Talbros Automotive Components Limited (TALBROAUTO.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Talbros Automotive Components Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Talwar, Joint Managing Director. Thank you, and over to you, sir.

Thank you so much. Good morning, everyone, and a very warm welcome to our quarter 1 results earnings call. On the call, I'm joined by Mr. Navin Juneja, our Director on the Board, our Group CFO. Also, we have SGA on the call with us, our IR advisers from Mumbai. The results and the presentation have been uploaded on the stock exchange. Let me begin with the industry overview. In quarter 1 FY '26, the Indian automotive industry recorded a muted performance in the domestic market with the 2-wheelers and the PV segment not doing good and the tractor segment, along with EV vehicles have done better in the quarter, but obviously, they're a much smaller base. Overall volumes declined by 5.1% year-on-year. The commercial vehicle space, where today Talbros is a large player, saw a muted growth, posting a 1% decline year-over-year in this segment. While price increase by OEMs provided some support, the demand remains soft, particularly in small commercial vehicle categories. Electric vehicles, on the other hand, continue to perform strong during the quarter. The segment's momentum was supported by an increasing consumer acceptance, a broader product availability and improving charging infrastructure. That said, the pace of growth moderated compared to previous quarters, mainly due to phased reduction of government subsidies, which affected the price competitiveness and the consumer affordability. The 2-wheeler and the 3-wheeler segment remains subdued with volumes declining by around 2% Y-o-Y. This softness is largely attributed to an ongoing inventory correction by OEMs and weak demand for entry-level bikes, especially those focused on fuel efficiency. Despite the near-term challenges, the industry outlook remains cautiously optimistic, supported by expectation of a strong festive season, above normal monsoons, which could help revive the rural demand. What we have seen and spoken to our OEMs in the domestic sector and export, they say that quarter 2 will be better than quarter 1 and quarter 3 definitely will be far better than the previous quarters. Coming to company performance. In the first quarter of FY '26, Talbros delivered a steady and resilient performance, navigating through persistent macroeconomic challenges, a broadly subdued demand environment in the auto sector and a slowdown in the export activity. Despite these headwinds, the company achieved a marginal 1% year-on-year increase and the total of income from operations reaching INR 211 crores. This growth, though modest, reflects the company's stable operational execution. EBITDA for the quarter stood at INR 35 crores, EBITDA margins at 16.5%, which tells you that no matter if the growth goes down, we work a lot on our operational efficiencies and economy of scale and continue to give you good margins. Our exports were strong. So that's a good product mix. So thereby, you got a -- thereby the net profit grew year-by-year at -- by 8% to INR 22 crores. The quarter also highlighted the resilience of Talbros' diversified business model. While the Forging segment faced a marginal decline due to its export orders and a delay in projects that had to be executed by OEMs worldwide, the company's joint ventures did decently well. Marelli Talbros and Talbros Marugo JV delivered a robust EBITDA growth of 30% and 26%, respectively, driven by an increased focus on value-added and technology-driven products. On the exports front, revenue from international markets contributed to 28% of the income for the quarter, showing our consistent effort to increase exports. Within the export mix, the U.K. accounted for 56%, followed by Europe not -- excluding U.K. at 27% and the U.S. only at 13%. U.S.A. contributes to about 3% of the total revenue. This well-diversified geographical spread over Talbros is a natural hedge against region-specific risks, including the recent tariff-related developments between U.S. and India. At the moment, we are continually looking to expand our exports to more countries as we speak. TACL continues to maintain a balanced revenue mix across OEMs, aftermarket and export markets, which again provides a natural hedge. The company secured orders worth INR 580 crores during the quarter. These orders span across different product categories, geographies, highlighting customers' preference for Talbros' capabilities. While fluctuations in the market will demand continue to pose challenges, Talbros is committed from shifting from pure acquisition focused efforts to efficient execution. This is crucial to translating our strong order pipeline into a sustained revenue growth. Looking ahead, Talbros remains firmly aligned to its long-term strategy. The company will continue to deepen its relationship with OEMs. We are in discussions with OEMs other than the existing ones in our country to get more business from them, expand our EV component offerings and at the same time, increase exports as well. That's all from my side. Before I pass on the call to Mr. Juneja, I would like to say that our company is looking at a stronger quarter 2 than quarter 1. And at the same time, quarter 3 seems to be very bullish because a lot of our order books, which have been delayed due to execution by OEMs, will come into berthing. Thank you, and I pass on the call to Mr. Juneja.

