Why Schaeffler India Share Price is Falling

With the Indian auto industry picking up steam, auto stocks have witnessed a surge. Riding this rally has been Schaeffler India.

The stock has delivered returns of 40.9% since the beginning of the financial year 2023. It is one of the best performing auto stocks this year.

But lately, the sentiment for the stock changed, showing a sharp decline.

So, what led to the sudden fall in the stock?

Sky-high valuations lead to profit booking

The company shares have been trading at a high valuation since the beginning of the financial year 2023. Therefore, the recent correction could be due to the absurd valuation of the company.

At present, the company's shares are trading at a PE (price to earning) multiple of 50.5x and a PBV (price to book value) ratio of 10.3x. The PE multiple is higher than the industry PE multiple of 29.5x.

Taking into account these valuations, it is possible that investors have booked profits. A rally was seen in the stock post the September quarter results.

The company reported a 26.1% YoY increase in net profit at Rs 2.2 bn for the September 2022 quarter. This was on the back of an increase in revenue. Revenue of the company rose 18.1% YoY to Rs 17.6 bn against Rs 14.8 bn in the year ago period.

For the financial year 2023, Schaeffler India is further ramping up capex under the Production Linked Scheme (PLI) scheme at its new plant, which will enable it to localize several of these new products for both export and EV segments.

The adoption of locally produced goods would help the business thrive, given the strong emphasis on product innovation.

Additionally, the recent investment made by the Schaeffler Group in India to create software and electronics solutions for electric vehicles will benefit the e-mobility segment of the business.

How Schaeffler India shares have performed recently

Over the last week, the company's shares are trading lower by 8.7%.

So far, in 2022, the stock is trading higher by 49.9%. Over the last year, shares of the company have soared by 80.5%.

The company touched its 52-week high of Rs 2,786.1 on 15 September 2022 and its 52-week low of Rs 2,677.6 on 29 November 2021.

About Schaeffler India

Schaeffler India Limited, previously known as FAG Bearings India, is one of India's major ball and rolling bearing manufacturers servicing the automotive and multiple core industrial segments.

The Schaeffler Group is a top provider of innovative solutions to the industrial and automotive sectors.

The business develops, produces, and distributes high-precision roller and ball bearings, engine systems, transmission components, chassis applications, clutch systems, and other machine-building production activities.

The company's three business segments -automotive, industrial, and aftermarket offer a wide variety of goods and services.

Additionally, it conducts fleet workshops for the automotive aftermarket and industrial distribution markets providing training to significant garage influencer groups.

To know more about the company, check out Schaeffler India company fact sheet and quarterly results.

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