Sample  write-ups  
 Shivalik Bimetal Control   
Vol. No. : 27    Issue No. : 44                             Friday, September 10, 2021

Niche play

Armed with niche products as well as product development capabilities backed by strong technical expertise and additional capacity, the company is well placed to capitalize on strong demand for its products triggered by strong growth of Electric vehicle industry (including allied charging infrastructure) and increased usage of electronics in automobiles, electrical and industrial industry.


Idea

Shivalik Bimetal Controls

BSE Code

513097

BSE Group

B

NSE Code

SBCL

ISIN Demat

INE386DO1027

Bloomberg

SBC.IN

Reuters

SHVB.BO

Par Value

Rs 2

52-week High/Low

Rs 214 / Rs 38

Current Price

Rs 194 on BSE and Rs 194  on NSE (as on 9 Sep 2021)



Shivalik Bimetal Control (SBCL) is engaged in the business of manufacturing and sales of thermostatic bimetal/trimetal strips& components, current sense metal strips shunts/resistors, SMD current sense resistors and other electron beam welded products.The Company specializes in joining of metals by various methods such as diffusion bonding, electron beam welding, continuous brazing and resistance welding.

The company promoted by technocrats SS Sandhu and N S Ghumman was incorporated in 1984. The promoters as end of Jun 2021 holds about 60.61% of total share-holding of the company. The company have its manufacturing unit located at Chambaghat, Solar in the state of Himachal Pradesh.

SBCL have two Joint Venture Companies [Innovative Clad Solutions; Checon Shivalik Contact Solutions] and one Associate company [Shivalik Bimetal Engineers] as on 31st March, 2021.

Operates in niche segment with low competition as well as it is single vendor to many prestigious OEMs

SBCL is one of few manufacturers of bimetal parts and shunt resistors in India. SBCL has a leading position in the bimetal sector owing to technical expertise, integrated & automated production facilities and a wide product range.

The products of the company finds application mainly in Switchgears, protective relays, metering, various Automotive Devices and Energy and Battery Management Devices and various other Electrical Electronic and Automotive Devices.

Shunt resistors are widely used in the automotive and industrial markets to detect current in high power sets. In the automotive field, the shift towards computerization and electro-mechanical systems resulting from the need to provide greater safety and efficiency along with the emergence of electric vehicles has increased number of small motors and ECUs required, driving the demand for compact shunt resistors.

Electron Beam Welded SHUNT (using Copper & Resistance Alloy strips) manufactured by the company forms an integral part of "Battery Management System" (BMS) or "Intelligent Battery Sensor" (IBS) for vehicles as well as "Electronic Energy Meter." The company have an integrated manufacturing capability from designing stage to bulk supplies. Similarly another product offering of the company i.e. Snap acting thermostat metal disc is becoming increasing popular as a cost effective protection of small motors and appliances.

The Company offers precision manufactured components specific to the application requirements of its customers. SBCL has in house stamping facility consisting of 10T, 20T, 40T, 50T stamping process that enable it to produce customize precision parts and components. Further it have its own sophisticated tool room consisting of the following machines CNC wire EDM, EDM Drill, rotary grinder, milling machine, surface grinder, drill machine and lathe machine.

SBCL given its ability to meet custom requirement, specialized ability and new product development capability have low rivalry in the domestic Indian market. Thus the company operates in a niche segment.

The Company is a single vendor to many prestigious OEMs since 1986 and has successfully met the most stringent of demands set by multiple large global organizations.

Increasing contribution to sales by Shunts

The share of shunts to the top-line is on steady rise. The contribution of Shunts that stood at 14% in FY16 increased to 31% in FY17, then to 42% in FY19 and 48% in FY20. The share of revenue from thermostatic bi-metal/tri-metal strips & parts in FY20 stood at about 52%.

Non-Indian markets contributes 60% of top-line with strong geographical diversification

The Company’s products are exported to over 40 industrialized countries around the world.The company got about 60% of its FY21 consolidated revenue outside India with 32.8% come from Americas, 13.4% from Europe and 13.9% from Others. In FY20 too non India revenue to top-line stood at 60%.

Capacity expansion projects to get completed by end CY2021

The Company is in the process of setting up additional manufacturing facilities (Unit IV) at location which is near by the Company’s existing plant. Currently the company have completed construction of Unit IV factory building and erection of P&M is currently going on. Similarly the company is constructing factory building on land adjacent to Unit I for which the factory building construction is completed and erection of plant and equipment is currently going on.

The company expects the installation of equipment will be completed and ready for trial runs at Unit I expansion and Unit IV by end of CY2021.

Growing demand for EVs & investment in charging stations to have positive impact on demand for products of the company

Products of the company find application in Electric Vehicles as well as Charging Stations.The charging stations will require both Switchgear as well as Current Sense Resistors.