Thank you, Anuj. Good morning, and a warm welcome to all the participants. Let me begin with the financial overview. Total revenue for Q1 FY '26 stood at INR 211 crores as against INR 209 crores in Q1 of FY '25, which is a relatively flattish growth. EBITDA for Q1 FY '26 stood at INR 35 crores as against INR 35 crores of the -- in the last year of Q1 FY '25. EBITDA margin stood at 16.5%. PAT for Q1 FY '26 stood at INR 22 crores, as against INR 22 crores (sic) [ INR 20.6 crores ] in Q1 of FY '25, a growth of 8% on Y-o-Y basis. Now coming to the division-wise performance. In the Gasket division, in Q1 FY '26, sales for the Gasket division stood at INR 135 crores as against INR 133 crores of Q1 of FY '25, a moderate 2% growth on Y-o-Y basis. EBITDA for Q1 of FY '26 stood at INR 22 crores, which is a growth of 5% as compared to the same period of last year. Coming to the Forging division. Revenue for Q1 FY '26 was INR 75 crores, which has remained a little flattish, primarily because of the export demand little subdued European market where our major customers are there. EBITDA stood at INR 13 crores in Q1 FY '26, which is slightly a degrowth as compared to last year, but as Anuj told you that we will recover this in the second quarter. For Magneti Marelli Chassis Systems Private Limited, revenue for Q1 FY '26 stood at INR 73 crores as against INR 69 crores, a growth of 6% on Y-o-Y basis. EBITDA for Q1 of FY '26 stood at INR 13 crores, a growth of 30% on Y-o-Y basis. Now coming to the Talbros Marugo Rubber Private Limited. Revenue for Marugo Rubber business in Q1 of FY '26 was at INR 30 crores, a slight degrowth as compared to last year because of the delay in launches by Maruti of EV vehicle. EBITDA stood at INR 4 crores in Q1 of FY '26 as against INR 3 crores in Q1 of FY '25, a growth of 26% on Y-o-Y basis. We are dedicated to creating superior value for our customers through highly -- high-quality products offered at a competitive price. We aim to consistently increase and exceed customer expectations, while building trusted long-term relationship with our stakeholders through operational excellence. And this is from our side, and we would like to open the floor to question and answers. Thank you.

[Operator Instructions] The first question is from the line of Shikha Mehta from Time & Tide Advisors.

Congratulations on a decent set of numbers given the situation. I just had a few things I wanted to understand. I think in Q4, we mentioned that we would see a better FY '26 than FY '25 because there was a delay of certain orders. Are we still holding good on that guidance?

Yes, we are still hopeful that -- irrespective of what has happened in the first quarter and what is happening in U.S., et cetera, we are still hopeful that we'll achieve a double-digit growth in this financial year.

So would that be -- are we hoping to be closer to 20%? Or are we expecting...

No, no, 20% ma'am. No, I never said 20% in last call also. I said around 15%.

No, no. I was asking if it's double digit -- okay. And...

No, no, no. Double-digit growth start from 10% onward ma'am.

Right. Okay. And secondly, I wanted to understand, we've already done a lot to improve our margins to 16.5%. Are we hopeful that we can improve this further? Or is this something that can be sustainable for...

No. Ma'am, it will be improved further. When the top line goes up, it will be improved, definitely. Don't see first one quarter, wait for the year. We will deliver good results. I'm quite hopeful at this moment.

Understood. And another thing, sir, I wanted to understand was we -- like we mentioned, there's been a slight slowdown for a while now in the CV segment, but a lot of reports are suggesting that green shoots are starting to be visible in that sector. So do we have any outlook on CV as a segment for us?

So of course, you are right. It was -- June was very slow. July was also slow in CV segment. But with the festive season, we can expect some uptick in this CV sector. We are expecting -- and plus we have new product launches in the CV segment. Of course, it will take care of better growth for us in the CV segment.

Understand. And lastly, sir, on the forging side, historically, forging has been a segment of high growth for us. I understand the last 2 quarters have been a little muted. But how can one look at the whole year? And what is our expectation? And if you could also help us understand what has happened because of which we're seeing muted growth?

So ma'am, first of all, muted growth is because -- last time I told you that because of the BMW delay, schedule came down, but now it has been recovering. And every quarter, you can see a better performance on that front. Plus new products launches, which are expected from OE customers, have been a little delayed by 1 or 2 months. Of course, it will be also be there. In this quarter, 1 or 2 -- 1 press, I think -- 1 or 2 press got breakdown for 3 weeks. And I think 1 press got breakdown for 3 weeks, 1 press got breakdown for 2 weeks. And we lost order of approximately INR 2 crores to INR 3 crores because of that. But it will be -- we will recover in this quarter. All presses are online now or recovered. So you can see a better growth as compared to first quarter and second quarter. By the year-end, I'm expecting this division should be around INR 325 crores.

