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5 Reasons Why Sansera Could Continue Speeding 🚗

Imagine being a master mechanic with a toolkit so advanced that you can fix not only cars but also aeroplanes and rocket ships. That's Sansera Engineering for you!


What started as a company making precision-engineered components for Maruti Udyog back in the early 1980s, is now a full-fledged precision-parts manufacturer for two wheelers, three wheelers, passenger cars, commercial vehicles, and even aircrafts.


But even after the massive expansion and diversification, Sansera still gets 3/4th of its revenue from supplying parts to vehicles running on Internal Combustion Engines (ICE). Now one may think of this as rather uncool, given the rapid shift to EVs.


But the story is far from that perception. In fact, Sansera has the potential to see growth in the high-teens for its ICE business. And to further top it up, it has sown the seeds for high-growth by starting to make components for not just EVs, but also aircrafts.


With 5 strong drivers in place, Sansera is heared up to continue growing - perhaps even faster than before!


1. More Outsourcing = Bigger Market

Firstly, while ICE vehicles may not have the brightest future, there is a prominent trend in the industry - that of higher outsourcing.


Original Equipment Manufacturers (OEMs) or simply vehicle manufactures are increasingly outsourcing precision components to streamline operations and focus on innovation and product development.


This outsourcing wave is beneficial for specialised players like Sansera, which can leverage its expertise and economies of scale to meet demand efficiently.


Moreover, given the rapid shift to EVs, several European forging companies are hitting the brakes on capacity expansion for ICE-specific components, resulting in more business for Sansera.


2. Higher Value Due to Premiumisation

Other than volumes increasing because of higher outsourcing, the value of components has also been going higher - giving Sansera a further boost.


As cars become more premium, the ‘content per vehicle’ changes significantly. Enhanced aesthetics and performance features nearly triple the content per vehicle, translating to higher revenue for component manufacturers like Sansera.


This premiumisation is not just a trend but a profound shift in consumer preferences, driving sustained demand for high-quality precision components.


3. Higher Share for Better R&D

But not everyone can benefit from making premium parts. After all, one would also need to up its capability game. With a strong R&D backing, Sansera has been able to nail this point as well.


Modern automobiles are shifting towards lighter, more efficient materials. Aluminium components, for example, are becoming increasingly popular due to their lightweight and high-performance characteristics.


Sansera, with its advanced manufacturing capabilities, is well-positioned to capitalise on this shift. The adoption of such materials not only enhances vehicle performance but also increases the market size for these advanced components, creating a lucrative growth avenue for the company.


4. The EV Surge

Just as the market is moving from ICEs to EVs, Sansera is too. It forayed into the EV market by developing components for EV drivetrains, rotors, and transmissions.


Additionally, it has also started focusing on making parts which go in vehicles, irrespective of whether they are ICE or EV. No matter what the engine, areas like suspension, steering and braking are pretty much the same.


From FY21 to FY24, the revenue share for Sansera from EV and tech-agnostic products surged from 5% to 12%, growing at an impressive 60% CAGR. This remarkable growth underscores Sansera's ability to innovate and adapt to market trends.


With a strong order book promising triple the FY24 segment revenue, Sansera’s EV and tech-agnostic segment is set to zoom ahead at a similar pace over the next three years as well.


5. Reaching for the Skies

And while Sansera has got its ground laid out by securing both the ICE and EV markets, it is additionally also securing the skies!


The company has diversified into the aerospace sector (5% of its FY24 revenue) by supplying high-precision components for seating, lighting, cargo handling, and more to giants like Boeing and Airbus.


Sansera’s new aerospace facility in Bengaluru, covering 10 acres, with two-thirds of the space dedicated to aerospace and one-third to defence, has the potential to generate Rs. 350 crore in annual revenue at full capacity. In FY24 alone, it achieved Rs. 110 crore of revenues.


Sansera's strong order book in this segment, comprising 1.5x FY24 segment revenue, indicates a promising future. With this burgeoning order book and its strong client relationships, this segment is forecasted to grow much higher than the rest of the company.


Summing it Up

So, what’s the bottom line? Sansera Engineering is masterfully navigating a two-lane highway.

On one side, its traditional ICE business is cruising steadily, driven by outsourcing, technological advancements, and premiumisation. On the other hand, its ventures into EVs, aerospace, and defence are accelerating at breakneck speed.


To put it in perspective, Sansera’s auto-ICE segment generated approximately 76% of the company’s revenue in FY24, down from 83% in FY21 - despite not declining. Just faster growth in new areas is what led to the composition change.

Segment

Product Portfolio

% of Revenue (FY21)

% of Revenue (FY24)

Auto - ICE

Connecting rods, Rocket arms, Crank shaft, Gear shifter forks

83%

76%

Auto - Tech Agnostic & EV

Connecting rods (non auto), Crank shaft, Stem comp

5%

12%

Non- Auto (Aerospace & Defence, Off-road, Agriculture)

Aerostructure parts, Cargo system, Door assembly, Pump barrel

12%

12%

This balance not only mitigates risks but also positions Sansera to capitalise on multiple growth avenues, whether it’s powering the vehicles of today, electrifying the rides of tomorrow, or reaching for the skies.


The strong expected earnings growth makes Sansera Engineering an exciting prospect worth keeping on your investment radar. Buckle up, because this could be one exhilarating journey you won’t want to miss!

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