Highlights:

The Company has continued to exhibit resilient performance on the back of balanced business portfolio and judicious capex.

On industry front, the automotive production registered a growth of 17.8% in CY2022 with strong growth in the passenger vehicle and commercial vehicle segment. However, the tractors continue to see some challenges and 2-3 wheelers witnessed slowdown.

Growth in passenger vehicle is driven by easing pandemic related challenges and semiconductor shortages, while rising market demand and positive sentiments led to a strong growth in commercial vehicles. Tractors segment is seeing some moderation because of cyclical impact and demand crunch in the rural market.

The company sees budget 2023-24 announcement of increased capital investment outlay of Rs 10 lakh crore and highest ever capital outlay in Railways of Rs 2.4 lakh crore for FY2024 as a major positive.

The sale of the company has increased 18% yoy and 2% qoq in Q4CY2022. EBIT margin improved to 16.2% in Q4CY22 from 15.7% in the previous quarter and 16.1% in the corresponding quarter last year.

The free cash flows have jumped sharply by 33% to Rs 245.4 crore in Q4CY22 with the reduction in working capital.

The company has reduced working capital levels to 17% of sales in CY2022 from 18% in CY2021. The focus would be on inventory management and receivables to keep check on working capital levels.

The performance of the industrial segment was impacted due windmill equipment sector facing weak demand on account of challenges in the Europe. However, India's announcement of annual tendering for 8 GW of renewable energy for next decade and incentivisation for wind power is positive.

The company also expects the industrial segment to benefit from the budget announcement of high capex for Railways and 200 Vande Bharat trains to be positive for the segment with business wins for Vande Bharat and LHB coaches.

The railways segment contributes 4-5% of revenues.

It has continued the trajectory for business wins in both Automotive and Industrial businesses. In the automotive technologies segment, the key wins were for e-mobility solutions and wheel bearings for passenger vehicle segment and clutch systems for commercial vehicle segment.

In the automotive aftermarket segment, the focus continued on diversification and penetration through range extension.

The company has exhibited strong export performance in CY2022 with the growth of 60% gaining share in revenues to 16.6% in CY22 and 19% in Q4CY22.

The company expects relocation and localization of some products from parent company to help in improving exports. The company is continuing with export strategy and relocation strategy for bearings is progressing well.

Geography wise the exports of the company is well diversified across all continents - America, North America, Europe and Asia etc.

The capex of the company was substantially higher at Rs 183 crore in Q4CY22 up from Rs 100.5 crore in Q3CY22 and Rs 56.6 crore in Q4CY21. The capex for CY22 was higher at Rs 499 crore against an estimate of Rs 400 crore.

The company had planned capex of Rs 1000 crore for a period of CY22-CY24. Now the company has raised the capex estimate to Rs 1500 crore and plans capex of Rs 500 crore CY2023 too.

The capex for CY2023 relates to spends on relocation and capacity expansion for export. For domestic business growth the focus is on industrial segment. The company is setting up new plant in Vadodara for futuristic product in automotive segment.

In the automotive aftermarket segment the company is adding new products confirming with BS6 norms and products which are more traded.

The cost discipline and countermeasures would continue to support margins.

The wind segment contributed 10-12% of revenues in H1CY22. But weak demand due to economic sanctions due to Russia-Ukraine crisis impacted demand in H2CY22. The company expects situation may improve when sanctions are lifted or wind as a segment picks up.

The plants with high volume standard product have capacity utilization of 85-90%. Automotive plants have capacity utilization of 75-80%. Thus, the plant capacity is not the constraint for growth in CY2023.

The company remains focused on improving content per vehicle and new product launches. With EV coming in, the content per vehicle is set double.

The company expects macroeconomic and geopolitical headwinds to continue with weakened global market outlook, inflation and input cost pressures.