Frontier Springs hosted a conference call on Nov 7, 2023. In the conference call the company was represented by Kapil Bhatia, Managing Director.

Key takeaways of the call

In Q2FY24 both core verticals – springs and Forging – have sustained their momentum, contributing significantly to performance of the company for the period.   The witnessed this quarter are indicative of true potential of the business of the company. 

Expansion plans of the company are well underway, and it aim to conclude these enhancements by the end of this fiscal year.

Currently the company has hammers of 1 tonne and 3 tonne capacity. Ongoing installation of the 6-tonne hammer at its facility will augment operational capacity.

The company expect to close FY24 with a revenue of Rs 160 crore  and an EBITDA margin of 15%. For FY25 the company looks at a revenue of Rs 200 crore and Rs 500 crore by FY27.  The company looks at maintaining an EBITDA margin of 15-18% for FY25 and years that follows. 

Air Springs – The company have been approved as a "Developmental Source" by the Indian Railways. This accreditation empowers the company to participate in tenders comprising 20% of the Indian Railways’ requirements for Air Springs. The company is optimistic about the vertical’s contribution to overall business, with substantial order execution anticipated in the next financial year. It is in anticipation of the final nod as a "Regular source" for the supply of Air Springs to Indian Railways, which it expect to secure by Q1FY25.

Air Springs - In light of the strong demand for Air Springs, the company have decided to enhance its manufacturing capabilities, committing an additional capital expenditure of  Rs 5 crore. This investment will expand our production from 120 coach sets per month to 200, thereby aligning the Air Springs vertical’s capacity with the combined top-line potential of   Coil Springs and Forging Division.  One coach requires 4 air springs. 

Air Springs are high value and high margin business. The company having turned in a air spring sales of Rs 5 crore is expected to close with a sales of Rs 15-20 crore  for FY25.  For FY25, the air spring sales is expected to jump to Rs 50 crore with coil spring sales for FY25 being Rs 60-70 crore and forgings sales of Rs 70-80 crore.  

The outlook for its products, with the Indian Railways, is exceptionally promising.  IR was allotted 1.4 trillion to be spent on track and rolling stock infrastructure.  Wagon demand is exceeding the cumulative production capacity of the wagon producers in the country.

An capex of about Rs 10-12 crore capex is sufficient enough to support a revenue of Rs 500 crore.

Addressable market for the company (springs & forgings) per wagon is about Rs 40-50000/wagon.

Order book is about Rs 150-160 crore and the order booking is a continuous process. Consistently there is flow of tenders this gives strong order inflow visibility. The company will be having about RS 80 crore of order inflow in H2FY24.

EBITDA margin is about 15% for coil springs.

Forgings was 30% in FY23 revenue and about 40% by FY27.

The company is in talks with Alstom, Bombardier and Siemens for the metro coaches. Alstom have already inspected the production facility of the company.

Planning to get into defence segment by catering to OEMs such as BEML etc. Forgings has lot of opportunities in non railways segment.  Trail production of products for defence will start by Feb 2024 and commercial production will commence from FY25 onwards.   The company will be getting trial orders from BEML.