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Talbros Automotive Components Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤27th May 26

Summary : Talbros Automotive Components reported record Q4 FY26 performance, driven by strong order wins and robust demand across segments, with management confident in future growth despite inflationary pressures and order commercialization delays.

Management Perspective positive : Management expressed being 'extremely pleased and delighted' with record performance, 'confident' in future growth, and highlighted 'strong' order acquisition and 'healthy' margins despite challenges.

Concall Report Analysis & Insights

Business Overview

  1. Achieved strongest ever quarterly performance in Q4 FY26.
  2. Consolidated revenue grew 15% Y-o-Y to INR237 crores in Q4 FY26.
  3. EBITDA margin reached a record 18.7% in Q4 FY26 due to cost management.
  4. Gasket and Heat Shield division is the largest contributor, with 52% of revenues.
  5. Forging division showed strong recovery, up 11% Y-o-Y in Q4 FY26.

Future Growth Prospects

  1. Secured new orders worth INR500 crores in Forging, including European OEMs.
  2. New domestic orders for JVs total INR170 crores for hoses and anti-vibration.
  3. Targeting 15-20% year-on-year growth in FY27, driven by strong order book.
  4. Significant capex planned: INR51 crores in FY26 and INR103 crores in FY27.
  5. EV segment growing rapidly, with new orders for EV platforms.

Management Insights

  1. We delivered our strongest ever quarterly performance in Q4 FY26.
  2. We are confident of delivering 15-20% Y-o-Y growth in FY27.
  3. EBITDA margins will be maintained at 17-18% through product mix and cost management.
  4. We are benefiting from global supply chain shifts towards India.
  5. Our order book is strong, and we are moving from acquisition to execution.

Signs of Skepticism

  1. Order commercialization has been delayed for some projects, impacting revenue conversion.
  2. Analyst raised concern about customer concentration with Maruti Suzuki.
  3. Capex for Gujarat facility shifted to FY27/28 due to order timing.

Risk Factors

  1. Geopolitical tensions in West Asia may cause temporary cost pressures.
  2. Potential for temporary shipment delays and supply chain disruptions.
  3. Inflationary pressures on raw materials and freight costs are ongoing.
  4. Customer concentration risk with Maruti contributing 20% of revenue.
  5. Delays in commercialization of previously announced orders.

Good To Know

  1. Appointed Ashish Gupta as CEO, bringing over 35 years of industry experience.
  2. Talbros holds 50% market share in Indian Gasket market, 3x nearest competitor.
  3. Heat Shield segment scaling meaningfully, with exclusive partnerships for lightweight aluminum.
  4. Lohum Talbros JV marks entry into ESG, focusing on recovered carbon black.
  5. Exports contribute nearly one-fourth of revenue, expected to reach 30%.

Key Drivers

  1. Strong order book conversion.
  2. Increased EV component demand.
  3. Global supply chain shifts.
  4. New CEO's strategic initiatives.

Key Analyst Discussions

Competitive Environment

  1. OEMs are shifting sourcing to India due to cost pressures and China Plus One strategy.
  2. Company wins new orders by offering better quality and competitive pricing.
  3. Strong customer relationships and financial strength are key competitive advantages.
  4. Existing vendors going bankrupt created opportunities for new business wins.

Market Trends & Consumer Behavior

  1. Indian automotive industry closed FY26 strong, despite global challenges.
  2. Passenger vehicle and two-wheeler segments showed significant growth.
  3. EV cars and two-wheelers continue to gain traction, expanding charging networks.
  4. Demand for SUVs and premium vehicles remains robust, entry-level recovering.

Financial Highlights

  1. Order wins declared over three years have not fully converted into revenue growth.
  2. Management expects double-digit top-line growth for standalone businesses this year.
  3. EBITDA margins are expected to be maintained at 17% in FY27.
  4. Q1 FY27 top line is expected to be similar to Q4 FY26 performance.
  5. Capex plans for MTCS JV were reduced and shifted to later years.

Product Composition

  1. Gasket and Heat Shield division is the largest and most profitable contributor.
  2. Q4 revenue mix largely supported by two-wheelers and passenger vehicles.
  3. Heat Shield business is high-margin and high-growth, especially for EVs.
  4. All divisions' components, except forgings, go into Maruti vehicles.

Strategic Considerations

  1. New CEO's KPIs and focus areas will be shared later, after his onboarding.
  2. Company aims for organic growth to achieve 18-20% target.
  3. Commercialization of Kia and Cummins orders has started, JLR order from September.
  4. Marelli JV expected to grow 35-40%, Marugo JV 15% in next year.