SCHAEFFLER || Consistently Performing Stocks #13
What has led to the consistency?
The aim of this series is to identify consistently performing businesses and understand a little bit more about how they are able to achieve this consistency.
Before we get into today’s stock, let me set some context regarding my research objectives. I do a weekly exercise to study and learn the business of one stock as part of my research activities as a SEBI registered RA. The primary objective is to understand the business a little bit more, figure out the key growth drivers and identify broader industry trends & patterns. Most of the research below is knowledge derived from the past Annual Reports and recent Quarterly Investor presentations. I am not an expert in this domain or industry. And more importantly, this is not a recommendation to buy the stock nor a thesis for a multibagger opportunity.
Let’s start ⬇️
Today, we will look at the key fundamentals & business of Schaeffler India Ltd.
What Has Led to This Consistency
Company Overview
Schaeffler India Ltd. is a leading manufacturer and supplier of high-precision components and systems for automotive and industrial applications. Operating four plants across India, it produces bearings, engine and transmission parts, and clutch systems under globally recognized brands like FAG, INA, and LuK.
In simple terms, Schaeffler makes components that are essential for vehicles and industrial machinery to run smoothly. Think of them as creating the "invisible" but critical parts inside engines, transmissions, and factory equipment that reduce friction, improve efficiency, and ensure reliability.
The company serves three main segments:
Automotive Technologies
Industrial Solutions
Automotive Aftermarket
providing innovative solutions for internal combustion engines as well as electric and hybrid vehicles.
Good Revenue Mix
Schaeffler India works across different sectors: Automotive Technologies (34% revenue), Vehicle Lifetime Solutions (9% revenue), and Bearings & Industrial Solutions (44% revenue), plus exports (13% revenue). This mix helps when one market struggles.
By selling to different types of customers and regions, they don't rely too heavily on any single segment, which helps smooth out the ups and downs.
R&D Connections
Schaeffler India has access to the global Schaeffler Group's research network while developing products for local needs.
They spend 6-6.5% of their yearly revenue on research, working on precision engineering, clean mobility, and digital technology.
This lets them improve current products while developing new ones for electric vehicles.
Long-time Customer Relationships
Schaeffler has built relationships with car makers and industrial clients over many years. Their customers give them high loyalty scores (8.41 in 2023) and satisfaction ratings (92%).
These old friendships mean customers have integrated Schaeffler's parts into their designs, making it hard to switch to competitors. These long relationships result in repeat orders even when the industry slows down.
Steady Aftermarket Income Streams
Schaeffler’s "Vehicle Lifetime Solutions" business provides ongoing income through maintenance, support, and digital services throughout a vehicle's life. This part of the business often does better during economic downturns when people repair rather than replace vehicles.
They have also expanded their reach through online platforms and by acquiring Koovers, an online marketplace for auto parts. Aftermarket services give them predictable income with better profit margins than their main business.
Local Supply Chain Resilience
About 80% of Schaeffler India's parts come from local sources, which protects them from global shipping problems and currency fluctuations.
They work with local suppliers to improve their capabilities without compromising on quality.
AlsoThey have multiple suppliers for critical components to reduce risk.
Strategic Adaptation to Industry Trends
Schaeffler benefits from accelerated electrification and hybrid vehicle adoption in India.
Their focus on advanced mobility and sustainable technologies positions them well to capitalize on government initiatives promoting electric mobility and clean energy.
The company is expanding its product lines for e-mobility components, enhancing digitalization across operations.
Consistency Formula
Good Revenue Mix → Business Cycle Resilience
R&D Connections + Industry Trends Alignment → Innovation Leadership
Long-time Customer Relationships + Aftermarket Services → Recurring Revenue
Local Supply Chain + Global Technology Access → Supply Chain Stability
That’s it for today. Every week, I will pick one consistently performing stock and share a little bit more about their business for learning purposes. Do subcribe if you wish to receive it in your Inbox every Saturday.
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Disclaimer: Anand Ganapathy K is a SEBI-registered Research Analyst with SEBI registration number INH000016630. This post is purely for learning purposes to understand more about the business. It does not recommend buying or selling stocks mentioned in this newsletter. Securities market investments carry market risks. Kindly review all related documents before investing.
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Thank you very much for your research report. It gives me a deep knowledge about the company.