Talbros Automotive Components (NSE:TALBROAUTO) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day and welcome to the Talbros Automotive Components Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Anuj Talbat, Managing Director. Thank you, and over to you, sir. Our Director and Group CFO, along with the IR firm SGA.

0:59 The results and the investor presentation have been uploaded on the Stock Exchange and the company website. Before I take you through our performance, I'd like to spend a moment on the broader industry landscape. The Indian automotive industry delivered a healthy performance during the first quarter of twenty seven, supported by continued demand across key vehicle categories, improving consumer sentiment, sustained infrastructure spending, improved supply chain stability. Structured trends such as premiumization, including localization, vehicle electrification, and global sub chain diversification continue to create significant opportunities for the domestic auto comm industry.

1:46 The passenger vehicle industry recorded sales of approximately 1,270,000,000 units, reaching a growth of 26% year on year. The growth was primarily driven by sustained demand for SUVs, premium vehicles, as well as new model launches. The two wheeler segment also continues recovery with a growth of almost 20% to year on year at 5,630,000 units. The growth is supported by improving rural demand, stable financing availability, and obviously, the GST cut as well. This segment and the one above remain important for Talbros as we are, you know, supplying to both passenger vehicles and two wheel segment.

2:33 You'll also see in the coming slides that in the pure PV joint venture that we have, we have grown higher than industry. Commercial vehicles recorded steady performance during quarter with industry volume of nearly 2.83 lakh minutes, registering a healthy 15% growth. The growth was supported by robust infrastructure spending, improved freight movement, as well as mining activities. The long term outlook for the segment remains positive, driven by sustained government CapEx and resilient growth targets. Electric mobility continue to witness healthy adoption across vehicle segments. EV passenger vehicles volume grew by 87% year on year, while electric two wheeler continue to gain market share with the growth of approximately 68% supported by increasing charging infrastructure, rising fuel prices, and this entire disruption that happened in the West war gave birth to electric vehicle getting more and more popular. As you know, Talbros Automotive is anyway supplying a lot of components for electric vehicles.

3:42 We maintain strong partnerships with our diversified customer base with OEMs such as Maruti, Tata, Jaguar, and Rover, Bajaj, etcetera. Beyond domestic demand, global supply chain continue to undergo structured realignment. Seven international OEMs are actively diversifying their supply chain away from China and expand sourcing from India. We expect to capture meaningful growth opportunities, including our wallet share with existing customers while also establishing relationships with new OEMs who expand our customer base. Coming to our performance, I'm pleased to share that Talbros has delivered yet another record quarter, achieving its highest quarterly quarterly revenue and surpassing the previous high recorded in quarter four of twenty six. During q one, our total income stood at 242 crores, registering a growth of 15% year on year, EBITDA of 43 crores at a margin of 17.6%.

4:41 Margins during the quarter witnessed temporary pressure on account of elevated commodity prices, particularly steel and aluminum, as well as other inflation costs such as labor increases in some states. But we're very happy, very positive that you will get these increases in the OEMs in the coming quarters. Our diversified business model, balanced exposure across domestic export markets, and presence across multiple vehicle segments continue to provide resilience during varying industry cycles. Our gasket and heat shield division continue to remain the largest contributor to our business, giving us 52% share in the revenue. The division reported revenue $1.64 crores of the 242 I mentioned to you, growing by 21% year on year. And EBITDA increased to 29 crores with a growth of 32%.

5:32 Growth has come basically from increased leaching exposure with car makers like Hyundai in Korea, as well as a lot of data center business, which I'll talk about later in my speech. We continue to maintain our leadership position with nearly 50% market share in the domestic basket market and a single source of many, many OEMs. I've mentioned to you, our heat shield business is showing good momentum, strong momentum because it's, again, a lightweight product. It's for noise vibration harshnesses NVH. It's something for the future, and we are the probably the largest player for this product category in India. Our forging division continues recovery this quarter with revenues being at about 78.4 crores. Again, as you know, that forging is pretty much a total export oriented unit.

