Release Date: May 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Talbros Automotive Components Ltd (BOM:505160, Financial) achieved a revenue of INR1,258 crores in FY24, marking a 21% year-on-year growth.
- The company received significant orders worth INR1,000 crores from a new OEM in Europe, which will commence by Q4 of this year.
- EBITDA for FY24 stood at INR127 crores, a growth of 36% year-on-year, with an EBITDA margin of 16.1%.
- The Gasket division demonstrated strong performance with revenues of INR502 crores in FY24, a 20% growth year-on-year.
- Talbros Automotive Components Ltd (BOM:505160) is focusing on increasing exports from 25% to 35% in the next three years, leveraging strong order inflows from leading OEMs.
Negative Points
- The company's joint venture, Talbros Marugo Rubber Private Limited, saw a decline in EBITDA for Q4 FY24 by 34% due to shifting issues.
- Capacity utilization in the forgings division is around 82% to 85%, indicating a need for capacity enhancement soon.
- The company faces challenges with raw material price increases, which may impact margins if not mitigated effectively.
- There was a one-off increase in other expenses due to air freight costs related to the Red Sea issue, impacting the forgings division.
- Despite strong growth, the company’s margins in the Marelli Talbros Chassis System Private Limited business are currently hovering around 13% to 14%, with expectations to reach 15% in the next two years.
Q & A Highlights
Q: What are the current capacity utilizations for Talbros' divisions like gaskets, forgings, and the Marelli and Marugo JVs?
A: Our capacity utilization is around 90% in the gaskets and heat shield division, 82% to 85% in the forgings division, 80% in Marelli, and around 90% in Marugo Rubber's anti-vibration and hoses divisions. (Navin Juneja, Group CFO)
Q: Given the high capacity utilization, when do you plan to enhance capacity, and what is the expected timeline for ramp-up?
A: We are already enhancing capacity in the gasket and heat shield divisions with a new premises in Pune, expected to start supply by July-August. The forgings division will see a CapEx of INR30 crores this year, and Marelli will have a CapEx of INR60-62 crores with the new plant ready by September-October. Marugo will have a CapEx of INR6 crores. We expect all CapExes to be completed by Q3 FY25. (Navin Juneja, Group CFO)
Q: Why have the margins for the Marugo JV declined, and what is the outlook for the next financial year?
A: The margins declined due to some shifting issues, but things have stabilized. We expect EBITDA margins of 9% to 10% in the next financial year. (Navin Juneja, Group CFO)
Q: How are you mitigating the impact of increased raw material prices?
A: We are negotiating with suppliers and expect to recover the increased costs in the next financial year. The lag effect for passing on the increase is typically based on the average of the last six to three months. (Navin Juneja, Group CFO)
Q: What is the contribution of the industrial segment to your gasket revenues, and are there plans to expand this segment?
A: The industrial segment contributes around 2% to our gasket revenues. It is a very small part of our business. (Navin Juneja, Group CFO)
Q: How do you plan to increase exports and deal with decreased demand in India?
A: We have received significant export orders and are developing new products for existing customers. The Marelli order of INR1,000 crores is a deemed export. We expect exports to account for 35% of our revenue by FY26. (Navin Juneja, Group CFO)
Q: What is the impact of the shift from ICE to hybrid and EV on your business?
A: The shift to hybrid does not affect us negatively; in fact, it increases our component demand. We are also supplying components to EVs, with 3% of our revenue coming from EVs. We have secured significant EV orders across our divisions. (Navin Juneja, Group CFO; Anuj Talwar, Joint Managing Director)
Q: What is the current order book for EVs, and how much of it is from exports?
A: Out of the INR2,000 crores order book received in the last year, INR475 crores is for EVs, and INR450 crores is for exports. The Marelli order is also expected to contribute significantly to exports. (Navin Juneja, Group CFO)
Q: What are your strategies and targets for achieving a 13% CAGR by FY27?
A: We are focusing on expanding our product portfolio, securing new orders from OEMs like Mahindra, and increasing our export business. We expect significant growth in our forging and Marelli divisions, with new product developments and large orders in the pipeline. (Navin Juneja, Group CFO)
Q: What is the outlook for margins in the coming years, and how will increased exports affect them?
A: We expect margins to remain around 15%-16% in the near term, with potential for improvement as export business grows. We aim to achieve higher margins in the future but will wait for one more year before revising our guidance. (Navin Juneja, Group CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
