- Talbros revenues grew by 6% y-o-y in Q3 FY 17 (YTD basis: +10%)
- On the other hand, Revenues (exc other income) grew by 7.3% y-o-y for the third quarter. For YTD the growth was 9.3%
- EBITDA margins declined by 6% y-o-y for Q3 FY 17. However, for the nine month period EBITDA margins increased by 6% against the same period
- Employee costs increased by 13.3% for the nine month period (+ 11.9% y-o-y for Q3 FY 17) mainly due to 24% increase in minimum wages in Haryana
- Other expenses increased by 12.1% to INR 21.2 Crores. These expenses – mainly comprises of processing charges, power and fuel – increased due to the outsourcing of some operations, which led to an increase in process charges
- Interest costs fell by 4.6% y-o-y for Q3 FY 17. For the nine months period, interest costs declined by 5.6%
- Net Income increased by 15% y-o-y to reach INR 4.50 Crores (YTD: +36% to INR 11.7 Crores)
Automobile Industry Update
- Auto sector witnessed a de-growth of 2% in the quarter
- Highest impact was observed in the 2 wheeler segment – a decline of 3.6% in volumes mainly due to liquidity freeze in rural and urban areas
- Passenger vehicle segment grew by 12% for the quarter
- Commercial vehicles remained almost stable – growing at 1% in the third quarter
- Gasket division – received new orders from Ashok Leyland, Maruti Suzuki. Further, export orders are received from Kubota Thailand, Ducati, Caterpillar USA and Kubota Japan.
- Forgings division – new orders were received from BMW Germany, Koyo bearings as well as increase in business from GKN Europe
Key Segmental Updates
- Gasket division (including Nippon Leakless Talbros) outperformed the industry due to an increase in the export sales
- Combined revenue (from gasket & NLK) reached INR 72 Crores in the third quarter (EBITDA – INR 10 Crores)
- On the other hand, domestic two wheeler segment sales were in line with the industry growth (gasket division impacted due to demonetization)
- Forging division – revenues were up 46% y-o-y to INR 19 Crores (vs INR 12.9 Crores in Q3 FY 16)
- JV MMT continues working towards expanding its portfolio to OEMs (leading client being Maruti)
- MMT revenues witnessed a growth of 33% in the third quarter mainly due to higher sales volumes primarily of Maruti (Portion of revenue to TCL – INR 10.6 Crores)
- JV TMR witnessed a strong performance and grew by 51% with its OEM customers (revenue share attributable to TCL – INR 3.7 Crores)
- Gasket division sales (TCL is a single supplier to Hero, Honda and Bajaj)
- Sales to Bajaj – INR 55 to 65 Crores
- Sales to Hero is with the JV – INR 70 to 75 Crores
- Sales to Honda – INR 25 to 30 Crores
- JV TMR has 2 business clients – anti vibration (business is quite full with orders from Maruti, Daimler and TATA Motors, Isuzu and Honda) and hose (TCL recently secured a large order from Maruti and the hose division is expected to break even from next year)
- New customers added in forging business – GK Europe, Volvo, Eicher. Further, the company is even trying to negotiate with Royal Enfield. Additionally, TCL is even moving up in the value chain – recently started a company called Amol in Gujrat for connecting rods
- The company is in advanced talks with BMW for exporting ‘toe hooks’
- TCL plans to launch a new product ‘front axle’ – for PC segment – (part of JV MMT) which is a larger component about 14 kilos (revenue expected from this component – INR 4,000)
- TCL is planning on a new technology – post coating gaskets. TCL plans to do more of localization for global procurement for gaskets.
- The company is already working on the engine mount (prototype developed) as well as truck mount. Moreover, TCL is currently even working on the suspension bushes for Marugo.
- Currently, TCL is working on heat shields with Daimler, Volvo Eicher, Cummins and is expected to be a major contributor for FY 2018 (about INR 5 to 7 Crores)
- The company will continue to make its product mix more export oriented
- TCL will be paying a special attention to manage the long term loans as well as the working capital going forward
- Company plans to attract new customers like Maruti for heat shields to increase its exposure in the Indian market
- Post 2020, heat shields in the PC segment is expected to be worth INR 100 Crores and TCL plans to capture at least 20% of the share.
- Gasket division sales (including NLK) expected to grow in the range of 10% to 12% for FY 2017
- Revenues from forging are expected to grow in the range of 30% to 40% (forging revenues for FY 2017 to be somewhere between INR 65 to 70 Crores)
- No significant Capex plans in FY 2018. However, maintenance Capex would be: Gasket – INR 6 to Crores, MMT – INR 1 to 2 Crores, Forging – INR 4 to 5 Crores (minimum).
- Forging exports expected to grow by 20% in the next financial year