I was screening for growth stocks and came across Frontier Springs. Interestingly, this company is from my home town Kanpur.
The company is an approved supplier of Hot Coiled Springs and Air Springs to Indian Railways.
Air Springs are used in LHB coaches which are used in trains like Vande Bharat, Rajdhani express, etc.
Frontier is 1 of the 3 approved suppliers of Air Springs to Indian Railways. On the back of strong demand, management is guiding for Rs 240-250 crore gross sales in FY 25 against Rs 135 crore in FY 24.
Below, we have shared notes from Q2 FY 25 con-call of the company.
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Frontier Springs – Notes from Q2 FY 25 concall
- Revenue Growth: The company reported Rs 52.24 crores in revenue for Q2 FY25, marking a 59.49% increase year-over-year
- Profit After Tax (PAT): Increased 155.30% YoY to Rs 7.29 crores
- Annual Guidance: Expected gross revenue of Rs 240-250 crores in FY25 and Rs 300 crores in FY26
- Future Growth Projections: The company anticipates reaching Rs 500 crores in revenue by FY27, without significant CAPEX
- Margin Stability: EBITDA margins expected to remain between 18-20%
- Coil Springs:
- Experienced strong demand, driven by increased production of LHB (Linke Hofmann Busch) coaches
- Benefitted from stable raw material costs and emergency procurement orders
- Forging Division:
- A new six-ton hammer installation is underway, with trial production expected soon
- Orders from Indian Railways for forging products will start reflecting in financials from Q4 FY25
- Air Springs:
- Demand remains robust, supported by a healthy order book
- Positioned to meet the growing requirement for LHB coaches
- Indian Railways Expansion: Increased production of passenger coaches (from 6,000 to 10,000 per year) and freight wagons (from 10,000 to 30,000 per year) ensures continued demand for Frontier Springs’ products
- Long-Term Demand Visibility: The company foresees no slowdown in the next 3-4 years due to increased rail infrastructure spending
- Competition: The air spring market has only three approved suppliers, limiting new competition in the short term
- Current Utilization: Running at 65-70% capacity across segments
- Short-Term Bottlenecks: Minor CAPEX of Rs 5-7 crores planned to resolve production constraints
- Maximum Revenue Potential: The existing asset base can support up to Rs 500 crores in revenue by FY27
- New Customers: Working with Alstom, Siemens, and Bombardier to supply locally under the Make in India initiative
- Metro Projects: Developing customized air springs for different metro manufacturers
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Disclaimer: This is not a recommendation to buy/sell any of the stocks mentioned above. The securities quoted are for illustration only and are not recommendatory.
Ekansh Mittal
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