6:20 And what do you call it? It's basically exported to USA... To UK in product, not USA, UK, Europe. And the European car markets are still slow right now given the fact that a lot of inflation pressure out there. And even the Chinese class segment has really, really dented their balance sheet. However, we see this as an opportunity for the faulty division, where we have got massive orders from our JV partners, Narelli, which we will again talk about in the q and a section. As mentioned to you, exports remain our strongest growth pillars with with a contribution of almost 25%. We are targeting to take our exposure to 35% by FY twenty eight. Our export portfolio includes JCD, Dana, Gerardo, Jaguar Land Rover, and as well as BMW and Cummins America.

7:13 Operational pressures from West Asia crisis, manpower shortages, higher wage costs, elevated LPG prices have largely moderated through a few channels remain. Our strategy of building a diversified customer base across Europe, UK, and international markets now is now yielding meaningful results as well. Coming to a new growth vertical for Talbros is data centers. Data centers represents a new expanding revenue stream for Talbros. Our gasket components are going to power engines that data centers depend on. As you know, every data center in the world needs a 100% backup, and that can only happen to generators. So we are supplying to our customer like Cummins and Kelowczka Rolling Company. Are not only are they making engines for cars and vans and trucks, but also for generators. So this is new segment altogether.

8:06 Cloud computing and AI workloads are increasing the dependence of generators for the power centers, as you know. We estimate the current revenue potential from this segment, though a little bit nominal, can be about 30 to 40 crores annually. So that is a nice new segment to enter into. Coming to updates on important orders. As mentioned earlier, the Kia business has company show... Has has has has now resumed full pace. We've also secured the orders from Kia and Cummins. We're adding further depth to our order book and OEM relationships. As I mentioned, started supplying from our chassis division. It just took almost two years of design changes and start the production, but we are happy to say we started producing from, I think, quarter one of this year. This is massive. With this, will get more and more business from... Into our 40 business line and also heat shields.

9:03 Our planned CapEx is about 103 crores for the year across gaskets, forging, heat shields, and to try and, you know you know, meet the demands of the OEM. For FY '27, we continue to to continue to have a target group, a revenue target of about 18% to 20%, with margins being in the range of about 70 odd percent, little bit maybe 17.5% because we're still working out the whole impact of the inflationary pressures. With that, I hand it over to Naveen Juneja to take it forward. Thank you. Thank you, Anuj. Good afternoon, everyone, and a warm welcome to all the participants. As mentioned by Anuj, we are pleased to report a solid performance of Q1 in Q1 of FY 'twenty seven. I will now take you through the financial highlights.

9:51 For Q1 of FY 'twenty seven, the total revenues stood at INR $2.42 crores as a range INR $2.11 crores in Q1 of FY 'twenty six. For Q1 of FY 'twenty seven, our EBITDA stood at INR 43 crores with a margin of 17.6%. Paid for the quarter stood at INR 30 crores, growing 35% year on year basis. Now coming to our division line performance. In the Gasket division, first, the Gasket division in Q1 FY 'twenty seven, sales for the divisions stood at INR 64 crores as against INR 135 crores in Q1 of FY 'twenty six with a Y o Y increase of 21%.

10:39 EBITDA for Q1 FY 'twenty seven stood at INR29 crores, which is up by 32% on a Y o Y basis. Now coming to our second division of Forging. Revenue in Q1 FY 'twenty seven stood at 78 crores as against INR 75 crores in Q1 of FY 'twenty six, showing a growth of 4%. EBITDA stood at INR 14 crores in Q1 of FY 'twenty six, as against 13 crores of Q1 of FY twenty six. Let me begin with the discussion on our joint ventures, starting with the Railway chassis systems.

