Sterling Tools -
Q1 FY 25 concall and results highlights -
Revenues - 283 vs 223 cr, up 27 pc
EBITDA - 34 vs 27 cr, up 27 pc ( margins @ 12 vs 12 pc )
PAT - 18 vs 13 cr, up 38 pc
Company is the second largest manufacturer of fasteners and the largest manufacturer of MCUs in India. Has 04 manufacturing plants for fasteners and 01 plant for making MCUs
Results of SGEM ( their subsidiary that makes MCUs - Sterling GTAKE E-Mobility ) -
Revenues - 120 vs 75 cr, up 60 pc
EBITDA - 10 vs 6 cr, up 66 pc ( margins @ 8 vs 7.5 pc )
PAT - 7 vs 5 cr
Company expects that the EV penetration in the LCVs should improve once right products come to the market and that should happen shortly ( like it happened with E- 2Ws ). Company should be a big beneficiary via their subsidiary - GTAKE Mobility
Revenue contribution from top 10 customers in the SGEM is > 90 pc as the E-2Ws and 3Ws mkt is a concentrated market ( with top 4-5 players having lion’s share of the mkt )
Company’s current export share @ 3 pc. Company acknowledges it to be their weak link. They intend to take it up in future
Company has added Hyundai and Kia to their list of customers for their fasteners business. This should give a descent bump up to their base business
Have added E-3W customers to their GTAKE business. That should also help in ramping up their revenues by end of FY 25
Consolidated capex plan for FY 25 stands @ 55 cr ( almost equal split between Fasterners and MCU businesses )
In the EV segment, company aspires to sell additional range of products to their customers wef FY 26 - that should aid revenues in next FY
In the 2W - EV segment, OLA is their largest customer. Company is the single source supplier to OLA electric
An avg MCU costs aprox 8-12 pc of the cost of a two wheeler - depending on model to model
Company is the single source supplier of MCUs for all the 2-wheeler models that the company is supplying to ( this is a big deal - IMO )
Company aspires to be present in all aspects of power electronics and control electronics - as far as EV eco-system is concerned. That’s their ultimate aim and these are the areas where their new product line up will be coming from
Company has announced setting up of Greenfield capacity in India to make magnetic and electronic auto components in a JV with Yangin Electronics. Yangin is a major supplier to Kia and Hyundai Motor companies. Aim to generate a 200 cr/ yr kind of business from this initiative ( inside next 5 yrs ). A partnership with Yangin is expected to help company have firm visibility on orders from the Korean OEMs in India. Beyond the Korean OEMs, company will also target the Indian OEMs for these Electro-Magnetic components
EV business margins are likely to remain in single digits for the foreseeable future
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
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