Talbros Automotive Components Limited (505160) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Talbros Automotive Components Limited Q2 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Anuj Talwar, Joint Managing Director of Talbros Automotive Components Limited. Thank you, and over to you, Mr. Talwar.

Yes. Thank you so much. Good afternoon, everyone. A very warm welcome to our Q2 and half yearly FY '22 earnings call. I hope you all are staying safe and healthy and had a good festive month behind us. On the call today, I'm joined by Mr. Navin Juneja, our Director on the Board of Talbros and our Group CFO; SGA, our Investor Relation Advisers joining us from Mumbai. The results and the presentation are uploaded on the stock exchange and the company website. I hope everyone has had a chance to look at it. Before I start with the industry overview, I'd like to share with you that we all have done our bit to protect ourselves and our community by fully vaccinating our Talbros family. This ensures at least smooth working and people coming to the office hours and also traveling out to get their work done. I'll begin with the industry and the economy overview. Our government has taken massive vaccination drive across the country, with over 100 crore-plus people vaccinated in India. It brings confidence to get back to some normalcy. Rural India witnessed positive sentiments due to a normal monsoon. The festive season typically accounts about 40% of the annual retail sales, but you've seen today on the front page of Economic Times as well that this festive season did not bring much cheer to the [indiscernible]. However, we at Talbros still were able to beat the industry. You are already reading in the papers about the semiconductor shortage, the supply constraints, the fuel price hikes, increase in input costs, metal prices, commodity prices. So it's been a little bit of a tough and a challenging quarter for us, but we have managed to sail through and, if not, do better. There was some relief this morning about a cut on some excise on fuel for about 4 to 5 months. Hopefully, that will bring some cheer to the automotive industry. A quick update without going to too much detail. To our surprise in quarter 2, actually, the automotive industry declined by 3.37%. Passenger vehicles grew at about 4.17% for the quarter 2. CV segment grew at about 25% given the low base even in last quarter of last year. Two-wheelers declined by 6.19% and still look to be a bit muted even with the festive season. Exports have done well generally. I'd like to highlight a bit about Talbros, what we have achieved. I'd also like to share with you our strategy going forward. Our business is broadly divided into our stand-alone business, gaskets and forgings; and our 3 joint ventures with global auto comp leaders in gaskets for suspension, chassis and anti-vibration rubber components. We've always maintained that Talbros is a very hedged auto comp player. We supply across various platforms and in different markets globally. During H1 FY '22, our domestic sales -- of our domestic sales, 13% came from 2- and 3-wheelers. 27% came from passenger vehicles. 28% came from commercial vehicles. 10% came from the agri segment. This is something that we've been talking about for our various conference calls and investor call that we maintain to be a hedged company with not one customer being more than 10% to 11% of our turnover. Our export portfolio did well in H1. 27% of our revenue came from exports in H1 FY '22. Our forging business achieved 53% revenue from the export market, which continues being outlier within our group. We remain focused to achieve an export percentage of 28% to 30% in the coming years. Talbros is diversified and at pace with the market requirements. We are now supplying critical components such as suspension, chassis and forgings to electric vehicle space, both in India and globally. We ensure to capture market share, both in domestic OEMs and global OEMs, and also been pushing very, very hard with the [ OEM ] market in our country. And let me discuss a bit about our stand-alone business, Gaskets and Forgings. We still continue to hold a 50% market share along the financial [indiscernible] in the gaskets industry in our country. We have already successfully, as mentioned earlier to you, implemented BS-VI product line, which will increase our value-added components pricing per engine. This also helps you grow the export market. As you all know, BS-VI has always qualified component makeup. Going forward, talking about the HCV product line, which is the future for PV vehicles made of aluminum. It's for lightweighting. It's for noise reduction. It's for weight reduction. It's for heat reduction. And this product will start in the domestic market with the top car makers of the country maybe Q4 or latest Q1 of next year, depending on testing and validations. The product, which is called Nimbus, is a patent of our joint venture partner -- sorry, TA partner in Japan is basically for lightweighting of products and engines. The Forging division has continued to perform well both in the domestic and the export market. With more than 50% share coming from exports, this is quite an achievement given that we are an outlier given that we supply about 28% overall. Our focus in Forging is to move to value-added products, heavier-weight components, machining components, although we already machine about 99% of the products that we supply, but we're getting traction now from our existing customers to supply heavier part as well. As mentioned to you earlier, we're already supplying to EV platforms from our forging business into Europe. Coming to our joint ventures. Marelli is a 50-50 joint venture between Marelli and the [ Selantos ] Group, experienced to make complete chassis and suspension components in India. Even this division now, exports are about 11%, could have been a bit higher, but some of our European carmakers are experiencing semiconductor shortage, and that's caused a bit of a slowdown. On the other hand, I'm very proud to say that not only are we [indiscernible], but with our new Pune plant, we are supplying to all these Tata Motors models that you see, EV and non-EV, which are getting a lot of traction in the market. We have pretty much a very aggressive penetration with Tata Motors for their suspension components. Coming to Talbros Marugo. This joint venture is coming along. It's got an immense potential that we always maintained earlier. But again, given the huge semiconductor shortage and independence of Maruti, this is lagging behind a bit, but they'll come through. We are working on our strategy to go for more exports, popular JV partners in Japan, sending more products into Japan, working with some of the OEMs in the U.S.A. to increase our customer base in this product line. Here, again, testing validation and the kind of product it is, it takes time. Before I hand over the call to Mr. Juneja, who will walk you through all the numbers, all I can say is that we managed quarter 2 well with our hedge strategy and [indiscernible] exports and very tight operational controls to give you the margin that we could. Over to Navin, please.

