Shivalik Bimetal Controls hosted a conference call on May 19,
2023. In the conference call the company was represented by SS Sandhu, Chairman & ED and Rajeev Ranjan, CFO
Key takeaways of the call
Over the years the company made significant
strides of evolving landscape of technological applications. It offers
reengineering products to meet customer needs and delivers tailored solutions
to OEMs. Its focus on manufacturing excellence
with consistent quality positioned it as valued partner at various industries
and the company will maintain all these same virtues in the future as well.
Shivalik is a global leader in
next generation thermo static bimetal/trimetal electrical contacts and shunt resistors. Fostering deep relationships with leading
system manufacturers & OEMs globally. Establishing reliability with
longterm clients. Partnering with clients for bespoke applications. Expanding
mandates with existing clients towards more innovative capabilities.
Strong growth in revenue to the
tune of 30%YoY in FY23 was led by strong growth in volume with the addition of
new mandates from prominent clients. Despite cost pressures the gross margin
improved by 69 bps to 50.98% in FY23 through
astute management of raw material and processing input costs. EBITDA Margin
expanded significantly by 214 bps YoY to 24.84% in FY23, driven by manufacturing
efficiencies from greater economies of scale, and effective cost management in
a challenging global macroeconomic environment.
Witnessed solid growth across
segment. Standalone revenue in value terms of both Shunts and Bimetals grew
strongly by 20% and 26% respectively in Q4FY23 and 23% and 37% in FY23.
Geography wise Standalone Revenue mix (in Rs crore)
|
|
2303 (3)
|
2203 (3)
|
Var.(%)
|
2303 (12)
|
2203 (12)
|
Var. (%)
|
Bimetal
|
|
|
|
|
|
|
Americas
|
10.01
|
7.18
|
39
|
54.77
|
21.45
|
155
|
Europe
|
8.65
|
8.91
|
-3
|
33.23
|
27.22
|
22
|
Asia/Australia
|
38.3
|
29
|
32
|
121.34
|
104.21
|
16
|
Total
|
56.96
|
45.09
|
26
|
209.34
|
152.88
|
37
|
Shunt Resistors
|
Americas
|
31.29
|
20.57
|
52
|
114.83
|
92.1
|
25
|
Europe
|
5.22
|
4.04
|
29
|
19.91
|
16.23
|
23
|
Asia/Australia
|
16.67
|
19.62
|
-15
|
76.15
|
62.78
|
21
|
Total
|
53.18
|
44.23
|
20
|
210.89
|
171.11
|
23
|
Europe demonstrates a steady rise
for the Shunt Resistor segment for Q4FY23 & FY23. Despite weakness for
Q4FY23 Asia/Australia demonstrates a steady rise for the Shunt Resistor segment
for FY23. The Americas show a significant rise in the Thermostatic
Bimetal/Trimetal segment for Q4FY23 and FY23.
Launched just five years ago, the
Shunt Resistors business now grow to contributes around 50% of its total
business in value terms. In case of value the share between shunts and bimetal
were 50.2:49.8 in FY23. In terms of volume the mix between shunts:bimetal were
48:52 in FY23.
While the Bimetals segment
continues to be the long-term growth engine for the Company, Shunts have become
a fast growing and meaningful growth driver for Shivalik, and has emerged as an
equal to its Bimetals business within a relatively short space of time. With
multiple growth drivers propelling Shivalik forward, the Company is ideally placed
at the waypoint for the electrification of the Global Economy.
Total Global Addressable Market
of the company was USD1.23 Billion as of FY 2022 which is expected to grow at a
CAGR of about 9% to USD2.4 Billion by FY 2030.
The shunt resistors, thermostatic bimetals and electrical contacts
market is expected to reach USD 650 million, USD 350 million and USD 1400
million respectively by FY2030 from about USD 230 million, USD 350 million and
USD 800 million as of FY2022. Key growth
drivers going forward for total addressable markets are - Growing demand for
electric vehicles and charging stations; High demand due to exponential growth
in infrastructure sector; Growing demand for electric vehicles and charging
stations; High demand due to exponential growth in infrastructure sector.
The prices of raw materials
procured by Shivalik are index linked thereby reducing the risk of price
volatility. Further Shivalik is able to transfer price volatility as it enters
into back-to-back contracts with its customers. The Company has diverse set of suppliers
thereby reducing the risk of shortage of raw materials. The Company enjoys an
import-export ratio that provides a natural hedge for price fluctuation in case
of forex.
Entry into complementary market
segments - Shivalik’s strategic acquisition of CHECON’s (USA) stake in SEPPL
expands the Company’s offerings to manufacture and design Silver and Silver
Alloy based electrical contacts and assemblies. Shivalik also has a joint venture with Arcleor
Mittal Stainless & Nickel Alloys called ICS located in Indore, MP, India. Both these initiatives broaden Shivalik’s
offerings and provide entry into complementary market segments alongside
bimetal, trimetal, and shunt resistors.
The company enjoys favourable economic
moats such as efficient scale from specialization, High-switching costs for
clients and Contracts structured where
price volatility is borne by the client etc.
The company while continue to
build organic growth through building niche value added products for high growth
market segments, expanding and deepening its geographical reach (using existing
reputation and relationships as well as further
penetrating existing markets and entering new markets) for customization from
design-stage for products leading to margin improvements, is also analyzing opportunities
for meaningful inorganic growth.
Battery management system for
every vehicle will be one and roughly about 4 shunts per BMS is the normal
application.
EBITDA margin of Bimetal/shut
Reactors was about 20-25% but that of Electrical
Contacts is about 9-11%. Relative lower
margin of Electrical Contacts is largely due to higher RM component.
Growth in thermostatic bimetal is
much higher than shut reactors in Q4FY23. Bimetal is an established product for the
company for last so many decades. Starting to domestic market for long period,
the company started suppying to global markets for last 2 decades. Now getting more opportunities from customers
globally for thermostatic bimetals and this has resulted in strong growth rate
for bimetals compared to shut reactors.
Larger spread of customer base in
FY23 in case of SR compared to previous years.
As far as contract with Tier I for supply of SR, the contract not put
any limitations and the company can target all opportunities across globe.
In contacts the company is moving
to more value added products with lesser RM component, which will boost margin
going forward.
Growth for the company will be sustainable
and will continue for the company going forward even though the company don’t want
to put a number to it. The company
expects continuation of margin going forward. But with increase in volume there
will be some benefit of operating leverage benefits boosting margin.
The company added new customers
who have multiple products and presence across various geographies and the
company will introduces its various products.
Certain product the company already started supply and certain its is in
testing and there is multiple growth opportunities for the company in terms of
supply to these customers.
Of the overall supply to auto-sector
by the company, the shunt reactors for BMS is still insignificant even though
it is growing strongly.
Contribution of top 5 customer in
case of bimetals and SR is about 30% and 40% in FY23.
Internationally the company have
3 major competitors for bimetal, in case
of shut may be one or two. In domestic
the company has not competitor for the products it have presence.
The company was sole supplier for
colour picture tube industry in the country till FY19 and with collapse of that
industry the gross margin dropped in FY20.
But over the years the GM moved back to about 50% in FY22.
Key rawamterial nickel manganese
alloys here are 3-4 suppliers globally in in china, Japan and two in Europe.
The company is also using copper for which It has developed quality supplier in
India.
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