Broker’s call: Schaeffler (Buy)

Target: INR 3,328

CMP: INR 2776.60

While Schaeffler India’s operating performance for the first quarter of 2013 was below estimates, management was guided by a healthy increase in export earnings in the period ahead, supported by a strong order book, strong order book in the automotive aftermarket and continued solid performance in the rail segment. rail and infrastructure. related industries and increasing penetration in the high-value e-mobility sector.

The expected lower operating performance in the first quarter of the year to 2023 is attributed to the lack of operating leverage as well as the decrease in domestic revenue as well as export earnings on a quarterly basis. With the exception of the domestic automotive technology sector, all other sectors recorded a sequential decline in the first quarter of the year 2023.

We believe the domestic auto segment benefited from a sequential increase in OEM production during the quarter, as management denied any pricing action.

Schaeffler continues to invest in capacity building and has allocated 30 percent of its capex to repatriation/export-related capex and is targeting a localization level of 80 percent in the next 2-3 years from the current localization level of 76 percent.

The company will benefit from continuous localization, strategic expansion in the export market, and a strong footprint in the after-sales services sector. A successful entry into the supply of system solutions for electric vehicles would enhance potential profits on increasing scale and localization.