Understood. And in Q2, are we expecting to see year-on-year growth as well? I understand quarter-on-quarter will be better...

The quarter-on-quarter because last year, first 2 quarters were very good for the company and last 2 quarters were a little muted. This year, I think first 2 quarters will match last year, and then we can see a growth in the last 2 quarters because Anuj told in the speech also that new launch -- product launches we are expecting in third and fourth quarter.

Third and fourth quarter? Understood sir. And lastly on the export...

Quarter-to-quarter. Yes.

Okay. And sir, lastly, on the export front, I think this quarter, we've done 28% of revenues. We've been targeting 35%. So any guidelines on when we can...

Yes, yes, we are still -- Yes. No, no. U.S. is nothing for us -- for our group. For the group, it's only INR 35 crores -- INR 38 crores, nothing. Whatever the new businesses we are getting is mostly in the European segment. The Stellantis business, which we are talking, is on track. It will start in the third quarter. Plus we are expecting more business in that division. Export business, I think we will announce within 1 or 2 months of that. So we are quite hopeful that we'll be able to touch near to 35%. We are still hopeful. Now we are 28% in this market. Yes.

Right. Sir, I think a year back, we had mentioned something with Russia as well. Did that materialize? Or are we working on that? Or is that currently shelf?

No, no, we are working on that. Not directly Russia through other country, not directly. We're working. It will start in the third quarter...

Yes, it will.

Okay. And other than that, are we currently looking at any new geographies? Or this is our plan...

We're expanding Europe -- we're trying to expand Europe in a decent way.

[Operator Instructions] The next question is from the line of Vishwanath from Prosperity Wealth Management.

So my first question was, over the last few quarters, the company's revenues have remained range bound. So while our margins have improved due to operational efficiencies, so do we see this revenue trend primarily because of the subdued market demand or because of our utilization levels being capped? And are we holding back on our CapEx because of the market demand as well? Can you clarify on that?

Okay. What has happened, happened last 3 quarters. Some -- because of some customers have -- turmoil is happening in the whole world, you know that very well. And Indian market is also not supported in the last -- not performed really well, auto components I'm talking about. Auto market has been subdued also. So -- but we are quite hopeful and we have got orders -- sufficient orders to take the company forward. The orders -- some orders have been OE had delayed, that's fine, but now it has started coming into berthing. And we are CapEx -- there is no stoppage of CapEx. We are in the forging. We have recently ordered 1,600 tonne press, worth INR 10 crores approximately. We are ordering another 4,000 tonne press by the -- before this end of this calendar year. So we are -- orders are in hand, and we are hopeful that whatever the muted growth top line you have seen will improve in future quarters. Definitely, we have a look from third quarter onwards...

Yes, I would like to add what Navin mentioned in our forging business, which we believe in a lot, the whole point of ordering a heavy-duty press like 4,000 is to get larger part numbers, larger value add, larger value with the same OEMs and new OEMs, which -- and they want it from us. And that shows you the commitment that we are putting in this business.

All CapEx is online.

Yes. So our CapEx plans are as per -- going as per plan...

Yes, yes, we are not holding any CapEx.

This is a very short-term phenomenon. Automotive is a cyclical industry. It is not -- it goes through the ups and downs. We will see the uptick happening again from quarter 3, will get better. So just a short-term phenomenon. It's no cancellation of orders. It's a delay of orders. Like, for example, some of our OEMs in Europe or U.K., right, they're launching some EV vehicles. We are doing a lot of work with them, but the car is delayed by 1 year. Now we've already put in the money. We have to wait. So a big brand name like Jaguar Land Rover can also get delayed by a year or so. So it's just a matter of time. And as we mentioned to you, we are looking at constantly adding new domestic customers as well as export.

Understood, sir. So my second question is regarding Marelli. So is the CapEx completed with regard to that? And are we still maintaining the 35%, 40% growth for Marelli? And we were also supposed to commence Maruti and Stellantis supply from that. So is that on track as well?

Yes. To answer your question, CapEx is online. It has been incurred and some is -- and the process of being incurred. We are on track of it, and we expect the supply to be started from the third quarter onwards. We are on track of it. Everything is in line.

Got it. And my last question is with regard to the recent U.K. FTA. So how will we benefit from that?