Release Date: February 08, 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) reported a 40% increase in EBITDA to INR33 crores and a 66% growth in net profit to INR23 crores for Q3 FY '24.
- Revenue from operations grew by 22% to INR576 crores for the nine months of FY '24.
- The company secured orders worth INR980 crores across various product segments, with 40% of the order book dedicated to EVs.
- The forging division saw a revenue growth of 27% in Q3 FY '24 and a 49% increase in EBITDA for the nine months of FY '24.
- Talbros Automotive Components Ltd (BOM:505160) is expanding its presence in the EV spectrum and hybrid vehicles, with significant orders from both domestic and export markets.
Negative Points
- The company divested its 40% ownership interest in its joint venture entity, Nippon Leakless Talbros, due to flat growth in the business.
- Commercial vehicle volumes are expected to be relatively flat in the next year, which could impact growth.
- The company faces risks and uncertainties related to commodity price fluctuations, which could affect profitability.
- There is a potential for increased working capital requirements due to the growing share of exports and the forging business.
- The company’s growth projections are subject to the successful execution of new orders and market conditions, which may not always be predictable.
Q & A Highlights
Q: Could you provide more insight into the factors that led to the improvement in profitability and the 16.5% margins achieved this quarter? Can we expect these margins to be sustainable?
A: Our growth is primarily driven by new orders from both new and existing customers. This quarter's exceptional performance was partly due to favorable commodity prices. While we aim to maintain high margins, we expect a sustainable EBITDA margin of around 15% going forward. (Navin Juneja, Group CFO)
Q: Are you seeing any trends in the popularity of hybrid vehicles compared to electric vehicles?
A: We are present in all hybrid vehicles, especially with Maruti and Mahindra. Our heat shields are used in Maruti's hybrid models, and we expect to be part of future launches. Different types of mobility, including hybrids and EVs, will coexist, and we are well-positioned to cater to all. (Navin Juneja, Group CFO; Anuj Talwar, Joint Managing Director)
Q: Given the forecasted growth rates for passenger and commercial vehicles, how do you see Talbros Automotive's growth prospects?
A: Despite a potential slowdown in Q4 due to elections, we expect strong growth driven by infrastructure spending and our diversified customer base. We anticipate a minimum growth of 15% next year. (Anuj Talwar, Joint Managing Director; Navin Juneja, Group CFO)
Q: Are you in active discussions for orders with Maruti's new plant in Gujarat?
A: Yes, we are involved with Maruti's Gujarat plant through our joint venture, supplying components for their EV models. We are also setting up warehouses in Gujarat to support this. (Navin Juneja, Group CFO)
Q: What is your long-term growth guidance and strategy for securing new contracts?
A: We aim to achieve a top line of approximately INR 2,100 crores by FY27 with an EBITDA margin of around 16%. We have secured contracts worth INR 1,200 crores, including significant orders for EVs and exports. We expect to grow by 15% next year. (Navin Juneja, Group CFO; Anuj Talwar, Joint Managing Director)
Q: Could you explain the rationale behind divesting your stake in the Nippon Leakless Talbros JV and your future CapEx plans?
A: The JV's growth was limited, and we aim to invest in businesses with higher growth potential. The proceeds from the sale will be used for CapEx in our core businesses, which are expected to grow by 20% or more. We do not plan to raise additional debt for this. (Navin Juneja, Group CFO)
Q: How do you plan to increase exports in the coming years?
A: We aim to have exports constitute 30% of our revenue in the next three years. With new orders from international customers and the start of EV platform exports in 2025, we expect significant growth in this segment. (Navin Juneja, Group CFO)
Q: What contributed to the 62% Y-o-Y growth in the Talbros Marugo Rubber segment?
A: The growth is primarily due to increased volumes from Maruti and the introduction of new models. We expect this trend to continue as we cater to more models. (Navin Juneja, Group CFO)
Q: Do you plan to enter non-automotive segments?
A: We are already involved in the industrial segment and plan to expand further into non-automotive areas, leveraging our existing capabilities. (Navin Juneja, Group CFO)
Q: How do you manage working capital across different business segments?
A: Working capital requirements vary by segment. For example, the gasket business has an average debtor cycle of 82 days, while the forging business is around 113 days due to export orders. We aim to maintain efficient working capital management across all segments. (Navin Juneja, Group CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
