Shivalik Bimetal Controls Ltd (SBCL)

My Q2FY24 Earnings call notes:
(can have some discrepencies due to audio quality issues)

• Overall outlook is positive compared to last quarter. Customer engagement has increased. Might see some constraints in next two quarters due to macro enconomic factors but next financial year should be good.

• During pandemic, over stocking happened because of supply chain constraints as what we produce is a critical component. Currently we are seeing inventory correction, which is a healthy sign. Ather macro factors have minimal impact.

• Anticipating next FY, should be making at least 20 million smart meters YOY. Sizeable market share is achievable because of make in india push. Smart meters business is 10% of overall revenue. Expects this business to grow by 2X near year.

• Shunts revenue split: 40% automotive, 40% smart meters, 20% energy storage applicaitons. Within 40% smart meters: Don’t have exact number but roughly 15-20% is domestic.

• Drop in gross margins due to product mix changes, more of bimetals instead of shunts. Coming quarters will be similar. Next financial year, hopeful of things reversing. Earlier 50-50 split b/w shunts & bimetals. Will take few quarters to get back to where we were.

• Shunts revenue going down as orders drying up in short term because of macro economics, geo-political trends, inflation but confident of turnaround. Silver lining is order slowdown is because of degrowth in market. No single customer issue. Not losing out business to any other competitor.

• Current time has given us opportunity to work on process improvements, couldn’t do it before as we were running on higher capacity utilisation. Process improvements include focus on automation, detection systems, in-process inspections, expirement with technologies, detect potential faults / variations in production before end product is completed. Automation systems provide real-time data, provide batch-to-batch data, helps in analysing & determining how incoming variables impact overall quality of product. End of line online inspection. Aim is to reduce rejection, rework. cut down on manufacuting lead time. ~2% gross margin improvement target due to process improvements.

• Bimetals growing 20-25%. Capacity utilzation of bimetals: 33-34%.

• Most of the growth will come from exports.

• Other income consists of forex gain. 90% of it. 10% from small jobs we are doing for vendors.

• Expects 10-40% future growth. Huge variation in expected growth. There are certain factors beyong our control if they dont improve (which we are hopeful of improving) we will still grow by 10-12%.
  In case exports normalise, we will see growth beyond 30-35%.

• Continous projects & new product developments going on irresecptive of macro factors & slow down.

• Confident that we will maintain growth despite of slowdown in shunts division. Overall performance should be better than what we did last year. We increased capacity in bimetals division because we could forsee demand from exisitng customers & new opportutinities. Some are in development, some have materialised into business.

• Expect shunts division degrowth has bottomed out. Should remain at this level for some time and then pick up. Shunts division operating at 40% capacity utilisation.