My notes on the co. with some insights from Schaeffler India’s latest concall.
- Exports have been growing well since Sep 2020.
What is significant about the Sep 2020 quarter? Why did exports grow despite covid induced challenges?
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With the benefit of hindsight, in Sep 2020, the German parent, Schaeffler AG, decided to cut jobs and move manufacturing to lower cost locations (such as India).
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Exports have been growing at a much faster clip than overall sales. Rolling 4 quarter overall sales growth of 28% vs exports growing at 63%.
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Rising exports have led to a better margin profile.
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Exports are now to all the continents, including Asia Pacific and North America and South America, where they did not have a significant presence in the past.
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Their export product portfolio has been expanded as well.
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A large portion of 150 Crs Capex in the June 2022 quarter was spent to increase export capacity.
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They have a clear strategy for exports for the next few years depending on what product lines they want to manufacture in India.
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Geopolitical issues in Europe could benefit Schaeffler India.
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Scalability - To put things into perspective, Schaeffler India’s total sales (domestic + exports) were a tiny 6% of Schaeffler AG’s worldwide sales and how much of that could come to India is anybody’s guess.
It all depends on how much the parent gives to the Indian co and whether or not Schaeffler India has a cost advantage in manufacturing those products vs Schaeffler AG’s manufacturing locations outside India.
To summarize, growth is likely to come from
- New customers from new geographies
- New products
- Better margins due to an increasing share of exports.
Disc: Invested from lower levels. No transactions in the last 30 days.
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