11:27 Revenue for the quarter stood at INR 100 and crore, reaching a growth of 43% on a Y o Y basis. EBITDA stood at INR17 crores. The business concludes its strong momentum, driven by high volumes for passenger OEM vehicles and increasing value added products. Now coming to our JV, Talbros Margo. Revenue for the quarter stood at INR 40 crore raising a growth of 31% on a Y o Y basis. EBITDA stood at INR 6 crores, a growth of 57% on a Y o Y basis. This division continued to deliver healthy operational performance supported by strong customer demand and improved efficiencies.

12:18 Our large joint venture, Rovan Talbros, also continues to progress as planned. This business represents our strategic entry into sustainable materials to recover our own black and demyelination efforts, further strengthening Talbros' presence in the circular economy ecosystems. We here believe this business offers significant primary potential and expect it to emerge as important growth drivers over the medium to long term. Our strong order book, diversified customer base, leadership position across multiple products categories and continued investment in technology and capacity provide us confidence in delivering sustainable growth momentum in the coming quarters.

13:07 This is all from my side. Thank you. And we'd like to open the floor to question and answers. Thank you very much. We will now begin the question and answer session. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Deepen Shah from Six Senses. Please go ahead.

13:53 Yes. Thank you for the opportunity and congrats on a very strong set of numbers, I should say. Sir, I had a couple of questions. Firstly, on the new OEMs. So Anuj mentioned that about seven OEMs are looking for diversifying their supply chains from China to India. Could you just throw some more color on how far they have come in and whether at what stage are we, if at all, any in transacting with them? So that's the first question. Maybe some update on the new projects which we have started with, some more color that would be helpful. And the third... Yeah. So maybe that's the first question. Will come back. So I did a first question, Deepin. I think that we will talk with... I think, again, is the reason is that the European car market is a pretty dented with their balance sheets as I keep mentioning.

14:42 So BMW is giving us more business, existing customer. Volvo is a potential new customer with the gas in business line. Marelli is just opened up a door with TALBROAUTOIS. So new customer from the chassis business line as well as the forging business line. We are working with Jaguar Land Rover on new components for the first time, which are plastic components for electric vehicles. That's, you know, a old customer with a new product line that we're working with JLR. Cummins America, as I keep you, is a very slow starter. It's like a tortoise, but I'm very, very hopeful by '27, '28, you'll see at least $30.40 crores of business coming from America Cummins. You know, we buy a harness gaskets, we have aftermarket gaskets, we have data center gaskets.

15:28 So that's a slow starter, but a short starter. That is there. Kia, we are doing good work with. Hyundai, we're doing good work with. Maruti is doing good work with. In fact, I'm gonna try and meet Tata Motors chief in the next ninety days to talk about the potential plant in Gujarat for for chassis as well. So, yeah, things are looking good. Yeah. Looking very positive. Yeah. Okay. Great. And the second thing is on the Marelli thing, like, we have been in talks with the company for the past couple of quarters about the. Any further progress on that? We'll have a better picture for you around end of September. You know our strategy. So I think they are in the middle of court proceedings.

16:13 So by September 30, we'll have a better picture. We can talk offline on this. Okay. Thanks so much, and all the very best. Thank you. Yeah. Thanks. Thank you. Ladies and gentlemen, in order to ask a question, you may press star and 1 at this time. The next question is from the line of from CGW Investment. Please go ahead. Hello, sir. Congratulations on a great set of numbers. So, sir, my question was on the data center part of it. So currently, sir, how much percentage of our gaskets revenue is coming from data center, and how are the inquiries going on? And It's about only 55% of the gasket business today.

16:59 It's very new because even for us, we started seeing that, you know, that our products that go into Cummins that go into, you know, Cummins, we see supplies. We do about 100 crores that come in every year, right, approximately. The gas division, they said, will be north of 600 crores. $30.40 crores will come from this this particular segment and also to those to all companies. That's something about five, 6%. That's about it. But it's increasing. You know, we are pretty much single source to commence for this particular engine component. So as and when it increases, it it keep going up. Today, $30.40 crores, we have a 300 crores, 200 crores. So... And... But we're not, like, running and getting this business. It is whatever engines that they're giving to us for this particular segment, we're getting that because I'm single source to come.

