Sandhar Technologies – An emerging market leader

Sandhar Tech (Q3 FY24) (rough cut)

1. Start of better utilisation of assets and capex done in few past quarters. Enormous growth is to be seen. EV space progressing well. DC-DC charger, motor controller and charger.
2. Q3 – largest customers – TVS motors, 30% of revenue, Hero -19%, JCB – 9%, Honda-3% and so on.
3. Capacity utilisation – new projects of casting and sheet metal – mid level (50-60% and likely to be fully utilised by end of FY25). Proprietary items (smart locks, DC-DC converter, MCU, EV Charger) need incremental capex but small.
4. Romania is still at 10-20% capacity. Bosch, ERW? customers are planning to shift from China to this plant. Likely to reach good capacity utilisation by FY25/26.
5. EV products – one product under trial, hope to launch by 1QFY25. Engaged with 2 customers.
6. Q4 outlook – seems extremely strong.
7. Election impact – commercial vehicles may see pull back. Others will not see pull back.
8. Why set up capacity –at the call of customer. Only when customer says then only capacity is set up. Smart locks, EV: capacities are set up at the behest of the customer.
9. Others constitute: tools and dies, after market, plastics business, clutch and break panels.
10. What are the peak revenue for sheet metal – (my calculation: sheet metal in Q3 FY24 was ~105 crores, so annual run rate at 60% capacity is 400+ crores. Hence this may go to 600+ crores in FY25).
11. Most bullish on proprietary products (smart lock): mechanical lock cost was – 200-300rs, smart lock shall cost 10x. Existing business will catapult. Revenue potential (from smart locks) is 10x. 10-20m vehicles are sold domestically. (my calculation: addressable domestic market for 15m vehicles is in 3000 crores to 4000 crores range). In addition, global market is also a huge potential. My own hunch is smart lock segment itself can be equal to it its overall revenue as of today in 3 to 5 years.
12. Smart locks? for Honda, Suzuki, and Hyundai (4-wheeler) will be launched in FY25.
13. Debt is at 554 crores. Net debt target is of 100 crores next year.
14. Margins are likely to be in 10-11% range in FY25. Potential is 12 to 13% in long-term.
15. EV products capex – around on 10 crores in FY24, FY25 20-30 crores. Asset turn and margin: very asset light: MCU – output per piece supply is 1000s of rupees. Sub parts done already so capex is not required much.
16. Bought a company in 2006 – oldest die casting facility. Patent came along away. Tools for seat belt chair (not sure here) (60% market share) are made by use. Customers are extremely happy due to technology.
17. Every casting for TVS is from us.
18. Power and fuel 100 crore cost: solar power capacity: contract with solar power company – zero capex investment, 2.5 to 3 rs per unit savings expected.

Disclosure: own it and added more today.

Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.