Summary
Sundram Fasteners Limited - Q3 FY26 Earnings Call Summary Thursday, January 29, 2026, 11:00 AM IST
Event Participants
Executives 3 R. Dilip Kumar (CFO), R. Ganesh (VP Finance & Projects), S. Bharathan (EVP Marketing)
Analysts 6 Aditya (Happy to Invest), Amar Ahil (Radian Capital), Amar Maurya (Lucky Investments), Anuj Sehgal (Manas Capital), Mukesh Saraf (Avendus Spark), Varun Arora (Emkay Global Financial Services)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹1,359 crores | Flat YoY; strong domestic growth of +18% offset by moderating exports due to US tariff pressures. |
| PBT (Before Exceptional) | ₹174 crores | +13.7% YoY from ₹153 crores; reflects better control over fixed and variable costs despite tariff impacts. |
| Exceptional Item | ₹11 crores | One-time provision related to the impact of the new Labour Code. |
| PAT (9-Month) | ₹401 crores | +5% YoY from ₹382 crores; supported by robust domestic OE and aftermarket performance. |
| EBITDA Margin (9M) | 17.3% | Improved from ~16% levels; management targeting 18% in the intermediate term. |
| Gross Margin | ~60% | Stable at the Raw Material Cost (RMC) stage; slightly lower after adjusting for inventory movements. |
| Export Revenue % | 25% | Down from historical levels of 30-33% due to North American demand contraction and tariffs. |
| Domestic Segment Mix | 62% OE, 13% Aftermarket | OE segment driven by M&HCV, Passenger Vehicles (PV), and Tractors. |
| Capacity Utilization | ~60% | Varies by line; fasteners/ICE lines at +70% while EV/powertrain lines are sub-50%. |
Geographic & Segment Commentary
- Domestic Market: Registered 18% growth across OE and aftermarket segments. Growth is balanced across M&HCV/Engines (35% of domestic), Cars/MUV (40%), and Tractors (10-12%), with management expecting to outpace industry growth by 200 bps.
- Exports (North America): Revenue share dropped from 70% to ~61% of total exports. Performance impacted by tariffs (25-50% depending on steel content) and a slowdown in the North American ICE and EV segments.
- Exports (Europe & ASEAN): Revenue share increased to 25% of exports. Management is aggressively de-risking by pursuing new RFQs in Poland, Romania, Sweden, and the UK to mitigate US tariff pressures.
- Non-Auto Segments: Now accounts for 38% of total revenue. Includes Wind Energy (scaling to ₹500cr/annum), Aerospace (growing 50-60% YoY to ~₹5cr/month), and Railway fasteners (leveraging Vande Bharat modernization).
Company-Specific & Strategic Commentary
- Non-Auto Diversification: Focused on increasing non-auto share to 50% over the long term; Wind Energy and Aerospace are high-margin segments providing operating leverage.
- EV Strategy: EV project capacities are in place, but ramp-up is delayed to H2 FY27 as global programs are postponed. Equipment is currently being multi-purposed for ICE/PHEV requirements to maintain utilization.
- Import Substitution: Management is eyeing opportunities from the Quality Control Order (QCO)/BIS norms which may force domestic OEMs to shift fastener sourcing from China to local players.
- Subsidiaries: China operations seeing an uptick in construction/CV segments (80% domestic China sales); UK subsidiary (Cramlington) remains cash-neutral despite a de-growth in the European truck market.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | Double-digit (>10%) | Based on market feedback and domestic outperformance; targeted for FY27. |
| EBITDA Margin | 18% | Targeted as export business recovers and high-margin Aerospace/Wind segments scale. |
| Capex (FY26) | ₹350 crores | Includes replacement and new capacity for wind/aerospace. |
| Capex (FY27) | ₹250 crores | ~30% for replacement; 70% for revenue-generating lines with 1:1 asset turn. |
| Segment Growth | 8-10% (CV/PV) | Industry outlook for FY27; Company aims to outperform by 2%. |
Risks & Constraints
| Risk | Context |
|---|---|
| Tariff Pressures | Exports to the US are facing duties of 25-50% on iron/steel content, impacting contribution margins. |
| EV Transition Delay | Major EV programs in North America have been postponed, leading to lower-than-projected utilization of new EV-specific lines until H2 FY27. |
| Pricing Pressure | High competition and low capacity utilization in the Chinese market are putting pressure on subsidiary margins. |
| Raw Material Costs | While RM prices have moderated, they have not returned to pre-spike levels, keeping margins below the historical 19-20% range. |
Q&A Highlights
Export Mitigation (S. Bharathan)
- Question: How is the company mitigating the drop in North American exports? (Varun Arora - Emkay)
- Answer: De-risking via Europe (Poland, Romania, Sweden) and the UK. Significant RFQs are in final stages to offset North American contraction.
EV Ramp-up (R. Dilip Kumar)
- Question: What is the status of the North American EV orders? (Varun Arora - Emkay)
- Answer: Capacity is ready, but EV pick-up is now expected only in H2 FY27 as programs were postponed. Equipment is being used for ICE/PHEV in the interim.
Margin Expansion Levers (R. Dilip Kumar)
- Question: What drives the move toward 18%+ margins? (Mukesh Saraf - Avendus Spark)
- Answer: Three levers: High-margin Aerospace scaling up, Wind Energy growth (30% YoY) providing operating leverage, and a recovery in the export mix.
Import Substitution (R. Dilip Kumar)
- Question: Will BIS/QCO norms lead to major import substitution? (Parikshit Gujarati - Nimesh)
- Answer: It is a potential opportunity as the government reviews HSN-level imports from China. However, luxury/low-volume parts may still be imported due to global supply chain ties.
Key Takeaway
Sundram Fasteners delivered a resilient Q3 FY26, characterized by a standout 18% growth in domestic markets which offset a challenging export environment currently burdened by US tariffs. While headline PAT remained flat YoY at ₹122 crores due to an ₹11 crore exceptional labor code provision, operational PBT grew 13.7%. The company is successfully diversifying its revenue mix, with non-auto segments like Wind Energy and Aerospace now contributing 38% of revenue. Strategic focus remains on de-risking the export portfolio toward Europe and awaiting the delayed EV ramp-up now slated for H2 FY27. Management has guided for double-digit revenue growth and an improved 18% EBITDA margin for FY27, backed by a ₹250 crore capex plan and strong domestic demand in M&HCV and tractors. Watch points remain the pace of export recovery and the implementation of BIS norms for import substitution.
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