Shivalik Bimetal Controls Ltd (SBCL)

Shivalik Bimetal Controls Limited Earnings Call Summary: Q2 and H1 FY 2025

This summary focuses on the key takeaways from Shivalik Bimetal Controls Limited’s earnings call for Q2 and H1 FY 2025.

Financial Performance:

• H1 FY 2025 Revenue: ₹26.77 crore, a slight decrease of 3.86% from H1 FY 2024.
• H1 FY 2025 Gross Margin: 46.57%, marking a reduction of 272 basis points compared to the previous year. This is due to the shift towards high-demand products with slightly lower margins.
• H1 FY 2025 Profit Before Tax (PBT): ₹47.24 crore, down 11.09% from H1 FY 2024, with a margin contraction of 178 basis points to 21.79%. This was influenced by rising input costs.
• H1 FY 2025 Profit After Tax (PAT): ₹35.2 crore, representing a PAT margin of 16.27%, a modest decline from the previous year.
• Sequential Growth: Q2 FY 2025 revenue grew by 2.8% over Q1 FY 2025, signaling early signs of recovery in the automotive and industrial electronics sectors.

Business Segment Performance:

• Shunt Resistors:
  • Growth expected in Q4 FY 2025 and into the next financial year, driven by existing business and new opportunities.
  • Growth is expected in India and Asia, with the Indian market showing substantial growth.
  • US market is currently in decline but is expected to improve in Q4 FY 2025.
• Bimetal:
  • Decline in revenue is attributed to lower global commodity prices for nickel and copper, and reduced demand in certain markets, particularly Europe and Asia.
  • Strong growth is expected in the Indian market due to infrastructure growth and a strong real estate market.

Margin Guidance:

• Gross margin is expected to improve to around 50% in the next financial year, assuming a better year for the shunt business.
• Improvement is driven by stabilizing raw material costs and an expected shift in product mix with a higher contribution from the shunt business.

Management Guidance for the Future:

• Focus on delivering quality growth and building on existing R&D efforts.
• Expanding into new component applications, particularly in electric vehicles and industrial applications.
• Continued commitment to innovation, quality, and customer relationships.

Key Risks in the Business:

• Global Inventory Reset: This has impacted demand over the past two quarters, particularly in the US.
• Rising Input Costs: Contributing to margin contraction.
• Dependence on Key Markets: Performance is significantly impacted by demand fluctuations in the US, India, and European markets.
• Competition: The contact business faces more competition compared to shunt resistors.

Industry Outlook:

• Automotive and industrial electronics sectors are showing early signs of recovery, with demand gradually returning.
• The smart meter market is experiencing significant growth, driven by the increasing localization of latching relay production in India.
• Infrastructure growth and a strong real estate market in India are expected to drive demand for bimetal in the switchgear industry.

Disc: Invested