Thank you, Anuj. Good afternoon, and a warm welcome to all the participants. Let me begin with the financial review. In the Gasket, including Nippon Leakless Talbros, for Q2 FY '22, our stand-alone gasket sales was INR 91 crores as against INR 68 crores in Q2 of FY '21. Total revenue of Nippon Leakless was at INR 23 crores in Q2 of FY '22 as compared to INR 48 crores of Q2 of FY '21. This drop in sales is due to a reduction on the sales prices as we have introduced a local gasket [indiscernible] local materials and [indiscernible] imported material. The price of this gasket is INR 36 versus the imported gasket price of INR 46. But our margins are much better in this local [indiscernible] material gasket. This is the reason for drop in revenue. This segment saw a combined EBITDA of INR 18 crores in Q2 of FY '22. So coming to Forging division. The forging business is consistently performing well. The revenue in Q2 of FY '22 is INR 55 crores as against INR 43 crores in Q2 of FY '21. Coming to Magneti Maruti Chassis Systems Pvt Ltd. The total income for Q2 of FY '22 stood at INR 40 crores versus INR 32 crores in Q2 of FY '21. Talbros Marugo total revenue from operations for Q2 FY '22 stands at INR 12 crores vis-à-vis INR 11 crores in Q2 of FY 21. There is not much growth in this business because of -- as you are aware, in the last quarter, the Maruti business was down by 30% to 40% due to semiconductor issues. At this company, dependence is approximately 70% to 80% is on Maruti. Aforementioned revenue numbers of all the joint venture business are total revenue, including our share of business. Now coming to the consolidated financial performance of the [indiscernible]. On Slide #12 of the investor presentation, we have reported consolidated revenue based on [ NDS ]. We didn't include the share of all JVs. Total income, including other income, stood at INR 146 crores in Q2 of FY '22 as against INR 110 crores in Q2 of FY '21, a growth of 32%. On a half year basis, revenues stood at INR 285 crores versus INR 161 crores in H1 of FY '21. The [ managers ] for the period reflect strong business performance, execution of multiyear orders received in the past years and additional form of EV product lines bode well in expanding our order book. EBITDA, including other income, stood at INR 22 crores in Q2 of FY '22 as against INR 17 crores in Q2 of FY '21. On a half yearly basis, EBITDA stood at INR 40 crores versus INR 19 crores in H1 of FY '21. EBITDA margin stood at 14% for the quarter. Majority of our commodity price increase for the past 2 quarters were recovered during Q2, which has helped in adding the margins. While the reversal of salary reduction, which had taken place in the previous year, and increased increments of average of 10% in the current financial year has increased our employee expenses. PAT stood at INR 11 crores in Q2 of FY '22 as compared to INR 10 crores of Q2 FY '21. On a half yearly basis, PAT stood at INR 21 crores versus INR 1 crore in H1 of FY '21. Gross debt as at end of 30th September '21, including working capital, stood at INR 101 crores. For the quarter, we incurred CapEx of approximately INR 12.65 crores. We continue to witness strong momentum and benefits of our hedge portfolio. And accordingly, we foresee highest-ever profitability for Talbros in FY '22. This is all from our side, and I would now like to open the floor to question-and-answer. Thank you.

