Some quick notes from Sharda Motors investor call.
(partial notes since was not able to join for first 30 minutes due to conflict):
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TREM 4 may not be significant, however from regulatory framework perspective will pave way for TREM5 which is significant for Sharda. So far, TREM 5 proposed date is April’24 however may see some delays depending on TREM 4 implementation.
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BS6 RDE is net neutral or slight positive on revenue since will require scale down of some parts and addition of new parts.
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Eberspaecher JV clocked ~40 Crs and broke even for this quarter. In general, guidance of 200 Crs. per year for break even.
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JV capacity can be augmented quickly since it’s an asset light model.
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Have been approved under PLI scheme for existing set of products. Are still studying the finer details. However, some parts from TREM 5 will fall under the beneficial category of PLI.
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Kinetic Green JV – Prototypes has been submitted and expected to have trail run in Q3/Q4. Will supply for both 3W and 2W for Kinetic. Positive is that Kinetic has now tied-up with a China based player for 2W tech. They are not replacing any existing vendor with Sharda. This is day-one business with Sharda.
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Cash Utilization – Significant 500Crs+ of cash in books. Also, expecting decent cash accrual for coming years since mostly asset light. Looking for M&A opportunities in Powertrain agnostic solutions (quoted suspension as an example).
IMHO there may not be significant incremental growth in PV side hereon since they have garnered good ~60% marketshare ex-Maruti. Immediate next leg of growth driver is CV market penetration and scale-up. Asked couple of questions to clarify CV market positioning for them:
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Question: CV Market size in value/volume terms. Who all/ how many key vendors catering to CV segment. Sharda’s relationship with each of the two major CV OEMs.
Answer: CV market size is as big as current PV market size. Predominantly two CV OEM and two vendors play. Sharda is supplying for 1-1 engine specific models for both the OEMs. -
Question: Sharda’s marketshare in CV segment was in the range of 10% -15% a year back. Is there any change to market position now?
Answer: In the range of what it was a year back (inference ~15%) -
Question: One of the CV OEM has own subsidiary into emission control products. Why would they source from Sharda?
Answer: Currently that subsidiary is manufacturing multiple parts of the emission products. Also, that sub is into other lines of manufacturing (i.e engine parts etc.) Sharda is doing canning work for them on emission control products. Going ahead Sharda can look at supplying the end to end emission control product.
[not fully convincing answer though].
- Question: Second major CV player may be working with a different vendor for the emission control products for their PV business. Would they not prefer working with the same vendor for CV side of business as well?
Answer: CV Emission solutions are much more complex then PV. Hence, vendor capability to be evaluated independently.
@nirvana_laha – Noticed that you joined the call and asked couple of questions . Please share your notes (specially for first 30 mins of the call).
Disc: No Investment
Regards,
Tarun
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