Auto ancillaries are playing a crucial role in the automotive sector, especially in India. It supports vehicle manufacturing by providing essential components. India is emerging as a significant hub for auto ancillaries, driving growth in the industry. This growth is positively impacting the Indian market, enhancing its global competitiveness.
The importance of auto components is evident in the success of companies like Sansera Engineering Limited. In this article, we are presenting Sansera Engineering Limited’s robust order book, financial performance, and company segments.
Industry Overview Of Auto Components
India’s auto component industry is experiencing significant growth, strengthened by a shift in global supply chains and increasing domestic demand. This sector is a vital contributor to the economy, accounting for 2.3% of India’s GDP and providing direct employment to over 1.5 million people.
With exports projected to reach $30 billion by FY26, India’s role as a global hub for auto component sourcing is solidifying. By 2026, the auto component industry is expected to enhance its GDP contribution to 5-7% and grow to US $200 billion. It will reflect its importance in driving macroeconomic growth and shaping India’s automotive future.
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Company Overview Of Sansera Engineering
Sansera Engineering was incorporated in 1981. The company is an engineering-led integrated manufacturer of complex and critical precision-engineered components across automotive and non-automotive sectors. Sansera Engineering Limited has gained experience over the past four decades. The company has created differentiated products and diversified across product categories, both domestically and geographically.
Sansera Engineering Limited has operated 17 integrated manufacturing facilities, which include 16 plants in India and 1 plant in Sweden. It manufactures iron and steel forging products. The company also produces and distributes rocker arms, gear shifter forks, shafts, and crankshaft assemblies for the automotive and aerospace industries. Sansera Engineering Limited manufactures products that are important for two-wheelers, passenger vehicles, and commercial vehicle manufacturing.
In the Indian market, Sansera Engineering Limited is the largest supplier of connecting rods, rocker arms, and gear shifter forks in two-wheeler and light vehicle segments. In the international market, it is also one of the top 10 suppliers of connecting rods for light vehicles and commercial vehicles.
Segment Analysis
The company has diversified its wide range of products into the automotive and non-automotive sectors. In the automotive sector, the company manufactures and supplies a range of precision forged and machined components and assemblies, such as connecting rods, rocker arms, crankshafts, gear shifter forks, stem comps, and aluminum forged parts. These are helpful for the engine, braking, and suspension of the two-wheeler, passenger vehicle, and commercial vehicle verticals.
The automotive sector (ICE) has a sales mix of two-wheelers, including motorcycles (35.5%) and scooters (6.2%), passenger vehicles (19.4%), and commercial vehicles (10.1%) in Q1 FY25. The automotive sector (tech-agnostic and EV) has a sales mix of 10.2% in tech-agnostic and 6% in xEV segments in Q1 FY25.
In the non-automotive sector, the company manufactures and supplies a range of precision components for the aerospace, off-road, agriculture, and other segments, including engineering and capital goods. The non-automotive sector has a sales mix of aerospace and defence (3.7%), off-road (4.3%), agriculture (2.3%), and others (1.7%) in Q1 FY25.
The following chart shows the sales mix of the different segments of Sansera Engineering Limited.
Financial Analysis Of Sansera Engineering
Looking deeply into the financial analysis of Sansera Engineering Limited, the company’s revenue has increased by 19.84%, from ₹2346 crore in FY23 to ₹2811.4 crore in FY24. Revenue mainly comes from the top 5 customer base, which accounts for 46% of sales and is up by 160 bps YOY.
The company has earned revenue from India (69%), Europe (18%), the USA (10%), and other countries (3%). In FY24, the revenue has been divided into auto-ICE (76%), auto-tech agnostic & xEV (12%), and non-automotive sectors (12%). The revenue of the company has grown at a CAGR of 17.75% over the last four years.
Sansera Engineering Limited’s net profit has increased from ₹148.3 crore in FY23 to ₹187.5 crore in FY24, which has grown by 26.26%. The net profit of the company increased over the last five years. The company’s net profit grew at a CAGR of 23.81% over the last four years. EBITDA margin also improved as compared to the previous year, which was from 16.40% in FY23 to 17.10% in FY24. The company has maintained a margin of above 15% over the last five years.
