Highlights from the Quarter (Q2CY20):
Net Sales for Q2CY20 stood at Rs.438.9 Cr as against Rs.1,116.7 Cr in Q2CY19 (down by 60.7% YoY) and against Rs. 928.5 Cr in the previous quarter (down by 52.7% QoQ).
EBITDA for the quarter stood at Rs. (19.8) Cr as against Rs. 159.4 Cr in the corresponding quarter last year (decline of 112.4% YoY) and against Rs. 137.3 Cr in the previous quarter (decline of 114.4% QoQ). The EBITDA margin for Q2CY20 was (4.5%). Q2CY20 was the worst hit for Schaeffler India as there was a lockdown in most parts of India and the company was functional for only 26 days out of the planned 78 for the quarter. However, the company was able to minimize the impact of the crisis through cost control measures.
Net Loss for Q2CY20 was Rs. 42.5 Cr as against Rs. 82.5 Cr in Q2CY19 (decline of 151.5% YoY) and against Rs. 78.4 Cr in the previous quarter (decline of 154.2% QoQ). The Net Margin for the quarter stood at (9.7%) & the EPS stood at Rs. (13.6).
The company has developed and launched a new product in the Industrial portfolio called OPTIME, a sensor for monitoring machines and provides warning for potential incidents, reducing uptime as a result. The product was launched globally on 1 st of July 2020 and is scheduled for launch in India on October 1 st 2020
Outlook and Valuation
Q2CY20 was supposed to be the worst hit for the company, which is behind us now. We expect the next 2 quarters to be better for Schaeffler India. The Industrial segment has seen better/quicker recovery as compared to the Auto segment. However, as production and sales resumes for Auto OEMs, we expect the segment to catch up soon. For H1CY20 the company has grossed revenues of Rs. 1,367.42 Cr and we believe they can meet our forecasts for the full year. Therefore, we maintain our CY22E EPS estimates of Rs 151.40 and Net Margin of 9.7%. At a PE multiple of 32x, we maintain our BUY rating on Schaeffler India with a target price of Rs. 4,845 over an investment horizon of 18-24 months.