[Operator Instructions] The first question is from the line of [ Abhishek Jain ] from [ Arian Capital ].

Sir, can you throw some light on your EV side of the business, how Marelli JV is doing and what kind of opportunity or revenue we foresee for the EV side of the business going forward? And also, on the Forging side, if you can throw some light how the EV side of business is picking up right now.

Yes. Now coming to your question, let's start with Magneti Marelli. Magneti Marelli has already got the orders from Tata Motors for all their vehicles, which include the e-vehicles, and we are the single source there. The more the EV sales go there, we are there in that business. On the export front, in JLR, we have got the entry into all the vehicles, which are under the new platform, which are EV platform, which is coming from next financial year, I hope so. So we are there in that business. And whatever the turnover will be there, we will be part of that. The exact amount, I'm not able to comment on as of today because we are not aware of the future numbers they are projecting. But my [ suspension ] is there in their business, and we are part of that EV business. Whatever EV production will be there, we'll be part of that business. Now coming to Forging division. Forging division is applying to BMW a lot of components, plus fresh component we also receive for the EV vehicles. I foresee for that next financial year, the BMW business will be -- INR 20 crores to INR 30 crores will be in the EV. Now we have also a part of [ GM ]. We supply to Volvo EV vehicles, and we are part of that business. And that business is approximately INR 20 crores in this financial year. Going forward, of course, it's going to go up. Thirdly, we're also approved by JLR to supply components to JLR for their EV business from our Forging division also. At [ present day ] sales is a bit low. So the revenue of that business would be approximately INR 7 crores to INR 8 crores in this financial year, which is expected to go to INR 18 crores, INR 20 crores next financial year. This is...

Okay. And can we see INR 1,000 crore revenue in the next 3 years?

Of course, we are working on that. '24, '25, we are working on that.

And sir, on the EV, what percentage of revenue from the EV side of the business?

Yes. We are targeting approximately 20% revenue from the EV. 15% to 20% we are targeting.

Okay. And last, sir -- last question, sir, if you can throw some light on the margin side also. What will be the sustainable...

Between 14% to 15% anywhere, somewhere.

The next question is from the line of Shikha Mehta from Equitree Capital.

Congratulations on the amazing set of numbers. Sir, [indiscernible]

Your voice is not -- Shikha, your voice is not -- is breaking. Sorry about that.

[Operator Instructions]

Hello? Am I audible?

Yes. You may go ahead, ma'am.

[indiscernible]

Right. Right. Yes.

Basically, when we talk to our OEMs, both domestic and globally, some OEMs say 3 months, some say 6 months, some say 9 months. So what we're doing and they're doing is that they are engineering their product portfolio. So they're changing -- like, for example, Maruti, for example, if it has -- for a particular model, they'll produce that model on the line for the next 5, 7 days. So it's very fluid right now. No one really has an answer, but we are hoping that we are also in commercial vehicles, which are not directly impacted by this shortage. So that should pick up in the coming quarters. So no one really has an answer. Like this month, November, Maruti has given a very good guidance later for December. But 3 to 6 months, it's going to be fluid. No one really has an answer. Whatever we budgeted, whatever you're looking at top line, bottom line, we're still working with that. We're working on -- you don't stop. You start looking on the aftermarket, the placement market or [indiscernible] market, export market. You try and push some -- you try and push into commercial vehicles. So we will find a solution.

Right. And sir, if you could also give some guidance on the logistics costs. Are we seeing it coming down a bit now? Or is it still high?

No, ma'am. It's not coming down during the last 1 year. Logistic costs, maintenance costs and freight has gone up export by 300%. Of course, we have taken a brand in our books to some extent. And -- but what we are able to recover from, I think, 80% of the customers, approximately 75% of that cost, not 100%. But 2 customers, we are still fighting with them. Let's see. It's not coming down [indiscernible].

Okay. And sir, could you give me the capacity utilization for the half year and for the quarter in all our divisions?

Yes. Yes. I will give you -- for the half year, I can give you the capacity utilization. Just a second. Give us just a second. Just a second, I will just give you. Just approximately if we talk about the gaskets -- just a second, just a second. Yes. It's 82% in gaskets, okay? In Forging, it's 78%. In Magneti Marelli, it's 75%. In Nippon Leakless, it's 65%. And Talbros Marugo, in the 95% [indiscernible] is 75%, and hose is 25%.