17:46 And it is And gasket would be, like, 1% of the whole the generator cost? Whatever we can say, we don't know the real application. We ask them where it's going. We supply to them as a engine parts. Was that the same gasket go to engine. Engine can go to a commercial vehicle, some machine also, engine later also, same engine goes there. But if you see the progress of quarter or in this quarter Cummins alone, sold INR45 crores. Last year, we did about INR90 crores with Cummins. Before that, we did only INR81 crores. It shows that more demand is coming, that demand we ask them is going basically in engines for data center.

18:38 Okay. Okay. Okay. And in the Gas kit division, sir, so this year, we can expect around $1.65, $1.70 crore of run rate. But going forward, how much, you know, how much revenue can this division make for us? Also, currently... Also similar with the forging division. Like, what is the peak potential on both these divisions if I can get a number around that? Navin, answer that. You can answer this. I can answer that. This is a gasket division. Of course, the first quarter, we had a 21% growth. I think the same type of growth will also happen in second quarter. We expect the same because the market is very buoyant and we see the same type of growth.

19:30 But by the year end, we expect this to grow about 17% in this year, okay, overall. Coming to porting, please don't worry about the first quarter. First quarter is only 4%. Second quarter, we should expect double digit growth in this business. And by the year end, this business will definitely grow between 15% to 20%, definitely. Because the order will during also which will come into fourth and third quarter. And are we expecting to plug the Marelli business in the current consolidated since they are kind of getting, you know, bankrupt. So what what is Once the deal happens, ma'am, we can't talk about today.

20:19 But what is the plan? We can't talk about it. If it happen, we'll talk. Got it. But the margin Regarding regarding your two divisions... Sorry to interrupt you. Regarding your two divisions, gas is in forging. Over the next three to four years, our easy fee gas is going to about 850 to 900 crores, and four g is about $6.50 to 700. Got it. Then that would be gaskets. The major component would be what? It would still be PV series or we see data center to take about 15, 20% higher? Commercial vehicles exports orders are in. There are a of export orders that are coming our way.

21:08 So... Yeah. For our plastic components,, we are we are getting good quarter, about 25 fold for plastic component, more orders are coming. That will start maturing from next financial year. Got it. Got it, sir. And also on the Marelli side, this quarter, the margins have kind of gone down. Is that mostly because of the raw material cost itself or... No, it's a bit of it because other income is little less in this case in this quarter, but don't worry, it will come back. Don't worry. But we had some expenditure has been for the new because that is been launched, we have bought lot of manpower for that purpose. Shed rental has started, etcetera, etcetera. That is a pretty big will by the year end, everything will be sorted out. Don't worry.

21:58 I will come back. It's quite fine for Got it. Got it. Thank you. Yeah. Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of from Time and Tide Advisors. Please go ahead. Hello. Hi, sir. Am I audible? Yeah. Audible. Yeah. Yeah. Alright, sir. Congratulations on a great set of numbers. I just had a few questions. I know we've already discussed the forging division, but just wanted to understand a bit more in detail that Q1 was at 4% mainly because of your rep? Or was there some other issue as well? Or did some orders get delayed to Q2?

22:51 Why don't you repeat again little bit little bit louder, please, please? Yes. So on the forging side, I know we've already discussed this in detail, but just wanted to understand if in Q1 any orders got delayed or this is purely because the industry is a bit slow and your order also has been a bit slow? Not delayed really because we have the warehouses available, material available. Of course, as you are aware, initially, the manpower issue was there in this quarter, availability of manpower. With the LPG price going up and these but were when you come from outside of Haryana, etcetera, they went away, number one. And because of the gas prices going up, they... You know that. What is happening? What was happening? Correct. Everybody was afraid the COVID like situation will come.

