Key takeaways of the call

Market bounced back much better than anticipated. Demand across main sectors picked up during Q3CY2020.

Strong market recovery led to normalcy in operational performance. Production resumed to normalcy. All plants operating at regular capacity level.

During the quarter, both Automotive and Industrial segments of the company have shown resounding performance, responding to strong demand from certain segments, especially the tractor, passenger vehicle, 2 wheelers, rail, industrial distribution and wind sectors.

All business verticals i.e. auto OEM, auto after market and Industrial (both OE and Industrial distribution/after-market) have performed well in Q3CY2020 compared to Q1CY2020. All segments registered strong double digit growth. Industrial growth is higher than automotive segment in Q3CY2020. Industrial performance has been strongest and even better than auto OE and Auto after-market.

Automotive showed strong recovery in Q3CY2020. Some customers in PV has had fast recovery, tractors shows continued strong production numbers. Auto After-market registered highest sales in last 7 quarters.

Once customer stared operation in June 2020, the increase in demand went up sharply. Double digit growth month on month. Able to capitalize on strong demand during this quarter.

Demand recovery in Q3 is pretty good. However the company approached the market with cautious optimism while expect tractor industry demand to be strong going forward in Q4, the PV has to be watched out considering it used to taper off after festival season. The company continue with its efforts aimed towards responding to crisis with agility and ensuring business continuity with a cautiously optimistic outlook.

Sales mix - 43% industrial (including industrial after-market); 47% is automotive (including aftermarket) and balance exports.

In Sep 2020 launched Schaefflers' new after-market brand i.e. Trupower. Got tremendous response with orders. Gamut of products targeting after market will be launched under this brand and the first product under this brand is lubricant (engine oil, gear oil, grease, coolant, hydraulic oil). The products are launched in 30 locations now and targets launch in 70 location in 2021. Manufacturing of trupower lubricant will be in India but will be backed by German technology. Currently don't want to comment how much lubricant will contribute to topline. The lubricant market though crowded, the company see opportunity as lubricant is heart for good performance of bearings and customer moving up the value chain will appreciate it.

Market sentiment in Asia pacific is still weak. Exports performance in Q3CY20 is not good compared to Q3CY19.

About 11-12% of industrial is from railways evenly spread between metro and railways.

Strict cost discipline and countermeasures, enabled achieving strong result performance during the quarter. Some of the cost savings are sustainable.

The company was agile and responsive to customers. The demand is pretty fast and come in short notice. The company also faced some challenges in manpower and supply side with vendor facing manpower issues.

Started offering BSVI range of products. Gasoline engine product as well. So Increase in content per vehicles. Initially there was higher imports. Localisation is going as per plan.

Average content per vehicle is currently around Rs 3600-3700 per vehicle and plan to take it to beyond Rs 4700 per vehicle.

The company have products in all 3 segments i.e. Engine systems, transmission systems and others. In transmission clutch performance was strong driven by tractors.

Various sectors are at various speed of recovery. Cement and steel started to show recovery even though it is not at the last year levels. Mining is good with coal production at last year level. Auto – PV has recovered strongly. 2 & 3 wheeler is on upward trend. In Sep2020 2w production crossed last year levels. CV though on recovery there is long way to go but the direction is right.