U.S. market with a growing pipeline of RFQs and expected gradual volume growth.
→Suspension and EV segments show promising developments, including EV joint ventures and new nominations.
→Overall optimism for fiscal years 2024 and 2025 with expected solid volumes aligned with industry growth and new market opportunities like tractors and exports.
→Growth in gross profit (~20% YoY) indicates volume and content per vehicle growth outpacing industry averages (~5-7%).

Margin guidance

Category 3

→Sharda Motor Industries expects continued growth driven by new product introductions and market expansion, particularly in LCV, passenger vehicles, and tractor segments.
→Focus on capturing market leadership in the domestic tractor market and expanding exports, especially in emission systems for smaller tractors and gensets.
→Gross profit growth outpaces market volume growth, indicating rising content per vehicle.
→EBITDA margins expected to remain at double-digit levels (10%+), supported by favorable product mix and productivity gains from RDE products.
→Potential tailwind of 10-12% EBITDA per vehicle increase due to new emission norms.
→Export business is nascent but poised for gradual increase, supported by a dedicated international business team and the China Plus One trend.
→Plans for upward revision of dividend policy reflecting strong free cash flow.
→Caution expressed on macroeconomic risks but optimistic on overall business development for FY24 and FY25.

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Fundraise plans

→There is no explicit mention of any current or planned fundraising through debt or equity during the call.
→The company is sitting on a lot of cash compared to CapEx needs and working capital.
→Preference for utilizing cash surplus is for M&A opportunities in powertrain agnostic products, but only if it meets strategic fit and correct valuation.
→No fixed timeline for any acquisitions or major investments.
→The company is focusing on dividend policy enhancement rather than immediate equity or debt fundraising.
→They are working on upward revision of dividend payout policy with a more predictable band.
→No mention of plans for debt raising or secondary equity issuance in the discussed period.

Order book

Yes

→The company has robust order books indicating positive momentum, especially in the light commercial vehicle sector (Page 4).
→International business development is progressing with a good pipeline of RFQs (Requests for Quotation) and initial small pilot orders expected to grow over time (Page 12).
→New opportunities are opening up in the 3-liter to 4-liter commercial vehicle segment, which is a fairly large market with potential orders in sight (Page 10).
→Emerging markets such as agriculture (tractor emission systems for TREM4) and construction equipment are also opening new order pipelines for the company (Pages 9, 13).
→The tractor market is becoming a 3-player competitive market, and the company is optimistic about capturing a good share, signaling strong potential order inflows (Pages 13, 14).
→While no exact order book figures are disclosed, the company shows confidence in growth backed by expanding market segments and new product developments.

Capex plans

Yes

→Sharda Motor Industries plans to utilize its surplus liquid reserves for strategic growth.
→Preference is given to mergers and acquisitions (M&A) in powertrain agnostic products.
→The company is conservative and long-term oriented regarding M&A, seeking the right strategic fit and value without a fixed timeline.
→There are many interactions happening related to potential M&A opportunities.
→Additionally, there is a focus on building smaller businesses internally, such as suspension systems.
→No radical diversification is planned; the focus remains within core competencies related to the automotive sector.
→The company is also exploring opportunities in the EV segment, especially 2-wheelers and 3-wheelers, via joint ventures.
→No concrete plans for immediate monetization of assets like the Noida land but monitoring for good deals.

How does Sharda Motor Industries Ltd rank vs peers in Auto Components?

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1Sharda Motor Industries Ltd

Rev 3Mar 3

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