The next question is from the line of [ Vebo Shah ] from [indiscernible].

I have a couple of questions. My first question is what kind of CapEx will be required to cover your EV market products?

So no, our products, whichever are there, will fit into EV. So suspension. Suspension will fit in the EV vehicle also. So no major CapEx is required for that.

Okay. And we are -- at present, we are getting more inquiries from domestic market or from the global market?

Both.

Both, both, both.

So in the domestic market you are getting requests from all the major OEMs, Tata Motors and all those people.

We're always aligned with them. So Tata is a leader out here. If I would say the number of vehicles they come up with then, global we're getting inquiries. Like Navin mentioned to you that certain global OEMs will only make electric vehicle platform vehicles after '23, '24, but that also includes hybrid, plug-in hybrid and EVs. So the future RFQs, that is request for quote, for our division is coming from those passenger vehicles coming from EV only for our Forging division, for our Rubber division.

EV -- we are getting [indiscernible] from export customers.

Export customers also are getting good traction there.

Yes. BMW, we are making some pushes and some parts we have started making for the EV vehicles already. There, we are part of their EV platform, and we're getting whatever [indiscernible] because Volvo is [indiscernible] [ GKA ] we supply EV components.

Okay. That's good, sir. Sir, my next question is, as you target to increase the export mix, how much distributed -- I mean it will be -- how much it will be distributed -- it will be amongst all the segments between the JV? So can you provide the breakup -- export breakup on each segment and each JV currently in that sense?

Yes. Yes. I will give you that breakup also. Yes.

Overall, it's 27%.

Yes. I will give you the breakup. I have the breakup with me. Just a second, I will give the breakup [indiscernible]. Just a minute.

See, Gasket used to be 12% 2 to 3 years back. Now it is -- it's touching 18%. Forging is 53%. Chassis is 12%. Rubber is about 4%, 5%.

Yes. No, I give the exact breakup of that. In gaskets, 17%; Forging, 53%; Nippon Leakless, 0; Magnet Marelli, 11%; Marugo Rubber, 15%; overall, 27%.

The next question is from the line of Faisal Hawa from H. G. Hawa & Co.

Sir, you have consistently had a very low ROE and ROCE for many years. So do you feel that this is a function of the kind of business that we are in? Or is there some ways we can improve the ROCE and ROE? That's one. And secondly, sir, how do you feel that this exports market could pan out? Because with India, we have good domestic supply of iron and steel, and in most other countries, we see the steel could be very expensive. Do you see that the demand for our products would really go up on the cost differential alone?

So first, you are talking about -- because your voice is not clear [indiscernible]. I don't know why.

Should I repeat my question, sir?

Yes. First, your question is our ROCE and ROE.

Yes, it is.

We have improved -- I think the -- our -- first of all, I want to -- at least to inform that our -- in this current financial year, H2, during the first 6 months, our margins have gone up very, very, I think, higher. My -- if I talk more about the ratios, and my key ratios if I talk about -- just a minute [indiscernible].

So the ROCE...

If my ROE of the first 6 months is 16.4% as opposed to last year of 10.5%, ROE has gone up to 18.9%...

ROCE.

ROCE, as opposed to 14.1% of last financial year. The major reason for this is all the biggest [indiscernible] products. We have -- my prices are much, much higher, better. My margins are much better as compared to BS-III and BS-IV products. Number one, my export business is going up continuously. As compared to last year, it was 23%, 24%. Now it's 27% as a whole as a group. And stand-alone business is about 28%. So these 2 things have helped us to review our margins, and going forward, all these BS-VI -- more BS-VI products will be [indiscernible] by the customers and by OE customers. My margin will keep on going on this. And the good part is I'm able to recover the majority of price increases, but still something is left, which we're really hopeful to recover in next quarter, definitely. Yes. Hello? Any other questions? Hello?

Mr. Faisal Hawa, your line is still on mute. Do you have any further questions? Looks like no response from the current participant. [Operator Instructions] The next question is from the line of [ Aditi Saman ] from [ ADM Advisors ].

Congratulation on good set of numbers. Sir, I have a couple of questions. First, what kind of future expansion will look like at Talbros? And second is on the financial front, at this run rate, what kind of profits are we looking at for FY '22?