The global electric vehicle market size is projected to grow from 4,093 thousand units in 2021 to 34,756 thousand units by 2030, at a CAGR of 26.8%. Factors such as growing demand for low emission commuting and governments supporting long range, zero emission vehicles through subsidies & tax rebates have compelled the manufacturers to provide electric vehicles around the world. This has led to a growing demand for electric vehicles in the market. Countries around the world have set up targets for emission reductions according to their own capacity.

EV’s had a growing demand in the covid-19 period. This led to a growing demand for EV production around the world. In the first few months, however, the production of most companies was affected due to lockdowns and logistics problems. However, post lockdowns, demand for EV’s surged as governments around the world increasingly encouraged changing to low emission fuel vehicles.

Many countries also increased their EV charging stations and hydrogen fuelling stations across their states. Overall, there wasn’t much of a loss for the electric vehicle market during the pandemic due to its increase in demand.

The Indian auto industry is expected to record strong growth in 2021-22, post recovering from effects of COVID-19 pandemic. Electric vehicles, especially two wheelers, are likely to witness positive sales in 2021-22. According to NITI Aayog and Rocky Mountain Institute (RMI) India’s EV finance industry is likely to reach Rs. 3.7 lakh crore (US$ 50 billion) in 2030. A report by India Energy Storage Alliance estimated that EV market in India is likely to increase at a CAGR of 36% until 2026.

In addition, projection for EV battery market is forecast to expand at a CAGR of 30% during the same period. This is a huge opportunity for India to not just achieve its sustainability targets but also emerge as a global EV manufacturing hub. The current trends are in favour of growth and the revised policies under the FAME-II scheme, which are already in place, are bound to increase traction in the segment.

Electrical and industrial demand growth is expected to rebound on favourable government policy

The growth of the company is directly connected with the Electrical, Electronics and Automotive Industries considering the application of the products of the company in switchgears, energy meters, industrial, electrical applications, automotive and electronic devices. The current policies and programmes of Government of India (Atmanirbhar Bharat, production linked incentive, FAME II, scrapping policy of older vehicles) as well as demographic profile of the country augur well for the long term demand growth for the products of the company.

The Government of India attributes high priority to electronics hardware manufacturing as it is an important pillar of Make in India, Digital India and Start-up India programmes. The Electrical Consumer Durables (ECD) segment in India is likely to grow owing to a demographic profile with higher disposable income, access to easy finance options, increasing electrification of rural areas, rapid urbanization and growth of nuclear families, and emerging consumer trends of ‘Home Proud’ and ‘Health & Wellness’ etc. Continuous focus on innovation to drive differentiation and creating value has provided a growth impetus to this sector. The Electronics System Design & Manufacturing (ESDM) marketing India is anticipated to increase at a CAGR of 16.1% between 2019 and 2025, owing to strong demand, supportive government policies and increased digitalization.

Similarly the global switchgear market is enrolling solid growth because of expanding access to power in developing nations and growing investments in smart grid networks in developed economies. The worldwide switchgear manufacturing market is growing because of expanded interest for cutting edge switchgear from power age and dissemination organizations and manufacturing companies. These elements alongside innovative advances, for example, smart grids and IoT technologies is expected to drive the switchgear manufacturing sector globally. The Indian switchgear market is expected to see high demand due to exponential growth in residential, commercial, and industrial sectors that the country is witnessing. With the expansion of smart grids, the need for quality power is also increasing. Therefore, for smart grids to function optimally the communication between the switchgears, other network equipment and operators also become progressively important. The Global Switchgear Manufacturing Market is expected to exceed more than US$ 137.10 Billion by 2024 at a CAGR of 6.3 % in the given forecast period.

Global Smart Meters Market is expected to witness high growth due to the rise in demand for devices in every sector. Smart meters are rapidly replacing traditional meters due to their accuracy and their proving better information. Smart meters are electronic devices that accurately monitor energy consumption. Smart meters offer a host of benefits such as reduction of meter reading cost, removing inefficiencies, disconnection and reconnection cost in billing, and re-connection costs to corporations and consumers. There are a number of factors influencing the growth of the market including fiscal incentives and appropriate policies of the government. Furthermost, the rise in investments from governments to support the smart meter installation in the end-user sectors such as industrial, residential, and commercial are increasing the growth of the global smart meter market. Global Smart Meters Market is expected to grow at about 7.3% CAGR during the forecast period, 2021–2027.

Strong infrastructure investment to boost economy, consumption growth as well as PLI scheme leading to revival of private sector investment growth, higher defence spending and growth of EVs and related infrastructure provides good opportunity for SBCL to tap into.

Good start to FY22, Operating profit margin at strong 22.5% Q1FY22

For the quarter ended Jun 2021, the consolidated sales jumped up 147% to Rs 70.31 crore albeit on low base impacted by national lockdown tocontain first wave of covid pandemic last year. The operating profit margin (OPM) stood higher at 22.5%, a jump from 11.9% in the corresponding previous period. Thus aided by higher sales as well as strong OPM the operating profit jumped up by 369% to Rs 15.85 crore. The PBT was up 549% to Rs 14.84 crore. With share of profit from associate/jv stand at Rs 0.49 crore (a swing of 0.57 crore) and nil EO expenses, the PBT after EO was up 594% to Rs 15.33 crore. With taxation stand higher by 561% to Rs 3.74 crore the PAT was up 606% to Rs 11.60 crore.

