Q3FY23 concall notes
- 588 crores of cash in the balance sheet
- Management was constantly asked on providing an index so that investors can compare Sharda’s growth against the industry growth on PV/LCV/CV. Management has for the last few concalls said that they are working on sharing an index and are close to having one. The answer was the same this time as well.
- In the CV joint venture, they are working on modularization of exhaust systems. This will allow them entry into older engine families that are in the market.
- No slowdown in CV JV revenues
- On exports, they are working on a large number of RFQs and are expecting some test orders. If the test orders succeed, then this can scale up. China +1 looks to be playing out
- In the EV joint venture, the assembled battery prototypes made by them are still in testing phase. Prototypes were readjusted to the new AIS amendments on safety.
- Management was also questioned on the high cash balance and how they want to deploy/share it. Management wants to utilize it for M&A in a power train agnostic space. Management was requested to earmark a certain amount for M&A and then look at distributing the rest to shareholders.
- The move towards CNG by OEMs in the LCV/MHCV space is neutral i.e. even though diesel exhaust systems have more content per vehicle compared to the rest, a move away from diesel to CNG may not impact the content per vehicle much for Sharda.
- Management was requested to provide a rough cut estimate of the tractor exhaust system market size now that they have TREM 4 sales in their revenue
My impression
- Not much new information from the concall.
- Even though the management has been conservative in concalls and not forthcoming on guidance till anything materializes, this time I felt disappointed when the management said that they didn’t have the quarterly and 9M revenue numbers in front of them for the CV joint venture. This is despite the CFO being there in the call. Managements usually have these numbers on their fingertips.
- Will keep watching for execution on exports and RDE in the near term. The larger potential upside due to TREM 5 is still a year away. There is value at current valuations but need to be wary if this can become a value trap.
Disclosure : Invested with a 3% allocation. Slightly reduced in the last 30 days as a part of portfolio rebalancing.
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