Schaeffler India proposes capacity expansion plan at an investment of ₹1,500 crore over the next three years
3 min read 27 Mar 2023, 09:34 PM ISTWith a market valuation of ₹43,704 Cr, Schaeffler India is a large-cap company with operations in the auto ancillary industry.
PremiumWith a market valuation of ₹43,704 Cr, Schaeffler India is a large-cap company with operations in the auto ancillary industry. With four manufacturing facilities and 11 sales offices, Schaeffler has a sizable presence in India thanks to the three well-known product names FAG, INA, and LuK. The company plans to invest ₹1,500 crore in capacity growth over the next three years, including the construction of a new facility at Hosur at a cost of ₹300 crore.
“As we forge ahead into the future, our unwavering commitment to expanding our business remains resolute. This year, we invested ₹4,990 million in Capex**, with a primary focus on enhancing the capacities for exports as well as driving our growing domestic automotive and industrial businesses. We are establishing a sustainable and future-ready plant at Hosur (Tamil Nadu) for the automotive business while our Savli (Vadodara) plant will be expanded for the Industrial business," said Schaeffler India in its annual report 2022.
“We have thoroughly reviewed our Capex strategy, taking into account various internal and external factors, and are ambitious to invest ₹15,000 million over the next three years. We will stay focused on capital efficiency to improve upon resource utilisation and realise optimised returns," the report further reads.
Commenting on the Capex strategy of Schaeffler, Abhishek Gaoshinde, Deputy Vice President - Research, Sharekhan by BNP Paribas said “While Schaeffler has been a leading player in the domestic bearing segment, it has been receiving healthy orders from the overseas market also. Exports have contributed 16.9% to its topline in CY22 compared to 12.9% in CY21. The rise in export revenue is supported by its engineering expertise and cost effective production capabilities. Schaeffler has increased its capex program from ₹1200cr to ₹1500cr over 3 years, which in our view is in line with order inflow visibility. We believe Schaeffler is one of the key beneficiaries of China +1 and Europe +1 strategies followed by MNCs. Having said that and considering Schaeffler needs to increase localization of the traded goods to fulfill domestic as well export demand, we believe that the incremental capex would augur well for the company in medium term."
Commenting on the technical outlook of the stock, Rahul Ghose, Founder & CEO – Hedged, an algorithm-powered advisory platform said “The stock Schaeffler India has been in a broad based sideways for the last 10 weeks and has a strong support just above the 2500 mark. The company, although having delivered positive results for 9 months in a row now, is still trading at a high valuation level when looking at it from the price to book value metric. The stock can give a technical bounce as it is trading near a demand zone but multiple supply levels on the stock between 2800 and 3000 levels could halt this technical pull back. Positional traders should look to initiate a buy only when the stock comes close to the 2550 mark which also coincides with the lower Bollinger bands."
Commenting on the technical outlook of the stock A R Ramachandran, Co-founder & Trainer-Tips2trades said "Strong fundamentals in terms of consistent profitability and a consistently high ROCE of above 20% makes Schaeffler India a strong buy on every correction. Technically, a Daily close above 2848 will be very bullish and investors can buy for a target of 3138 in the near term. Immediate support will be at 2738."
The shares of Schaeffler India closed today on the NSE at ₹2,787.00 apiece level, down by 0.01% from the previous close of ₹2,787.15. The stock touched a 52-week-high of ₹3,969.85 on (15-Sep-2022) and a 52-week-low of ₹1,840.85 on (25-Mar-2022).
