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Talbros Automotive Components Ltd

| Q2 & H1 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤14th Nov 25

Summary : Talbros announced a new sustainable JV, expects strong H2 FY26 recovery despite Q2 cyber-attack and muted demand, and targets significant export growth.

Management Perspective positive : Management expressed 'great enthusiasm' for the new JV and stated Q3/Q4 will be 'very, very solid' and H2 'better than H1'. They are 'very hopeful' with GST cuts and expect strong recovery from disruptions.

Concall Report Analysis & Insights

Business Overview

  1. Talbros reported H1 FY26 revenue of INR427 crores with 16.5% EBITDA.
  2. A new joint venture with Lohum Cleantech was announced for sustainable products.
  3. The JV will develop recovered carbon black and devulcanized rubber.
  4. Indian auto industry grew 9.5% in Q2 FY26, reaching 8.8 million units.
  5. Exports contributed 26% to total revenue in H1 FY26.

Future Growth Prospects

  1. New JV with Lohum Cleantech is expected to be a high-growth, value-accretive division.
  2. New orders from Kia, Kamaz, Tata, and Mercedes are set to commence production.
  3. Stellantis order for EV components is expected to start production in January.
  4. Targeting 35% export contribution by FY27, up from current 26%.
  5. Exploring new product lines and technologies with future partners.

Management Insights

  1. Enthusiastic about the new joint venture with Lohum Cleantech for sustainable growth.
  2. Expect Q3 and Q4 FY26 to be very strong due to new GST norms and festive recovery.
  3. H2 FY26 is anticipated to be better than H1, with demand picking up.
  4. Strategic focus on business diversification, strengthening OEM relationships, and cost optimization.
  5. Confident in achieving INR1,750-INR1,800 crores revenue for next year.

Risk Factors

  1. Cyber-attack on a key European client caused a one-time business loss of INR10 crores.
  2. Muted demand in Europe affected export performance in the last 6 months.
  3. Decline in BMW EV vehicle sales impacted bush business.
  4. Ford Mustang recall led to reduced volumes for related components.
  5. Muted demand for commercial vehicles domestically in Q2 FY26.

Good To Know

  1. The new Lohum JV aims for INR500-INR600 crores revenue in 5 years with 15%+ EBITDA margins.
  2. Lohum is an R&D-led company with over 100 engineers and 300 IP filings.
  3. JV products, recovered carbon black and devulcanized rubber, will be 25-30% cheaper than virgin materials.
  4. Total capex for FY26 is around INR50 crores for Gasket/Forging and INR60 crores for Marelli.
  5. JV capex for the next 2 years is INR70 crores, funded by 40% equity and 60% debt.

Key Drivers

  1. New Lohum JV drives sustainable growth.
  2. New orders from Kia, Tata, Mercedes.
  3. Strong Q3, Q4 recovery expected.
  4. Exports target 35% by FY27.

Key Analyst Discussions

Competitive Environment

  1. Lohum JV offers competitive advantage with R&D, clean process, and high substitution percentage.
  2. JV products will have low ash content (5%) and be 25-30% cheaper than virgin materials.
  3. Existing recyclers have 18-20% ash content in recovered carbon black.
  4. The JV's process is very clean and generates EPR credits.
  5. Talbros maintains a hedged portfolio supplying all vehicle segments.

Market Trends & Consumer Behavior

  1. Indian auto industry saw 9.5% growth in Q2 FY26, driven by domestic demand and exports.
  2. GST 2 rollout caused muted demand in early September, but volumes rebounded post-Navratri.
  3. Favorable monsoons benefited tractor volumes due to GST cut.
  4. 2-wheeler industry grew 10.3% due to rural demand and GST benefits.
  5. Commercial vehicles grew 9.4% supported by infrastructure momentum.

Financial Highlights

  1. Q2 FY26 revenue was INR217 crores, H1 FY26 was INR427 crores.
  2. Q2 FY26 EBITDA was INR36 crores, H1 FY26 was INR70 crores.
  3. EBITDA margins for Q2 FY26 stood at 16.4%, H1 FY26 at 16.5%.
  4. PAT for Q2 FY26 was INR23 crores, H1 FY26 was INR45 crores.
  5. Marelli Chassis Systems grew 18% in Q2 FY26, with 44% EBITDA growth.

Product Composition

  1. Focus on margin enhancement through a sharper product mix.
  2. Actively exploring new product lines and technologies.
  3. Diversifying business and strengthening OEM relationships.
  4. Maintaining a balanced revenue mix across domestic OEMs, aftermarket, and exports.
  5. Supplying components from 2-wheelers to heavy trucks.

Strategic Considerations

  1. New JV with Lohum Cleantech is a strategic step for sustainable, technology-led growth.
  2. Company is actively pursuing more growth opportunities, JVs, and technical collaborations.
  3. Ongoing exercise to talk to potential partners in Japan and Korea.
  4. Targeting INR1,750-INR1,800 crores revenue for next year.
  5. Orders are coming, with announcements expected by March.