Sundram Fasteners Limited — Q3 FY25 earnings call

Call held 30 Jan 2025

Management summary

Sundram Fasteners delivered a steady Q3 FY25, characterized by strong export growth (+15% in 9M) which offset a moderate domestic market. While margins faced temporary pressure from unfavorable product mix, rising power tariffs, and mark-to-market currency hits, management remains optimistic about FY26. The company is navigating delays in EV platform launches by recalibrating revenue targets while maintaining a dominant 40-45% market share in the core fasteners business.

Highlights

  • Standalone Revenue reached ₹1,256 crores for Q3 FY25, with 9M revenue at ₹3,869 crores (+6% YoY)

  • Standalone PAT for the quarter stood at ₹120 crores, up from ₹116 crores in the corresponding quarter

  • Export revenue grew 15% YoY in 9M FY25 to ₹1,174 crores, outperforming domestic growth

  • EBITDA margin for Q3 was 16.1%, slightly lower than the 9M average of 16.8% due to product mix and power costs

  • Market share in Indian fasteners remains dominant at 40% to 45%

  • Wind energy segment now contributes 5-6% of total revenue, with 100% capacity utilization

  • Capex of approximately ₹300 crores incurred during the first nine months of the fiscal year

  • Management guided for an EBITDA trajectory of 17% to 18% for FY26

Concerns

  • Geopolitical Uncertainty (US/Europe)

Key financials

  1. Revenue (Standalone) ₹1,256 Cr
  2. EBITDA Margin (Standalone) 16.1%
  3. PAT (Standalone) ₹120 Cr +3.4%YoY
  4. Revenue (Consolidated) ₹1,444 Cr
  5. PAT (Consolidated) ₹130 Cr

What they filed

Q1 FY27: revenue up 19.6%, net profit up 9.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,289 1,257 1,354 1,350 1,338 +4%1,351 +7%1,502 +11%1,615 +20%
EBITDA214 203 204 222 226 +6%216 +6%234 +15%256 +15%
Net profit131 120 134 138 140 +7%122 +2%180 +34%151 +9%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Geographic Mix
    70% Domestic Revenue Share30% Export Revenue Share15% 9M Export Growth
  • Domestic OEM Segment
    37.5% Commercial Vehicles (CV) Mix40% Passenger Vehicles (PV) Mix
  • Non-Auto (Wind Energy)
    5.5% Revenue Contribution100% Capacity Utilization

Guidance & targets

Margin

  • EBITDA Margin Trajectory Margin · FY26 · Medium confidence 17-18%
    taking into account the rupee weakness and additional exports volume in FY '26, our EBITDA trajectory could be between 17% to 18%.

    — R Dilip Kumar, CFO

Revenue

  • Export Trajectory Revenue · FY25 · High confidence $180-200 million
    I think it's reasonably realistic. So, somewhere between $180 million to $200 million, definitely, it looks like we will achieve.

    — R Dilip Kumar, CFO

  • Wind Energy Revenue Share Revenue · FY26 · Medium confidence Higher single digit

    From 5-6% today

    Currently as I said we would be between 5% to 6%, and probably we will take it up to higher single digit as I mentioned.

    — R Ganesh, VP Finance & Projects

  • EV Revenue (Year 1 & 2) Revenue · FY26-FY27 · Low confidence Recalibration required

    Previously ₹200-250cr (Yr 1), ₹450-500cr (Yr 2) → Recalibration required

    Hazarding an estimate would be too premature now, but definitely there will have to be some recalibration to that.

    — S Bharathan, EVP Marketing

Volume

  • Domestic Industry Growth Volume · FY26 · Medium confidence 5-6%
    As far as the industry outlook is concerned for FY '26, the domestic segment is expected to grow at about 5% to 6%, consolidated.

    — S Bharathan, EVP Marketing

Risks & concerns

  • Geopolitical Uncertainty (US/Europe)

    high

    Potential US tariffs under the new administration and ongoing conflicts in Europe/Israel continue to cloud the export demand outlook for Class 8 trucks and European markets.

