Sansera Engineering

My Notes reading the concall and research :
Board of directors of Sansera Engineering Ltd. approved a fund raise of up to Rs 1,200 crore

Board Approved investment/CAPEX in MMRTFIC ( 20 CR )
MMRTFIC is a research, product development and manufacturing entity that builds sub-systems and systems for next-generation radars by leveraging machine learning with artificial intelligence for mm-wave sensors with hybrid beam-forming capabilities.

Domestic side, healthy upsurge in demand, especially on the 2-wheeler side

2-wheeler segment has been driven by driving rural economy and its positive monsoon effects.

PV side, SUVs continue to do well. However, demand for small cars is on the lower side. The industry is also seeing heightened levels of inventory.

• Precision Engineering: Sansera’s precision engineering is a common strength across all sectors they serve.
• Emerging Sectors: Success in non-auto, tech-agnostic, and xEV sectors.
• Growth: These emerging sectors expanded by 34% year-on-year this quarter.
• Auto Tech-Agnostic Products: Achieved a top line of Rs. 712 million with a 68% year-on-year growth.
• xEV Business: Grew by 29% year-on-year to Rs. 421 million, despite a reduction in business from a key 2-wheeler customer.
• EV OEMs: Facing cost pressures, leading to optimism about export potential.
• Non-Auto Business: Grew by 16% compared to Q1 FY ’24, with strong double-digit growth in all subsegments except Agriculture.
• Aerospace and Defense: Achieved Rs. 256 million in revenue, growing 28% year-on-year. Added new customers like Saab and Triumph Aerospace. Expected CAGR growth of 40-50% over the next 2-3 years.
• Off-Road Segment: Generated Rs. 302 million in revenue, with a focus on increasing wallet share in North America.
• Agriculture Sales: Recorded Rs. 161 million in revenue for the quarter.
• Industrial and Marine Engines: Seeing significant traction, expected to contribute meaningfully to the non-auto category.
• Auto ICE Segment: Revenue grew by 7.2% due to strong growth in the 2-wheeler segment and increased content per vehicle.
• Order Book: Stood at Rs. 16.9 billion as of June ’24, with 63% from international business and 37% from domestic orders.
• Capacity Utilization: Current facilities operating at 65-70% utilization, with peak utilization up to 80%.
• CAPEX: Planning Rs. 4,500 million in FY ’25 for brownfield expansion projects at existing facilities.
• CAPEX Allocation: 40-45% of CAPEX will go towards tech-agnostic and non-automotive segments.
• New 4,000-Ton Press: This will be fully commissioned by the end of H1, expanding the product portfolio in higher capacity engines and aiding in lightweight and aluminum components.
• Future Opportunities: Potential for chassis and suspension components on the aluminum side.
• Aerospace Expansion: Board approved adding a special process facility to the existing machine facility, expected to be fully utilized by FY ’27.
• Land Acquisition: Signed an MOU with the government of Karnataka to acquire 55 acres for greenfield expansion.
• CAPEX Plans: Further investments will be made in line with Board approvals, with updates to follow.

Financial Performance during the 1st Quarter of FY ’25:

• Revenue Growth: Revenue from operations increased by 13% to Rs. 7,439 million this quarter.
• Domestic and International Business: Growth came from both domestic and international markets.
• Highest Quarterly Revenues: Achieved the highest ever quarterly revenues on the domestic side.
• Gross Margin Expansion: Gross margin increased by approximately 2 percentage points, from 39.9% in Q1 FY ’24 to 41.8% in Q1 FY ’25, due to a favorable product mix.
• Employee Expenses: Increased due to annual salary hikes.
• Other Expenses: Semi-variable expenses increased with sales.
• Logistics Issues: Higher international freight costs impacted expenses.
• EBITDA: Stood at Rs. 1,275 million, up from Rs. 1,144 million in the same period last year.
• EBITDA Margins: Remained stable at 17%.

• Depreciation and Amortization: Increased to Rs. 400 million for the quarter due to continuous CAPEX and capacity building.
• PAT Margin: Maintained at stable levels.
• Profit After Tax (PAT): Closed the quarter with Rs. 501 million PAT.

1. Strong Order Book: The company has a robust order book with significant visibility into ongoing projects.

2. Long-Term Focus: They focus on long-term projects rather than quarter-to-quarter order book acquisition.

3. Confidence in Growth: They are confident of achieving higher order numbers than the previous year across all segments, including aerospace, defense, their Swedish subsidiary, and international business.

4. Project Timing: The timing of project completions varies based on customer schedules, but overall confidence remains high.

5. Revenue Growth Target:
   • Siddhartha Bera asked if the company still expects to achieve a 20% revenue growth for the year, as previously stated.
   • B R Preetham responded cautiously, noting a 13% year-on-year growth on a consolidated basis and a 16.8% growth in product sales for Sansera on a stand-alone basis.

6. Performance by Segment:
   • The Swedish subsidiary experienced a 20% decline.
   • Fitwel, another domestic segment, had a flat performance with around 2% growth.
   • Sansera’s stand-alone product sales grew by almost 17%.

7. Outlook for International Business:
   • Preetham expressed concerns about the international business outlook for the second half of the year.
   • Despite this, he highlighted strong growth in the 2-wheeler sector and new developments contributing to commercial revenue.

8. Value Addition from Sansera to MMRFIC:
   • Sansera aims to enhance MMRFIC’s capabilities in electronics and software, particularly in radar manufacturing.
   • Sansera will contribute to the mechanical elements of radars, such as antennas, chassis, and gimbals.
   • The goal is to offer a comprehensive solution combining both electronics and mechanical elements.

9. Strategic Importance:
   • Sansera’s support includes manufacturing expertise, management bandwidth, and financial oversight.
   • This support enables MMRFIC to participate in larger projects and attract interest from sectors like defense and space.
   • MMRFIC has set up a world-class cleanroom facility for PCB manufacturing, attracting significant interest.

10. Profitability and Growth Targets:
    • Neel from Valuequest Investment Advisors asked about the medium-term target of 20% margins and the growth potential in key segments.
    • Sansera’s key growth segments include auto agnostic and aerospace, with aerospace expected to contribute 8-10% of the book in 2-3 years.
    • The discussion also touched on the potential scale and profitability of the aluminum forging business and why competitors might be hesitant to enter this segment.