Had a chance to speak to Rajeev (CFO) of Shivalik. He had about 40 mins for the call. Could not ask some of the questions due to time constraint. Below are some of the takeaways
Shunts
Shunts is being made through EBW. Launched in 2015-16. We have been doing EBW through 2008-09. Earlier, used to manufacture CRD (colored picture tube component). That component was manufactured through EBW. Now current sensing shunts.
Applications are in energy meters, auto, energy storage. 70% is being used in energy meters. Meter can be tempered by anyone. But after using this, it becomes very efficient. Developed markets are adopting energy meters in a big way. This is a bigger opportunity. Even in India there are big announcements by govt. 25000cr (need to check this number) meters announcement within India. Old meters being replaced by new meters.
How is our readiness in terms of product approvals, customer relationship as new age applications scale: Meters are being supplied by Havells, Schneider. We are supplying resistors to them. Our readiness is there. We are already working with these companies on bitmetals. Developing countries have just started with smart meters manufacturing. In domestic manufacturing, we are the only ones. Our relationship with the domestic players is there due to bimetals and electrical contacts. We are supply shunts. We are also ready in terms of capacity. If there is significant demand, we have the space to expand the capacity in the 2nd facility.
**Edge in Shunts/ Can others enter into EBW based shunts: Shunts may be of many types – 20-25 types. Very small components. We are not manufacturing small ones. We are manufacturing metal alloy based components. That has moat technology. Diffusion bonding, EBW are key but that is not the only thing. It has to be combined with series of processes. This is the core know how of technology. Machinery is critical. We are good with machines. Have been able to build our machines. One of our Swiss customer visited us and was very impressed with machines. These machines if you purchase from vendor would cost 10x.
Entry barriers on the type of shunts that we make: EBW is not easy. It comes to us because of bimetals experience. There are other processes also. Capex cost for machines is very high. We have our own machines. Takes long time to perfect the technology. Customer approvals also take time. Getting one big customer can take 2-3 years. Initial quantity is also small. Shivalik is an international brand now in terms of manufacturing. Many shunt manufacturers are our customers as they may take certain other types of shunts with us for ex Vishay or Permanent Magnets.
Risk of subsitution with another product. Hall current sensors vs shunts.
Current sensors are not efficient for automotive and energy meters. Efficiency of the product is not same. Not feasible in auto. Higher currency flow is needed when you start the engine.
Do you intend to manufacture relays: Customer had asked us to manufacture relays. These were getting imported. We didn’t have capacity then. We enforced Permanent Magnets to manufacture relays. It had capacity and assembling experience. Our relation with PML is good. We work closely. Would you want to go there in future? No. There are other big manufacturer of relays. Let the others manufacture. They will take shunts from us.
TAM for Shunts
Market size is $200-$230m today. We have taken certain estimates. It is also based on customer feedback and market study. TAM can grow 3x by 2030.
Energy storage – Quite optimistic about this application.
Energy meters technology is yet to evolve. Our calculation for market size is conservative.
Automotive: 1 car may be using more batteries later on. 1 BMS may have 1 or 2 shunt resistors. Will be placed on 4 nobs of batteries.
TAM is based on organic growth that we can do today.
New products in the value chain: We are open to backward or forward integration. but nothing on the table that I can talk right now.1600cr revenue target – when do you see that. We can achieve that by 2030. But tomorrow if the end industry growth is signficant, then it can be achieved earlier also in 5 years. What they need to do to get to 1600cr by 2030 – If shunts grow by 25% CAGR and rest of the business grows by 15%, company can get to 1600cr revenue by 2030.
Bimetals
Growth was significantly higher in FY23 than historical growth rate. Reasons? Seeing market share gain. Some player exited the market. China + 1 is also helping. Growth seems sustainable but shunts opportunity is bigger.
Margins when we get to 1600cr. We can improve PAT margins by 200-300bps. Looking to maintain the margins in the near term. Margins in last few years increased due to op leverage, power and manufacturing expenses, automation.
Promoter has plan to trim the stake? No plan as of now. Will share the plans in future if that is the case.
Disclosure: Invested. No transaction in last 10 days.
| Subscribe To Our Free Newsletter |
