Schaeffler India
Schaeffler India is engaged in the manufacture of bearings and related equipment.
The company has two key busuiness segments – Automotive and industrials
The Automotive Segment contributes around 53% of total sales for Schaeffler. Schaeffler’s client portfolio boasts of leading names like Maruti Suzuki, Mahindra & Mahindra, Hyundai, Tata Motors, Denso, TVS Motors, Bajaj Auto, Bosch, Hero Motocorp, Honda, Premier, Ford Motors, John Deere, Escorts etc.
Automotive technologies products include:
Engine systems including valve trains, cam phasing, belt drives, thermal management systems for passenger and commercial vehicles
Thermal management modules are gaining prominence with increased electrification of mobility
Transmission systems include roller bearings for electric mobility, damper solutions (to reduce vibration and increase drive comfort), bearing supports, clutch & gear shift synchronisation and bearings solutions
Chassis solution include rear wheel steering, active roll control, ball screw drivers and bearing product
Partner in Space Drive project and offering Space Drive II is a digitally coordinated driving and steering system consisting of hardware and software components
Basis for autonomous driving on level 4 / 5
7500 vehicles globally using Space Drive and have clocked over 700 million KM
Partners include Audi, BMW, Bosch, Renault, Honda amongst 30 other global OEMs and technology providers
Technologies for hybrid and all-electric drive systems include electrical axle systems, hybrid drive systems and, fuel cell stack (hydrogen vehicles)
Automotive aftermarket products include components provided in automotive technologies and also provides lubricants including Engine Oil, Gear Oil, Grease, coolants and hydraulic oil
Overall automotive business is a good mix (products offered) between conventional technologies and products catering to emerging green mobility supported by R&D capabilities of parent
Industrial segment is split across wind, rail, power transmission, offroad, industrial automation, raw materials, aerospace, two-wheelers clusters
Wind cluster
Wind turbine segment offers bearings catering to rotor shafts, gearbox, generators and offers calculation and simulation programs ensure that optimum designs for bearings for wind power applications are produced
Bearings for hydro power plants
Solar PV sector is provided with slewing rings, rollers and a variety of bearings
Additionally provides services ranging from application advice, calculation & design, technical testing, tribology, and surface coating
The wind cluster segment has long runway for growth due to increasing targets for decarbonization and investments in offshore wind farms. The segment has been a contributor / driver of revenue and growth in 2020 even when automotive sector was impacted by COVID
Rail vehicles
Offers bearings, traction motors and mechatronic products
A beneficiary of 2022 union budget with a slew of railway investments and uptick in dedicated freight corridor
Power transmission systems include electric motors, industrial transmissions, pneumatics and also offers bearings for marine, public & private institutions, locks & fittings and electrical household appliances
Schaeffler Aerospace offers complex and highly integrated bearing systems and electromechanical units including the relevant sensor systems
Additionally, offers reconditioning and repair of engine bearings for aircrafts and planes
Note: Have not been covering other products as it is getting repetitive
Additionally offering Industry 4.0 solutions enabling data recording at the central points of any type of machine during operation
Products include direct drivers, rotary systems & sensors and linear systems & sensors
Launched OPTIME app for comprehensive condition monitoring of all process-critical assets across entire machine and equipments
Prolink - Modular online measuring system for vibration analysis for the universal monitoring of machines
SmartCheck - modular condition monitoring system for continuous, decentralized machine and process parameter monitoring. It can be used on machines and equipment where such monitoring was previously too costly
ConditionAnalyzer - Digital service for bearing monitoring in electric motors, pumps, fans, and entire drive trains
The company is well diversified across industries and has investments and products in place to benefit from IoT and emerging green energy
Financials
The revenue growth in 2017 has been driven by Merger of INA Bearings India Pvt Ltd. and LuK India Pvt Ltd. with Schaeffler India
Despite slowdown in the auto OEM market and industrial Capex company has maintained its margins over 15%
Zero debt and all Capex based on internal accruals
Strong ROCE over the last 10 years (again to mention cyclical business)
Other points to note:
The company were heavy on the diesel engine applications with wide product portfolio in India and with BSIV to BSVI conversion bring products from its European technology centres into India to fee the gasoline need that came up. Started to localize the manufacturing of gasoline engine products (petrol engine products) in India as the volume began to pick up
Triggers for future growth:
The race to decarbonization and green energy and infrastructure Capex by world economies has increased the demand for metals and building materials resulting in capex in companies catering to metallurgy and cement
Addition of new products through New Automotive Product division to cater to Automotive aftermarket growth. Already launched lubricants and engine oil in this regard
April 2021: announced 1200 cr Capex across 3 years has been planned. Historically, the company had a net fixed asset turnover of c.4.8x over the last ten years and assuming the same, the company has potential to add c.3,000cr – 4,000cr to topline
Investing 300Cr over next 4 years in a new facility in Hosur for manufacturing transmission components and systems for automotive and tractors
The contribution of digital services to industries and asset efficiency monitoring
Challenges:
The company does not have an established track record in trains segment and could lose on potential opportunities (as the company opines “we have to do some more work is on the trains particularly on the passenger locomotives as well as the freight trains”)
Slowdown in end markets due to unforeseen challenges
Not able to win contracts through bids
Sustained chip shortage to impact automotive sector growth
Reduction in €/vehicle ( currently at 40-42)
Note: Views strictly personal and please do your own research
Disclosure: Not a SEBI registered analyst and invested (can be biased)