Sansera Engineering Limited’s ROCE has increased from 15.30% to 17.10% in FY24. The company’s ROE has increased in the last three years in FY22. In FY23, the ROE decreased slightly. In subsequent years, the company has improved the ROE from 13.40% in FY23 to 14.70% in FY24. Sansera Engineering Limited’s debt-to-equity ratio has reduced slightly from 0.55x in FY23 to 0.54x in FY24.
Order Book Of Sansera Engineering
Sansera Engineering Limited had a strong order book of Rs 16.9 billion in Q1 FY25, which has increased by 6.29% as compared to Rs 15.9 billion in Q4 FY24. Out of total, 63% of orders are from the global market and 37% of orders from the domestic market.
The automotive ICE holds half of the order book for the company. In this segment, passenger vehicles and commercial vehicles hold 36%, and two-wheeler vehicles hold 15% of the total automotive ICE. Automotive Tech Agnostic holds 17% and xEV holds 17% of the order book, which has a total account of 26% of the order book. The remaining 23% of the order book is held by the non-automotive sector. In this sector, aerospace and defence hold 10% and the off-road, agricultural, and other non-automotive sectors account for 13% of the order book.
With the following chart, we can understand the diversification of the order book of the company and the different time periods.
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Future Plans Of Sansera Engineering
- The company is investing at a CAPEX of approximately Rs. 4,500 million, which includes 40–45% of CAPEX to go towards tech-agnostic and non-automotive segments, and the remaining will be auto components.
- The company will be establishing a 4000-ton press, which will help expand the product portfolio for higher-capacity engines and aid in lightweight and aluminum components in FY25.
- The company board will invest Rs 30 crore in adding a special process facility to their existing aerospace machining facility. Which will be added by the middle of FY26 and fully utilized by FY27.
- Sansera Engineering has signed an MOU with the Karnataka government to acquire 55 acres of land. This will be used for greenfield expansion over the coming years.
- Sansera Engineering Limited has made a strategic investment in MMRFIC Technology Pvt. Ltd., which has a deal size of INR 200 million.
- The company has acquired new business for its Swedish subsidiary, including larger connecting rods. It will improve the profitability of the company.
- Sansera Engineering Limited is working on multiple channels, including defense, surveillance, and space applications. The company is focused on expecting significant growth in this high-margin business segment.
- The company is focusing on expanding its aluminum forging capabilities, seeing it as crucial for lightweight powertrains.
- The company has a strong order book of Rs. 16.9 billion as of June 2024. They are aiming for 40–50% CAGR growth in aerospace and defense over the next 2-3 years.
Key Financial Metrics Of Sansera Engineering
Some of the key financial ratios of Sansera Engineering Limited are given below.
Target Price
- Axis Direct Securities has given the target price of Sansera Engineering Limited to be Rs. 1580. According to Securities, the company will maintain an EBITDA margin growth of over 20% in FY25 and FY26. It also increased capex, new orders, and customer additions for future growth.
- IDBI Capital has announced a target price of Rs. 1625. Sanseera has a strong order book and attractive evaluation and growth potential. IDBI Capital is expecting revenue and PAT CAGRs of 17% and 35%, respectively, over the period of FY24 to FY27E.
- ICICI Direct Securities has declared the target price of Sanseera Engineering Limited to be Rs. 1570. According to the securities, the company has a robust order book to help double-digit growth, a healthy ROCE profile, and a balance sheet. The securities also estimate margins increased by 50 bps for FY25E and 100 bps for FY26E.
Conclusion
We are at the end parts of the article on Sansera Engineering Limited. The company has been performing well both financially and across its various segments. Sansera Engineering Limited is actively expanding in the auto ancillaries sector, focusing on innovative solutions and strategic investments.
The company is maintaining a robust order book of Rs 16,855 million, showcasing its solid market position and demand for its products. This positions the company well for future growth, particularly in the automotive and aerospace markets. What are your thoughts on Sansera Engineering Limited’s future growth? Let us know in the comments below.
Written By Nikhil Naik
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