TALBROAUTO - Talbros Automotive Components Ltd. Share Price

Management Outlook: Talbros Automotive anticipates sustained growth driven by strong domestic demand, recovery in exports, and diversification into high-margin segments like electric vehicles (EVs) and heat shields. The company maintains its FY27 revenue target of Rs.2,200 crore, supported by a robust order book (Rs.1,478 crore secured in 9M FY25) and execution of new projects from Q2/Q3 FY25.

Key Points:

1. Industry Trends: Mixed automotive sector performance with growth in PVs (4.5% YoY), tractors (20.1% YoY), and EVs (27% YoY). CVs remain sluggish but show signs of recovery.
2. Financial Resilience:
   • Q3 FY25 EBITDA margins improved to 17.4% (up 90 bps YoY) due to cost efficiency, localization, and operational leverage.
   • 9M FY25 revenue grew 9% to Rs.634 crore, PAT up 13% to Rs.68 crore.
3. Segmental Growth:
   • Gaskets (52% revenue): 5% YoY growth in Q3; focus on EV components.
   • Heat Shields: Orders worth Rs.245 crore secured; revenue expected to reach Rs.65"“70 crore in FY26.
   • Forging: Margin improvement despite export slowdown (Europe); new orders from US/UK to offset weakness.
   • JVs (Marelli & Marugo): Strong growth (Marelli EBITDA up 25% YoY; Marugo EBITDA up 81% YoY).
4. Capacity Expansion:
   • New Marelli plant (Rs.45"“50 crore capex) to boost capacity for EV components.
   • Current utilization: 70"“90% across divisions, with forging capacity to reach Rs.500 crore post-expansion.
5. EV Focus: Targeting 10"“12% revenue from EV components by FY26, with delayed OEM launches expected to accelerate growth.
6. Margins: Aim to sustain EBITDA margins at 16.5"“17% through localization, price revisions, and operational efficiency.
7. Exports: Recovery anticipated by Q4 FY25 as European inventory normalizes; direct exports remain stable (~60% of forging revenue).
   Guidance: 20%+ revenue CAGR over 2"“3 years, led by new orders, EV adoption, and JV scalability.

Question 1:
Considering the sluggish export demand and divestment in NLT, do we stick to our guidance of 2,200 crore by FY27?
Answer:
The company reaffirmed its FY27 revenue guidance of Rs.2,200 crore, citing strong domestic orders (e.g., Mahindra, Tata Motors), diversification into new markets (US/UK), and anticipated recovery in European exports.

Question 2:
Will EBITDA margins remain around the current level (~17.4%)?
Answer:
EBITDA margins are expected to stabilize between 16.5"“17%, supported by operational efficiencies, cost controls, and localized sourcing, though quarterly fluctuations may occur.

Question 3:
What are the utilization levels and revenue potential from existing facilities, including the new Pune plant?
Answer:
Current utilization:

• Gasket/Heat Shield: ~85% (max capacity: Rs.540 crore).
• Forging: ~75% (max: Rs.350 crore).
• Marelli JV: Near full capacity; new plant for Stellantis order (Rs.500 crore potential) to be operational in 6 months.

Question 4:
What is the expected revenue contribution from the Heat Shield segment in FY26?
Answer:
Heat Shield revenue is projected to reach Rs.65"“70 crore in FY26 (vs. Rs.32.25 crore in 9M FY25), driven by new orders from Maruti, Kia, and Volvo.

Question 5:
What are the key drivers for growth in the Gasket business?
Answer:
Gasket segment growth (~12"“15% annually) will be driven by new orders, EV components, and recovery in commercial vehicles. Margins improved via localization and cost optimization.

Question 6:
Are export challenges in Q3 likely to persist?
Answer:
Q3 export weakness stemmed from temporary European inventory corrections and Red Sea delays. Normalization is expected by Q1 FY26, with new export orders (e.g., EV components, off-roaders) ramping up from Q2 FY26.

Question 7:
What is the outlook for the CV segment?
Answer:
Green shoots in CV demand are emerging post-election uncertainty. Order execution (delayed launches, e.g., Maruti EV) and industrial activity recovery to drive growth in FY26.

Question 8:
What is the growth outlook for joint ventures (Marelli, Marugo)?
Answer:

• Marelli: Targeting Rs.500 crore revenue by FY27 (15% EBITDA) via new capacity and EV orders.
• Marugo: 25% growth in FY26 with expanded OEM partnerships.

Question 9:
What is the FY26 CAPEX allocation?
Answer:
CAPEX will focus on capacity expansion across divisions (e.g., forging, heat shields), prioritizing segments with strong order pipelines. Exact allocation depends on commercialization timelines.

Question 10:
How is the EV segment progressing?
Answer:
EV orders (12% of target revenue) face delays but remain on track. Focus areas include battery heat shields, noise insulation, and components for delayed OEM launches (e.g., European EVs).