For the fiscal ended March 2021, the sales was up 9% to Rs 203.72 crore, the OPM was up at 17.7% compared to 11.1% in corresponding previous period. Thus gained by higher sales and higher OPM, the OP was up 74% to Rs 36.14 crore. The PBT more than doubled (up 101%) to stand at Rs 32. 66 crore gained further by lower interest and depreciation. The share of profit from associate was up 142% to Rs 1.67 crore and EO Expense was nil compared to an expense of Rs 0.26 crore in the corresponding previous period. Thus PBT after EO was up 100% to Rs 34.33 crore. Thus after accounting for 138% increase in taxation, the PAT was up 89% to Rs 25.49 crore.

As end of March 31, 2021 the total borrowings of the company stood at Rs 22.80 crore and the company had cash and bank balance of Rs 15.93 crore.

Outlook

As the growth of the company is correlated with the performance of electrical, electronics, and automotive industries, the key user industries are expected to see steady growth starting Q2FY22.

While increased investment by governments across the globe in infrastructure development, defence spending as well as china plus one strategy across the globe are expected to drive demand for electrical and electronics industry and cascading impact for the products of the company.

The favourable demographic profile of the country with increased disposable income and aspiration are to drive the demand for appliances and automobiles. In addition the increased preference for personal mobility and growing share of electric vehicle to drive the demand for automobiles industry in the company. Further increase in electronics in appliances and automobiles with IoT are to drive the demand for products of the company.

Investment in additional capacity and the benefits derived from product improvement, new product development or import substitution, reduction in internal rejections, cut in lead time and production efficiency are to provide growth support. Availability of natural hedge and ability to pass on the material cost to customers along with cost control initiatives are to provide margin comfort.

Valuation

We expect the company to register a consolidated EPS of Rs 10.3 in FY22 and Rs 11.3 in FY23. At current market price of Rs 194, the scrip trades at about 17.1 times of its expected FY23 EPS.

Shivalik Bimetal Controls : Consolidated Financials

 

1903 (12)

2003 (12)

2103 (12)

2203 (12P)

2303 (12P)

Sales

193.392

187.22

203.72

265.64

308.14

OPM (%)

18.4

11.1

17.7

20.6

20.6

OP

35.54

20.75

36.14

54.72

63.48

Other inc.

5.39

4.41

4.05

4.61

5.07

PBIDT

40.93

25.16

40.18

59.33

68.55

Interest

3.58

2.94

1.63

1.80

1.96

PBDT

37.35

22.22

38.55

57.54

66.59

Dep.

4.85

6.01

5.90

6.28

8.79

PBT

32.50

16.21

32.66

51.26

57.80

Share of P/L of JV and assoc cos

1.95

0.69

1.67

2.32

2.42

PBT after Share of profit fromJV

34.45

16.90

34.33

53.58

60.22

Tax

9.83

3.71

8.84

13.91

15.66

PAT

24.63

13.45

25.49

39.67

44.56

Minority Interest

0.00

0.00

0.00

0.00

1.00

Net profit (after MI)

24.63

13.45

25.49

39.67

43.56

EPS (Rs) *

6.4

3.5

6.6

10.3

11.3

* EPS is on current equity of Rs 7.6806 crore, Face value of Rs 2

EO: Extraordinary Items

EPS is calculated after excluding EO and relevant tax

Figures in Rs crore

 (P): Projections

Source: Capitaline Database



Shivalik Bimetal Controls : Consolidated Financial Results

 

2106 (3)

2006 (3)

Var. (%)

2103 (12)

2003 (12)

Var. (%)

Sales

70.31

28.51

147

203.72

187.22

9

OPM (%)

22.5

11.9

 

17.7

11.1

 

OP

15.85

3.38

369

36.14

20.75

74

Other inc.

0.85

0.69

23

4.05

4.41

-8

PBIDT

16.70

4.07

310

40.18

25.16

60

Interest

0.44

0.38

15

1.63

2.94

-45

PBDT

16.27

3.69

341

38.55

22.22

74

Dep.

1.42

1.41

1

5.90

6.01

-2

PBT

14.84

2.29

549

32.66

16.21

101

Share of P/(L) from Assoc/JV

0.49

-0.08

LP

1.67

0.69

142

PBT before EO

15.33

2.21

594

34.33

16.90

103

EO Exp

0.00

0.00

 

0.00

-0.26

-100

PBT after EO

15.33

2.21

594

34.33

17.16

100

Provn for taxation

3.74

0.57

561

8.84

3.71

138

PAT

11.60

1.64

606

25.49

13.45

89

EPS (Rs)*

#

#

 

6.6

3.5

 

* EPS is on current equity of Rs 7.6806 crore, Face value of Rs 2

# EPS is not annualised due to seasonality of business

Figures in Rs crore

Source: Capitaline Corporate Database

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