First question is regarding the expansion plans. Of course, we have expansion plans in all our divisions. First, to talk about Gasket. We are -- we have an expansion plan for our heat shield business. We are setting up a heat shield line, plus next year, we will buy our Nimbus machine going forward, which can take care up to INR 50 crores of my sales in heat shield business alone. Plus, we are expanding our gasket facilities also because of the new [indiscernible] gasket, plus we're getting very good export from U.S.A., order we are getting from that. For that, we will be expanding all the facilities. And my -- our plan till '24, '25 is to invest another INR 33 crores in the gasket business alone and which will take our top line to approximately INR 500 million we are targeting by '24, '25. On the forging front, we are also expanding. This year, I will -- we already invested INR 70 crores in our machining facility, plus we are putting up a new shed for our -- approximately [ 20,000 ] square feet in our forging facility. Plus, after that, we will be adding more machines, and that might -- our target is to take the turnover in next 3 years to INR 350 crores minimum in this business. And this is on the Talbros business. Second question was FY '22. Of course, you can see that we are targeting a minimum EPS of INR 30 in this current financial year. If everything goes well, we will be able to achieve that.

Okay. Okay. That was helpful. And sir, is that a -- next question is on the product portfolio side. So is the product portfolio of export is different than what we supply to OEMs? So basically, what I'm trying to understand, is it better margin which tends us to diversify more towards export business? Apart from ForEx rate advantage, which factors lead to better margins in export business than for domestic business?

So are you're aware, domestic -- all customers -- nobody will give you EBITDA margin of more than 10%, 12% in OEMs, especially OEMs. They will go into deep dive everything, and they are aware of what's happening. They will give us some quotes from here and there. My EBITDA margin is around 12%, and that's in our domestic business. But in export business, the quality of orders, timely delivery, plus they don't change their customers again and again. The group relationship is also there with them. So -- and they compare the prices with the local supplier, et cetera. There, we -- Indian auto component [indiscernible] advantage. So we get a decent 18% EBITDA from there, 15% to 18% EBITDA customer to customer. But again, there is some risk also. And when the price increase goes up, we don't get in time, we get after 2 months. Freight increases, of course, we have -- they will not give us immediately. We have to wait. Plus recently, [indiscernible] also reduced their [ support ] benefit, which we used to get auto component by 2%. So these are challenges also there. But overall, margins are better there. And they have a capacity to pick the good numbers also. Like [indiscernible] so they are talking -- they talk big numbers.

Yes. I would also like to add that if you're just constrained to the domestic market, you're only constrained to the growth plans here. So for example, what we've seen that the festive season has not really taken a big offtake in demand of two-wheelers or PVs. If we're just domestic oriented, you don't have that extra advantage. So this is -- candidly, we started about 5 to 7 years back where export is only about 10%, 11%, and now the [indiscernible] 27%, 28%. God willing, everything gets better, we will aim a bit higher on this front as well.

The next question is from the line of [ Rupesh Tatio ] from [ Intelligence Capital ].

Congratulations on very good set of numbers. My first question is, sir, can you -- I'm a little bit new to the company, sir. So please, I will -- some of the questions might be very basic. My first question is, can you please give some view on the competitive landscape in all your 2 divisions in domestic market and 3 JVs? And on the broader context, there is that -- some of these things are very interesting when I look at it that your 40% market share in gaskets, 53% revenue of holding is into exports, there are some EV-related products [indiscernible] JVs. In general, if you can just give some feel about competitive landscape, and maybe if you can name 1 or 2 competitors in each of the segments.

Your queries -- sorry, the line is not clear -- you got it, okay.

So basically, within -- 50% of our turnover comes from gaskets. Now in gaskets, we are the largest along with our joint venture...

Yes, 50%.

We are about 50% around the country. Now having established well the BS-VI product line, which took years to validate, we are now going to export with this. Our gasket export has been 10%. Now about 18% -- 17%, 18%. Coming to forging. We took a conscious call when we set up the line in Bawal, which is North India. We realized that there is no point being only domestic because of margin pressure. We immediately started to focus on exports. And here, our export is about 53%. The whole financial also should end up at about 50%, 50% -- 50% or 52%. Now...

I got the numbers, but I'm asking from competition point of view.

It's a huge competitive landscape. Huge. I mean...

What are our advantages? Like, I mean, can you just tell 1 or 2 things that make us have this high market share or how good opportunities in export?

No. You want to know the competitive -- competition in gaskets and forging in the country.

Yes. Yes.

