Sundaram-Clayton up 23% in 2 days; hits new high on strong growth outlook

Sundaram-Clayton share price today: The company said it is well positioned to benefit from the switch to light-weighting, and has the ability to handle low volume, high variety complex parts

Sundaram-Clayton (SCL) share price hit a new high of Rs 2,209.95 on the BSE today, rising15 per cent in Friday's intraday trade. The stock has surged 23 per cent in two days on a strong growth outlook. The company said it is well positioned to benefit from the switch to light-weighting, and has the ability to handle low volume, high variety complex parts.

The company is one of the leading manufacturers of aluminum die castings focused on commercial vehicles and passenger vehicles. The strong growth outlook in the aluminum die casting industry is driven by light-weighting and robust demand in end-use industries. India, United States (US), and European Union (EU) aluminum die casting industries have strong growth prospects.

Many companies are expected to move out of China, which is a major source of supplies for automotive parts. This is expected to provide additional growth opportunities to the company.

Last week, SCL announced that it has commissioned the commercial production of Aluminium Die Castings, effective September 5, in Tamil Nadu. According to the company, the new facility has installed an annual capacity of manufacturing 7,750 MT of Aluminium Die Castings in the initial phase.

SCL had also said in its FY24 annual report that the business environment is expected to be challenging in export markets and healthy in India during FY 2024-25.

In the medium term, there are various initiatives in place to continue India's growth momentum. Production Linked Incentives (PLI) for automotive and auto component sector and other sectors are expected to strengthen the manufacturing sector in India. Besides, the special focus on setting up semiconductor manufacturing in India are going to be major drivers for auto industry’s growth. In FY25, the sales of Passenger Vehicle and MHCV segments in India are expected to register around 6 per cent and 11 per cent growth, respectively, and the sales of Two-wheelers are expected to grow by around 10 per cent. On the export market outlook, the truck industry in the US and the EU is expected to drop in FY25, the company said.

In the long term, technology changes such as stringent emission norms, fuel economy regulations, adoption of alternate drivetrain technologies, etc., are the major challenges the industry needs to tackle. Global truck manufacturers are already offering zero emission vehicles in the US and the EU.

However, the thrust towards light-weighting and zero emission vehicles is bound to increase leading to higher content of aluminium in all vehicle types. This shift to zero emission vehicles provides increased growth opportunities to the Company and it is well placed to leverage these emerging opportunities, being a preferred source for aluminium castings to major OEMs in India, the US, and the EU, SCL said.

Several Indian die casting companies and OEMs have set up or have been setting up new capacities over the past few years. The company will be continuing its actions to secure new businesses to ensure better utilization of assets despite the increased competition and cost, it added.