23:41 Fortunately, we had a bit of a slowdown because of two things. One is that some orders took little bit time to come into execution mode. Right. Number two, schedules from customer like BMW GK came down because of the European car market. But I've I've said yesterday to my... By my CEO, to my board yesterday, July is better than June, August is better than July, September is better than August. Something a positive positive trend will happen in this division. Some see this order book is coming our way almost about 500 crores for five years, 100 crores per annum. For profit? I I just... I did... I just took over from where you left. Okay. There's a little bit... You can say productivity came down. These are the every year it happens. There's a drop in production, five to in this quarter.

24:29 But now everything sorted out and plus the order is very, very encouraging. We should have a decent number in this quarter as compared to last quarter and compared to last year also. We should be anyway around 10% growth you should see in this quarter as compared to last year. Year end, everything should fall in line, we should be in the range of $3.40 crores to INR $3.50 crores types. Understood, sir. So, Marelia, Alberta is maturing in the third quarter and new order from Dana and Carraro also maturing in that period by third. Fourth quarter will be the super quarter and third quarter will be better quarter as compared to the second quarter will be also better. Don't worry. We are back. Got it, sir. Yeah. Next year, we got sick up.

25:15 And, sir, secondly, you know, on the data center component that we mentioned earlier, is the margin the same as the rest of the gasket division, or is this a slightly better margin product for us? Sir, we are supplying the same gasket. The gasket has gone up up. First, application margin, normal generator, home generator, shop generator, etcetera. Now with the new opportunity of data center coming up, the demand of generator has gone up very, very high. Understood, sir. The pricing on that product will be the same as the regular gasket? Yeah. Yeah. We are supplying the same gasket, but the application application hasn't Yeah. Understood.

26:03 And so on our ICE versus our EV division, are we seeing any... You know? Because a few OEMs have, you know, kind of reduced their guidance on the EV front. So are we also seeing that that, you know, our EV orders are kind of not growing at the pace we were expecting, but ICE is seeing stronger growth? We are seeing now we are seeing a stronger growth. The JCD JLR already started taking the materials. They're launching the vehicle in the month of September. By the way, I'm telling you because Tata Motors, we are already supplying EV vehicles and they have already grown very high, but Maruti also started its EV production. Just for your information, in this quarter alone and the following EV supply to My Total EV My total EV sales, with all the reasons around 12.5, it was around 9 crores last year same quarter.

27:02 And 10 crores in the fourth. So from q four, it has gone up by 2 crores. Right. Right. Right. And it's a room of 5% as compared to Q1 of FY 'twenty six. We are quite hopeful that we grow further up. It's now 3.27%. Last quarter, it was last year, was 2.9. Last quarter, it was 2.56. Yeah. Two year. Is that But we are in both segments now. Correct. And do we have any guidance on this? Say, we want to take it to 5% or 10% in the next three years, five year period? Around 5% minimum. 5%. Understood, sir. Understood. Currently, that's it from my side. I'll come back in the queue.

27:50 Okay. Thank you. Alright. Thank you. Thank you. Participants who wish to ask questions, press star and 1 at this time. The next question is from the line of Subhash Gauthay from Choice International. Please go ahead. Yeah. Can you hear me, sir? Yeah. Yeah. I can hear you. Yeah. So few of the questions I wanted to ask. So first question is, like, just previously answered regarding the EV. I just wanted to understand that like how is the EV mix progressing currently and how has the contribution evolved in quarter one twenty seven? Sir, we don't have any separate contribution. My contribution is same as other components in EV vehicles also because EV has gone up because of two major reasons in this quarter.

28:41 One is increase in Tata Motors EV production. You know that. We are supplying components there. Plus we are supplying bushes to BMW of EV vehicles, their sale has gone up little bit there. Plus JLR, we launched this vehicle in the month of September, EV vehicles, just start picking up little bit stuff from us. These are three major reasons for that. So you have good visibility regarding EV business. So do you have any kind of odd numbers which can you can say that like it will be contributed for next two to three years, like something percentage of contribution you will be get from EV businesses? First quarter, it is around 3.27% of this year. We expect in next two years, it should cross 5%.