    Both cautious

  • Currency Volatility and MTM Hits

    medium

    Sharp rupee weakness in December led to mark-to-market hits on Euro/GBP receivables and derivatives, though these are expected to reverse in Q4.

    Management acknowledged

  • Rising Power Costs

    medium

    State government revisions to power tariffs and fixed elements impacted margins, including costs for group captive schemes.

    Management acknowledged

Areas of evasion (1)

  • Specific value of EV orders currently in production vs. development stage.

Q&A highlights

2 direct
EV Order Delays and US Policy Impact Partial
And as expected, the businesses have commenced with major OEMs. However, the quantum and the volumes indicated have not fructified as yet. So, there is a delay there.

Reveals that while EV projects are active, the ramp-up is slower than initially guided, necessitating a 'recalibration' of future revenue estimates.

Asked by Sahil Rohit Sanghvi

Domestic Outperformance vs Industry Direct
So, for any part from the go ahead for the development to come to fruition, depending on the nature of the part it takes anywhere between 18 to 24 months... I think post half of the next year we should be able to see things coming to be.

Explains the lag between new product development (premiumization/EV parts) and financial results, setting H2 FY26 as the timeline for visible outperformance.

Asked by Mukesh Saraf

Competitive Moat in Fasteners Direct
The significant point is, our strong tool library... we should be handling varieties of say more than 10,000 number. So, the strong tool library comes in handy to support whatever the customer wants.

Identifies the massive SKU range and proprietary tooling as the primary barrier to entry for competitors.

Asked by Rushabh Shah

2 min read 5 chapters

Detailed narrative

Export Growth Outpaces Domestic Headwinds

Sundram Fasteners saw a significant divergence between its domestic and export performance in the first nine months of FY25. While total revenue grew 6% to ₹3,869 crores, exports surged by 15% to ₹1,174 crores. Management noted that growth was robust in both volume and dollar terms, with rupee depreciation providing an additional tailwind. The company remains on track to hit its full-year export target of $180 million to $200 million, despite a 'tough year' for the European market.

Margin Compression and Cost Dynamics

EBITDA margins for the quarter dipped to 16.1% from the 9M average of 16.8%. This was attributed to a slightly unfavorable product mix and rising power costs as state governments revised tariffs and fixed elements. Additionally, a sharp currency movement in December necessitated mark-to-market (MTM) adjustments on Euro and GBP receivables. However, management expects these MTM hits to reverse in Q4 and has guided for a stronger margin trajectory of 17% to 18% in FY26 as export volumes scale.

EV Strategy: Platform Delays and Recalibration

The transition to Electric Vehicles (EV) is facing timing challenges. Management admitted that while businesses have commenced with major OEMs, the expected volumes have not yet fructified due to platform delays. Consequently, the previous guidance of ₹200-250 crores in Year 1 and ₹450-500 crores in Year 2 is being 'recalibrated.' Despite these delays, the company has completed necessary investments at Mahindra World City and Sri City, and expects better visibility by Q2 FY26.

Non-Auto Diversification: Wind Energy and Aerospace

Sundram is successfully diversifying into non-auto segments to mitigate cyclical risks. The wind energy business has reached 100% capacity utilization of installed resources, contributing 5-6% of total revenue. Management plans to push this into 'higher single digits' by FY26. Furthermore, the company is leveraging its foray into aerospace and defense to upgrade quality standards and global competitiveness, aiming to maintain its market leadership across all portfolios.

Inventory Buildup in Anticipation of Strong Q4

Borrowings increased during the quarter, driven by ₹300 crores in capex and a deliberate buildup of inventory. Management explained that this inventory at depots and overseas warehouses is in anticipation of a stronger Q4, based on customer schedules and forecasts. This buildup, along with higher receivables, led to a slight increase in interest costs, which management views as a temporary investment for upcoming growth.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Automobile and Auto Components earnings calls