So there are smaller players in gaskets. They're not that large. There's Banco, which is mainly radiators, but they have small INR 100 crore business doing gaskets. The company Sankar Sealing, which is a privately held company in the South, maybe about INR 100 crores plus. Forging, I don't think we can put competition. I mean our aspiration would be to be the Ramakrishna tomorrow morning to that scale. There are many players in forging. You have local forging in Ludhiana. You've got some established players, the Ramakrishna. You've got [indiscernible] the next level altogether in forging, Mahindra Forgings. So forging really can't depend on competition per se. There's no aspiration. In Marelli, the company will be [ Sona Samek ] and SKH Metals. And in rubber, there will be [ Bill Autobody ] and Yamashita.

Okay. Okay. The second question is in general, auto industry has some very long cycle, sir. The gestation period and the time to win contracts is really large. So can you talk about R&D? Can you give some idea about the funnel in your R&D in terms of new products or some projects you are working with your customers? Can you give some color on that?

For example, let's say, in our Gasket division. The customer had a problem. Our largest OEM buyer is Cummins. Now he had to transition from BS-IV to BS-VI. So they had to put up a new product, which we called -- let's say, it's called the integrated wire harness gasket. It's a totally new product. It's metal. It is rubber. It is plastic. It's wire harness. He is reporting this. So he came to us, "Okay, let's work together to make sure we don't import it anymore, and we'll give you the business." So it took us about 2 years plus to get this product validated. So our R&D team actually files patents in the government of India, and there are several patents out there because gasket is up -- very high proprietary product because it is for the engine. And these [indiscernible] for the commercial vehicles globally. So took about 2 years plus. In export business, with our big OEM customers, it takes about 2 to 2.5 years from the inception date of the project to get it validated. In the heat shield space, it takes about 15 months; forging, 6 months; chassis, 6 months; rubber, 6 to 9 months.

Okay. So roughly, sir, can we say that your R&D projects are growing at 15% kind of? Like -- which will give us new revenue in future 3 to 5 years...

About 20% plus, we add new business every year back in the pipeline, approximately.

Okay. That is good to know. And if I can squeeze one last question, sir. I mean EV disruption is on the horizon. So do you see our company will kind of manage the soft landing without getting a lot of hit on either P&L or balance sheet in the next 5 years?

Okay, we already started supplying to EVs. We are supplying to EVs in India as well as globally. There is a bit of -- a little bit of a question mark on the two-wheeler segment today in the country with all this disruption with the Ola, then the Uber, Ola and [indiscernible]. So we are there also in two-wheeler and gasket. So maybe there's a [indiscernible] hit of only the two-wheeler business. So it's not too much for us. We're well aware of it. We're going to work with all spectrums, all energy platforms, both in India and globally, be it hydrogen, be it ICE engine, be it EV, we'll be part of those supply chain. We are not bothered about it, no.

The next question is from the line of Ravtej Singh from Malabar Investments.

[indiscernible]

Mr. Singh, I would please request you to speak a bit louder. Your audio is not clearly audible.

Okay. Just give me one second then. Give me a second, please. Is it better?

Yes. You may please go ahead.

Right. Sir, first of all, congratulations on the great numbers, generally, really despite the RM cost and the semiconductor shortage issues. So great to see us putting out consistent numbers despite all the headwinds in our way. Sir, I just [indiscernible] the EPS guidance that you gave for this year, could you please [ explain ] that? And then I'll just move on to the other questions that I had.

I could not hear you at all. I cannot hear you at all. You can say it again, what you want.

You -- actually, just give me a second. I'll just get this sorted.

I can't hear you at all. Your voice is cracking.

Hello? Yes. What I was saying is you've given out the EPS guidance, right, earlier in the call. I sort of missed that. If you could just repeat that once, that will be very helpful.

We are targeting EPS around INR 30 in this financial year.

So INR 30 EPS.

Yes. EPS.

Yes. So that would basically correspond to how many [indiscernible]?

You can multiply by [ 12.34 ], [ 1.234 ].

36 -- okay. So 36, 37. But sir, don't you think we can sort of overshoot? We already had a INR 40 crore run rate, right? We've done INR 21 crore in the first half.

Let's see. Let's see. I think -- of course, it would be better. It should be better.

Look, quarter 3 is still a little bit uncertain with all the semiconductor shortage, both globally and domestically. Earlier, the global player was not that badly affected, now just slightly affected. So let's see how quarter 3 going forward.

