I have tried to compare the scale that the management is claiming to achieve by 2030 to other trading giants from Japan and EU.

Japan is especially renown for having a trading dependent economy because it lacks many raw materials needed for industry and energy such as oil, coal, iron ore, copper, aluminum and wood. Japan must import most of these goods.

Most of these trading companies especially Japanese ones are decades old and are fairly large with buying offices in a large number of countries. This is what helps them with scale.

From glancing through their financials, a few questions come to my mind:

1. How come SG Mart would be able to achieve 30,000 Cr in sales when half of these giant companies barely reach that number. Even if their growth trajectory sustains, some competition would inevitably enter the market like Japan. Having 1000-1500 Cr capital is not that big of a moat
2. Sales realizations of a lot of these companies fluctuate along with steel prices year-on-year even though they have the advantage of having much larger reach and hedging capabilities. Once SG reaches a certain scale, it would be much harder for them to sustain their 5-10 day working capital cycle and their margins might also fluctuate.

Another question I have with investing in SG Mart is with respect to valuations. Here, you’re clearly paying for insane sales growth but since there’s no big moat, what is the exit multiple you would consider and how much of that is currently account for in the current stock price.

Shankara Building Products is also in trading business (more white label one compared to SG) and is in a sector with tailwinds (infra) but it hardly gets a PE of 16.

The valuations make sense if company is able to reach its 2030 vision and then it can give some outsized returns.

You can directly get the value from AMC website:
https://www.miraeassetmf.co.in/mutual-fund-scheme/nav-archive/mirae-asset-hang-seng-tech-etf

Lumax Auto Technologies –

Company profile –

A leading auto-ancillary company generating annual revenues > 2800 cr with last 3 yr revenues CAGR @ 37 pc. Currently operating via its 26 manufacturing facilities located in 6 states across India. Has 1 R&D and 2 engineering centers employing 350 engineers. Company has established long term relations with 20+ prominent clients in the auto Industry. At present company has 9 global JVs for various products. Company is a leader in gear shifter systems and Interior control systems

Company’s Products portfolio –

Advance Plastics –

Cockpit ( Dashboards ) and Consoles
Door pannels
Fuel Tanks
Heaplamps
Taillamps
Headliners

FY 24 revenues from this segment was 1613 cr. This segment has grown @ 60 pc CAGR in last 3 yrs. Breakdown of segmental revenues between 2W/3W, 4W, CVs stand at 23 pc, 69 pc and 8 pc respectively. Key customers include – Bajaj, M&M, Tata, MG, Toyota, VW, HMSI, Skoda, Renault, Nissan, Hero

Mechatronics –

Power window switches
Shark fin antenna
LF antenna
O2 sensor
Telematics control Unit

FY 24 segmental revenues were @ 64 cr, growing @ 115 pc CAGR in last 3 yrs ( although on a small base ). 2W/3W, 4W, CV revenue split stands @ 4 pc, 86 pc, 10 pc. Key customers include – MSIL, Honda, Toyota, Daimler

Structures and control systems –

Gear shifters
Control housings
Swing arms
Monostable E shifter

FY 24 revenues from this segment stood @ 643 cr, growing @ 12 pc CAGR in last 3 yrs. 2W/3W, 4W, CV revenue split stands @ 31 pc, 60 pc, 9 pc. Major customers include – MSIL, M&M, Toyota, Tata, Honda, Daimler, Bajaj, Piaggio

After market products –

Wiper blades
Filters
Gear Knobs
Mirrors
Engine Oils, Lubricants
Horns

FY 24 segmental revenues stood @ 397 cr, growing @ 16 pc CAGR in last 3 yrs. Company operates via a wide dealer network of 575 dealers selling across 27k retail touchpoints

Company’s manufacturing plants –

Mehsana ( Gujarat ) – 1 plant
Pune, Nashsik, Walunj ( Maharashtra ) – 10 plants
Manesar and Gurugram ( Haryana ) – 8 plants
Pantnagar ( Uttarakhand ) – 3 plants
Bhiwadi ( Rajasthan ) – 1 plant
Bengaluru ( Karnataka ) – 3 plants

R&D center @ Manesar, Engineering centers in Pune

Q1 FY 25 updates –

Revenues – 756 vs 632 cr, up 20 pc
EBITDA – 105 vs 88 cr, up 20 pc ( margins flat @ 14 vs 14 pc YoY )
PAT – 32 vs 22 cr, up 43 pc ( PAT margins @ 4.2 vs 3.5 pc YOY )

Segment wise revenue breakdown –

Advanced Plastics – 420 vs 371 cr, up 13 pc
Mechatronics – 28 vs 11 cr, up 160 pc
Structures and Control systems – 165 vs 147 cr, up 12 pc
Aftermarket – 84 vs 83 cr, up 1 pc
Others – 59 vs 19 cr, up 215 cr

Customer wise sales breakup –

M&M – 25 pc
Bajaj – 16 pc
Maruti Suzuki – 8 pc
After Mkt – 13 pc
Honda 2W – 5 pc
Tata – 5 pc
All others – 28 pc

Personal observation – – company’s 2 largest customers – Bajaj Auto and M&M are witnessing continued strong sales momentum in Q2 as well

There was no Capex in Q1. Capex outlay planned for rest of FY 25 stands @ 120-140 cr. Current cash on books stands @ 416 cr which is greater than their long term debt of 391 cr

Company had acquired 75 pc stake in IAC international’s India business in Q4 FY 23. IAC is a major supplier of interior and exterior systems and components like – Instrument panels, Cockpits, Consoles, doors and trim systems to M&M, Maruti Suzuki, VW India and Volvo-Eicher CVs

Out of the total capex outlay, 50 pc is likely to be spent on expanding IAC’s facilities

In the aftermarket segment, the OEMs are becoming more aggressive to garner a larger share of pie in the sales of spares ( through their own service networks ). However, the company still believes that it should be able to clock double digit growth in Aftermarket segment in FY 25

Company is guiding for a full year consolidated sales growth of 15-20 pc. A lot of company’s growth is coming from new product ( cars ) launches by OEMs. Should be able to sustain EBITDA margins in the 13-14 pc band for full FY ( like they did in Q1 )

Company has seen a huge growth in content per vehicle @ 4X over the last 5 yrs. They believe, there is still enough headroom for growth. However, next leg of growth now should come from selling to more OEMs / broader set of car/2W models

Mechatronics is one area which should keep growing strongly ( although on a smaller base )

Total debt ( long term + short term ) as on 30 Jun stands @ 660 cr

Rough break down of planned Capex this yr – IAC- 60 to 70 cr, Structure and Control systems – 30 cr, Mechatronics – 30 cr

Disc: initiated a tracking position, looks promising, not SEBI registered, biased, not a buy/sell recommendation

(post deleted by author)

Is management allowed to speak about stock prices ?