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

Sterling Tools is increasing engineering spend to INR 6-7 crores, a 3x increase to strengthen engineering capabilities including headcount, testing, and validation. A new Bangalore tech center has been opened for upgrading current products and developing new product lines. Incremental capex of INR 25-30 crores planned this financial year to add capacity in the fastener business, including for specific products and balancing equipment. The INR 30 crores capex is additional to previous capex plans aimed at growing beyond INR 800 crores in revenue and enabling manufacturing of new products. Capac

Future growth expectations in sales/revenue/volumes?

Fasteners business revenue growth guidance for FY24 is expected between 17% to 20%, despite a muted industry outlook. Volume growth contributes significantly, with 21% volume increase in FY23; product mix and price increases contribute around 7-8%. Robust revenue growth plans extend to FY25 and FY26, driven by new product development and increased share of business. EV component business aims to at least double revenue from FY23 levels (INR 171 crores), with capacity expansion underway (from 300,000 to 500,000 units per annum). EV business growth supported by confirmed contracts from over 15 c

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

Fasteners business revenue expected to grow 17%-20% in FY24; potential to reach full capacity revenue of INR 800+ crores with ongoing incremental capex (~INR 25-30 crores). EV business revenue targeted to at least double from INR 170 crores in FY23, with capacity expansion underway (from 300,000 to 500,000 units annually). EBITDA margins anticipated to improve: fasteners business margins around 16%; EV business margins expected to rise from 6.5-7% in FY23 to 8%-10% in FY24. Consolidated EBITDA margins will likely exceed 13% in FY24 driven by margin improvements in both segments. Return on Capi

Current/ Expected Orderbook/ Pending Orders?

Sterling Tools Limited has confirmed contracts with 15 customers in the EV segment, covering two-wheelers, three-wheelers (cargo and passenger), and LCVs. Despite fluctuations in volumes due to market and regulatory factors, the company expects order volumes to increase as the industry stabilizes. The company currently holds a 100% share of business with one of its largest customers. Three-wheelers volumes have started picking up well, with good growth noted in Q4 FY23. LCV volumes are expected to pick up from around Q3 FY24, currently selling in small quantities. The company aims to at least

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Sterling Tools LtdQ1 FY23Auto Components

Sterling Tools Ltd Q1 FY23 Earnings Call Analysis

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

Price: ₹275P/E: 29.0Market Cap: ₹951 CrSector: Auto Components

Management growth scorecard

Revenue

Category 3

Margin

Category 2

Fundraise

Order

N/A

Capex

Yes

1 of 4 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 3

→Fasteners business revenue growth guidance for FY24 is expected between 17% to 20%, despite a muted industry outlook.
→Volume growth contributes significantly, with 21% volume increase in FY23; product mix and price increases contribute around 7-8%.
→Robust revenue growth plans extend to FY25 and FY26, driven by new product development and increased share of business.
→EV component business aims to at least double revenue from FY23 levels (INR 171 crores), with capacity expansion underway (from 300,000 to 500,000 units per annum).
→EV business growth supported by confirmed contracts from over 15 customers across two-wheelers, three-wheelers, and LCVs.
→Two-wheeler segment fastener revenue grew 36% in FY23; PVs 25%, CVs 62%, and farm equipment 36%.
→Margin retention remains a priority; fasteners EBITDA margin guidance around 16% for FY24.
→Growth expected to be volume-led with a combination of new products and market share gains.

Margin guidance

Category 2

→Fasteners business revenue expected to grow 17%-20% in FY24; potential to reach full capacity revenue of INR 800+ crores with ongoing incremental capex (~INR 25-30 crores).
→EV business revenue targeted to at least double from INR 170 crores in FY23, with capacity expansion underway (from 300,000 to 500,000 units annually).
→EBITDA margins anticipated to improve: fasteners business margins around 16%; EV business margins expected to rise from 6.5-7% in FY23 to 8%-10% in FY24.
→Consolidated EBITDA margins will likely exceed 13% in FY24 driven by margin improvements in both segments.
→Return on Capital Employed (ROCE) in the EV business is strong at about 35%.
→Overall earnings growth expected to be robust, supported by faster-than-industry revenue growth across segments and ongoing product development.

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Fundraise plans

- The company has a commercial paper facility approved by the Board but has decided **not to activate commercial paper borrowing at all** due to tight scheduling and unfavorable cost compared to current short-term borrowings (5.5%-7%). - No mention of plans to raise funds through equity in the provided transcript. - Incremental capex plans of INR 25-30 crores this year are funded internally, aimed at capacity expansion and new product capabilities, indicating no immediate external fundraising need highlighted. - No explicit announcements about future fundraising via debt or equity were disclosed in the transcript. In summary, Sterling Tools Limited is currently **not pursuing new debt via commercial paper** and has not indicated any new equity fundraising plans. They plan to fund capex through internal accruals.

Order book

→Sterling Tools Limited has confirmed contracts with 15 customers in the EV segment, covering two-wheelers, three-wheelers (cargo and passenger), and LCVs.
→Despite fluctuations in volumes due to market and regulatory factors, the company expects order volumes to increase as the industry stabilizes.
→The company currently holds a 100% share of business with one of its largest customers.
→Three-wheelers volumes have started picking up well, with good growth noted in Q4 FY23.
→LCV volumes are expected to pick up from around Q3 FY24, currently selling in small quantities.
→The company aims to at least double its EV business revenue from INR 170 crores in FY23 in the near future.
→Sterling Tools anticipates a 2x growth potential in the EV business from current levels as new orders from multiple customers materialize.

Capex plans

Yes

→Sterling Tools is increasing engineering spend to INR 6-7 crores, a 3x increase to strengthen engineering capabilities including headcount, testing, and validation.
→A new Bangalore tech center has been opened for upgrading current products and developing new product lines.
→Incremental capex of INR 25-30 crores planned this financial year to add capacity in the fastener business, including for specific products and balancing equipment.
→The INR 30 crores capex is additional to previous capex plans aimed at growing beyond INR 800 crores in revenue and enabling manufacturing of new products.
→Capacity expansion ongoing in the EV component business from 300,000 units to 500,000 units per annum.
→Continuous investment planned to maintain the first-mover advantage and strengthen the EV product portfolio beyond motor control units.

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