Then we'll be more confident of giving you the exact amount.

Understood. So I thought the work was behind in this quarter and perhaps Q3, but do you think there's still more to go on the semiconductor issue?

Quarter 3 looks a little bit tricky, but we'll recover commercial vehicles, our [indiscernible] market, export market. We will.

Understood. Understood. Got it. Got it. Great to see. And if possible, could you -- so I'm not sure if you've done the analysis, but if you could just share the quantum of absolute cost hit that you have to take because of commodity costs going up and a lag in passing them through. I mean, that as a percentage of EBITDA or that in absolute terms, if there's any number, any figure, that basically just give me a normalized run rate to look at once all these one-offs or all -- [ commodity ] cost is passed on.

Yes. I would recommend for that detailed analysis, we will share with [indiscernible] because it's all -- there are different kind of expenses. We have captured our [indiscernible] from some of our domestic customers, export customers, also freight. So I think for that, we'll have to give it you on a separate line.

But the gross margin has taken a hit, right? So you think a 1%...

It has recovered.

80% recovered.

It has recovered, 80% of the company [indiscernible].

Exactly. Exactly. That's what I see as well. So you think that could correspond to a 100 bps advantage on EBITDA, 100 to 150 basis points?

I can't comment right now. Let's see how the thing moves, please.

Okay. Got it. And sir, if possible, what sort of visibility do you have over the next 6 months from your -- given -- from your current order book, 6 to 9 months?

We'll see a little muted quarter 3, but quarter 4 seems to be very good.

[ More muted Q3 ]. Okay. Understood. And any -- so what sort of interest are you seeing from OEMs for FY '23? And if possible -- on Slide 11, if possible, could you just take me through your expected revenue or your targeted revenue for FY '23? And yes, that would be all. And how the order book [ backed ] up when compared against that.

Let's see. I don't know -- we won't have to confirm orders. Nobody gives a confirmed order because they have not shown [indiscernible] customer also. I believe we'll be able to give that picture by the last quarter of this financial year.

Yes. About 13% to 15%.

15% around, we should be, minimum, which we're working on that.

Okay. About 15% growth top line.

The next question is from the line of Faisal Hawa from H. G. Hawa & Co.

Yes. So in my previous question, I had -- so how much of the steel pricing [indiscernible] because I believe the steel prices in India are a little lower than what they are abroad. So is that also a good tailwind for us to really be able to export, and it gives us a good advantage? And do you feel that the capacity utilization is just now going forward? And the ROCE and ROE, now they're on an uptrend, do you think it could rise further [indiscernible]?

Can you repeat your question? It's not very clear line. Sorry.

Sir, I repeat my question. How -- do you feel that steel pricing have been sustaining these exports sales? Because I believe steel prices in India are slightly lower than what the average is. And secondly, sir, now that ROCE and ROE is on an uptrend, do you feel it could sustain on an FY '22, '23, it could even reach like 19% to 20%? And what is our capacity utilization at this point of time? And you feel that it could rise further also?

The 2 years, definitely, it can go up by about 2% because I think my CapEx will -- my turnover will be much higher than the CapEx I've been doing now. So -- and regarding the capacity utilization, I told you earlier that my gasket utilization is [indiscernible] around 82%; my forging utilization, around 78%; my MMT utilization is 75%; my NLK utilization is at 65%; and Marugo Rubber [indiscernible] division is at 75%; my hose division at 25% at present.

The next question is from the line of [ Abhishek Jain ] from [ Arian Capital ].

Can you throw some light on your CapEx number for this thing? And what is our current end date at this point of time?

For this year...

And how we are going to fund the CapEx going forward.

INR 13 crores in the Gasket division and INR 12 crores in the Forging division for the current year. We already incurred approximately 50% of that in this financial year, already incurred, and balance we will incur by the end of financial -- this financial year. And this is -- we'll be able to tell you in the last quarter, please, because [indiscernible] that, of course -- again, there will be CapEx of minimum INR 50 crores -- INR 40 crores, INR 45 crores in the next financial year also.

Okay, sir. And the net debt number, sir, right now?

INR 101 crores, including long term, short term, INR 101 crores.

[Operator Instructions] Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments.

Thank you so much, everybody, for participating in the call. Thank you.

Thank you.

Thank you very much. Ladies and gentlemen, on behalf of Talbros Automotive Components Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.