Make In India And Capacity Expansion Will Unlock Future Opportunities

Key Takeaways

• Expanded manufacturing capacity and localization initiatives are set to strengthen margins, competitiveness, and market share through cost savings and greater scale.
  
• Investments in e-mobility, export growth, and diverse end-market exposure position the company for sustained revenue growth and reduced dependence on domestic cycles.
  
• Reliance on group exports, limited export diversification, and shifting technology trends expose Schaeffler India to stagnation, stranded investments, and margin pressures amid market transitions.

Catalysts

Engages in the development, manufacture, and distribution of high-precision roller and ball bearings, and related components worldwide.

• Significant near-term and ongoing capacity expansion-including the recent inauguration of the fifth manufacturing facility with 3x future expansion possible-positions Schaeffler India to capitalize on domestic manufacturing growth, improving economies of scale and operating leverage, which should support rising net margins and EBITDA over time.
  
• Accelerated localization efforts (local content above 78% and rising) and adoption of "Make in India" strategies are expected to lower input costs, improve competitiveness with domestic OEMs and the aftermarket, and provide access to import substitution opportunities, thereby boosting revenue growth and market share.
  
• Strategic investments and business wins in e-mobility (launch of e-axle production for Tata Harrier and growing hybrid/sensor offerings) enable Schaeffler to capture opportunities from the ongoing transition to cleaner and electrified vehicles, supporting both top-line growth and a shift toward higher-margin products.
  
• Robust export growth (23% YoY first half, particularly in Asia Pacific) plus the ability to leverage domestic plant capacity for global demand increase Schaeffler India's exposure to international markets and diversify its revenue streams, potentially smoothing cyclical domestic demand.
  
• Broad-based strength across infrastructure, railways, wind energy, and agricultural sectors-driven by India's infrastructure push and rising industrial capex-reinforces a positive long-term demand outlook for Schaeffler's industrial offerings, sustaining double-digit revenue growth and supporting higher asset utilization rates.

Schaeffler India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Schaeffler India's revenue will grow by 12.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.5% today to 13.1% in 3 years time.
• Analysts expect earnings to reach ₹16.5 billion (and earnings per share of ₹105.48) by about July 2028, up from ₹10.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹14.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 60.7x on those 2028 earnings, down from 62.8x today. This future PE is greater than the current PE for the IN Machinery industry at 33.6x.
• Analysts expect the number of shares outstanding to decline by 0.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.32%, as per the Simply Wall St company report.

Schaeffler India Future Earnings Per Share Growth

Risks

• The company's automotive exports are largely channeled to sister entities (not directly to external customers), which increases dependence on group demand, exposes Schaeffler India to risks of internal transfer pricing changes and global restructuring, and may cause external revenue growth to stagnate or decline if intragroup demand falls or parent strategies shift-impacting long-term topline growth.
  
• In the automotive segment, Schaeffler India continues to invest significantly in both ICE (internal combustion engine) and hybrid technologies based on current Indian demand, but a rapid acceleration in EV adoption could render these investments obsolete or underutilized, leading to stranded capex, lower asset turnover, and pressured margins if the transition to EVs outpaces management's expectations.
  
• The company's high capacity utilization (above 85% at most plants) and continued capex rollout leave limited headroom to absorb demand shocks; any cyclical downturn in end markets (e.g., auto/industrial slowdown or export drop due to global factors) or prolonged domestic stagnation could result in underutilization, decreased operating leverage, and lower net margin.
  
• Management acknowledges limited opportunity for meaningful export diversification in the higher-margin automotive technology side due to the preference of global OEMs to source locally in their own countries; this restricts export growth potential, leaving Schaeffler India exposed to both domestic competition and regulatory risk, potentially limiting revenue expansion in lucrative segments.
  
• Some industrial and non-mobility business segments (after previously posting 20%+ growth) have now flattened, suggesting limited visibility for continued outsized growth; if this stagnation persists or widens across sectors, it could dampen Schaeffler India's overall revenue momentum and pressure consolidated earnings growth.

Valuation

• The analysts have a consensus price target of ₹4325.333 for Schaeffler India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹4700.0, and the most bearish reporting a price target of just ₹3850.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹125.9 billion, earnings will come to ₹16.5 billion, and it would be trading on a PE ratio of 60.7x, assuming you use a discount rate of 14.3%.
  
• Given the current share price of ₹4068.7, the analyst price target of ₹4325.33 is 5.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.