29:28 Okay. And about... Yeah. Yeah. Go ahead. Hello? Yes. Mhmm. Yeah. So the another question is that, like like, are you seeing any, like, inquiries from global OEMs regarding CV components for this one? Yeah. Yeah. The supply will start from the first quarter or the second quarter of next calendar year. That is also for EV. Okay, okay sir. Thank you. Thank you, sir.

30:19 Yeah. Thank you. Before we take the next question, we would like to remind participants that you may press star and 1 to ask a question. The next question is from the line of from CGW Investment. Please go ahead. Hello, sir. Sir, my follow-up question was on the forging business. So I remember that a year back, we were expecting forging to do around 400 crore of revenue in FY twenty seven. So what led to the guidance going down? Like, was it, like... Like, just wanted to know the reason because I've been seeing in the last few quarters, we've broadly been doing 75 crores on an average. So, you know, is there a particular reason for it or, you know, just if I can get a little clarity on that.

31:28 Now, Peritrol again at my plant today, right, we speak here, they are again coming come back and try to start the business. That is INR 30 crores, 40 crores business I lost because of that. Plus little bit muted demand from the Europe. These are two reasons. Okay. Okay. And now that we're talking about a 14, 15% growth, so is everything in place for it? Because we also have a 500 crore order, right, sitting in our books for coaching division. So Yeah. We have. We have. Yeah. Yeah. We have equipment. We also had some manpower issues. We had some leadership issues. They're all being solved. As you know, Ashish appointed CEO of Talbros Automotive in April 1. He's spending about 50% of his time in in forging as well. Things are getting better, and you'll see better numbers going forward. 100.

32:19 Yeah. Okay. So we will go above the 75 crore of average because I think that is one of the things that we've been watching that we've not been able to close. This year, we should close this business at about INR $3.40 crore around over 2.53 here and there. Okay. Okay. Okay. And the gasket business should be around INR700 crores? It should be around INR680 crores to INR700 crores. It should be around that. It should be. Okay. And the peak revenue that we mentioned earlier, so by which year is that possible for us? By '30.

33:07 Okay. By FY '30, like for gasket division, we've spoken about INR900 crore of revenue. Exactly. Eight fifty. Eight fifty. And forging INR600 crore revenue by FY thirty. Yeah. We're already there. Maybe more. Okay. Maybe more. I'm pretty hopeful. Okay. Let's see all the things. Got it. It. Got it. Yeah. Thank you. Thank you so much. Thank you. The next question is from the line of Jay Jayan from JJ Capital. Please go ahead. Hi, sir. Sir, I have two questions. So firstly, which segment do you expect to do the in FY '27? Is it gaskets, forging, MTCS or TMR?

33:56 Pardon me, but can you repeat each segment is doing a export? Hello? Can you repeat the question, please? Yes, sir. Segment do we expect to grow the fastest in FY 'twenty seven? Is it the gas scales, porgins, MTJs or TMR? Sir, first of all, it should be TMR really, okay? Will grow very fast. Will in 30% to 40% growth will be there around. And secondly, it's 14%, it should be around 20% plus than gasket. And similarly, TMR, both are same, 18%, 20%. I think, Ghasti should be around 16%, 17% and Marelli should be also be 16%, 17%. Okay.

34:42 Sir, my second question is going ahead, what should be considered as a sustainable EBITDA margin? Around 17% you can assume. Okay. Thank you. Thank you. Ladies and gentlemen, in order to ask a question, you may press star and 1 now. Participants who wish to ask questions may press star and 1 at this time. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you so much for joining the call today.

35:30 We are proud of our resilient growth rates and numbers that we have shown. We are hopeful of the automotive industry and we're hopeful of catching bigger market share both in India and export market. And hopefully, we'll have better numbers in the future as well. Thank you so much. Bye. Thank you. Thank you. On behalf of the Talbros Automotive Components Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.