Unfortunately I could not join the concall, however there are some important pointers to note in this business
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SPR is the sole supplier for Pistons for the CNG bike Freedom 125. Though we can debate if the CNG bikes would work or not, it shows the technological advantage SPR has over competition. They have also mentioned that other OEMs are reaching out for similar technology. They will gain market share as this blending transition continues to take place.
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SPR has an in-house facility for testing engines. This is crucial when considering the variety of fuel options in the mobility space, including Petrol, Diesel, CNG, EV, Ethanol Blending, Flex fuels, and Hydrogen (or ammonia). OEMs’ R&D budgets would be stretched thin trying to compete in multiple categories, so they would procure systems from Tier 1 suppliers. This ongoing transition is set to benefit SPR greatly. This is also why their EMFi electric motor business is interesting and can be a cross-sell product.
If gas as a percentage of our energy mix goes up, we will see more such products coming up.
- They produce the motors and motor controllers from the ground up, providing all performance characteristics to the OEM. Imagine SPR being involved in the co-development of a powertrain: given the engine specifications, they could easily add a few slides on how to make the powertrain hybrid or EV with minimal design changes and provide simulation results. ( I know I would have done that ) . This approach allows them to make an impact at the design stage of a powertrain, thereby increasing their integration and relevance.
As ethanol blending increases engines will go through significant wear and team. A very interesting video on the impact of ethanol blending in our older vehicles. This is also an opportunity for SPR.
Fundamentally the valuation is not demanding. Technically it has been consolidating for some time. Lets see if it breaks out.
Disclaimer: 6% of my PF, added during the June 4th Crash. I am heavily biased towards this business and the product.
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