Talbros Q3FY18 Concall Summary

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 Industry overview

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  • Indian Auto Industry grew at 16% in Q3 and the company grew at 28% for the quarter
  • The performance of auto sector was mainly due to good monsoons, improved rural sentiments, increased production of BS-IV compliant vehicles.
  • SIAM final sales estimates for the current fiscal through March expects passenger cars to grow between 7% and 9%, commercial vehicles at 13%, two-wheeler 12%.
  • Industry report suggests the business environment on commercial vehicles, two-wheelers, three-wheelers and LCV has stabilized
  • Favourable macroeconomic conditions, stabilization post GST, healthy order books with a focus on localization will help in achieving company’s targets
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Company Updates 

  • Company is confident to achieve the targets for Q4 and for next two years mentioned in the business stateodstes
  • The company is already BS-IV compliant and also ready with BS-VI products.
  • Company has been approved by Governments for outsourcing.
  •  Instead of importing rubber-coated steel from Germany or Europe company will use Indian steel and will coat the rubber on it
  • Talbros is in talks with Iran Isuzu Motors and North European, non-automotive player to improve its exports
  • The company has already supplied to Volvo and Ducati and is in talks with Polaris of US for export.
  •  The company is already supplying Heat Shields to the commercial vehicle like Volvo and Daimler at about Rs.4 Crores to Rs.5 Crores per annum
  • The company is attempting to make indoors with Hyundai and Maruti
  • The company received a lot of RFQs from a global player for Heat Shield
  •  Sales of the JV were lower in this quarter because of the dependency on Maruti, Hero and Honda.
  • Yamaha, Hero, HMSI are the major customer and these customers also growing well
  •  The company gave certain cost down to Hero, which has impacted the turnover from the Hero side to maintain the status quo in terms of market share
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Financial highlights

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  • Total income for the quarter as for Indian GAAP was Rs.134.48 Crores, the same as per Ind-AS is Rs.103.98 Crores.
  • The difference is on account of consolidation of the share of revenue for JVs, which has not been taken into account in Ind-AS.
  • EBITDA as per Indian GAAP was Rs.17.1 Crores during this quarter with a margin of 12.71%
  • The EBITDA as per the Ind-AS is Rs.13.09 Crores, which does not include the share of JV.
  • Adjusted PAT for the quarter was at Rs.6.40 Crores as per Indian GAAP and as per Ind-AS, it is Rs.5.67 Crores.
  •  The adjusted PAT margin improved from 4.9% in Q3 FY2017 to 5.45% in Q3 of FY2018.
  • Total income for nine-months of FY2018 as per Indian GAAP was Rs.377.45 Crores, the same as per Ind-AS is Rs.287.02
  • The difference is on account of consolidation of share of revenue from the JV.
  • EBITDA as per Indian GAAP is Rs.45.58 Crores with the margin of 12.08%, the same as per Ind-AS is Rs.32.21 Crores, which does not include the share of JVs.
  • Adjusted PAT for nine-month of FY2018 is Rs.15.58 Crores as per Indian GAAP and PAT was Rs.13.19 Crores as per Ind-AS
  •  The company has reduced the working capital, which would be visible at the end of March
  • EBITDA increased by 12.7% for Q3 on a consolidated basis.
  • Profits decreased from associates, which is Rs.1.6 Crores in Q3FY18 compared to Rs.2.2 Crores in Q2FY18
  •  In aftermarket company increased its selling price by 4% and from January
  • The company expects the exports to be around Rs.9 Crores to Rs.10 Crores next year, on a turnaround of Rs.55 Crores next year
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Gasket Division including Nippon Leakless Talbros

  •  Talbros holds 38% of the market share domestically.
  • The revenue from standalone gasket business was Rs.74 Crores and NLK was at Rs.10.9 Crores during the Q3 of financial year 2018.This is on the account of company’s product mix going 55 towards export 45 towards domestic.
  • This segment saw combined EBITDA of almost Rs.12.3 Crores.
  • The revenue from standalone gasket business was at Rs.209.92 Crores and NLK was at Rs.35.3 Crores for the nine-months of FY2018.
  •  Consolidated EBITDA for this segment is of almost Rs.33.6 Crores during this nine-month.
  • Standalone gasket sales recorded a growth of about 22.37% because of improved rural demand and low vehicle financing rates.
  • Nippon Leakless witnessed sales volume growth on the account of sales to HMSI.
  •  The company is working with its local material suppliers to reduce dependence on imported content for Nippon LeaklessTalbros
  • The company expects growth of 20% minimum in the aftermarket on the gasket side
  • The sales in most profitable fter market segment had witnessed sequential growth over the last three quarters.
  • GST had introduced to 18% from earlier 28% in November of this year and company started witnessing the benefits from the same.
  • Focus on OE export business has helped in securing orders from Cummins, USA, Zetor Tractors – Czech Republic and non-automotive conglomerate in Austria for gasket business.
  • Other  business initiatives for cost savings such as the installation of post-coating line and localization of raw materials are on track.
  • The company sent estimates of certain global OEM contracts for gasket business from Cummins as well as ZetorTractors, Czech Republic.
  • Talbros in very hedged auto component player is supplying to all these segments.
  •  Order of Rs.4 Crores received from Cummins, USA and should start in the year by September quarter of this financial year
  • Margins went up to 13.31% of Q3, up from 12.7% last year quarter.

 Forging business

  • 54.3% growth in the revenues to Rs.29.15 Cr in Q3 FY2018 on a Y-o-Y basis from Rs.18.9 Cr. in Q3 FY2017
  • The revenue grew by 45.42% from Rs.51.9 Crores in nine-month of FY2017 to Rs.75.42 Crores in nine-month of FY2018.
  • The company secured contract from BMW for forging division and from Jaguar Land Rover for its Magnettidivision which will increase the working capital cycle in the case of export orders
  • The company’s decision is post coating line, which has got established in the month of February will help reduce imports
  • Disinvestment of company’s materials plant in Sona to India based materials by June of next year will help in reducing working capital
  • Forging business in this quarter showed growth of 54% and Rs.2 Crores a month is already happening from the forging business
  • Margins had gone up on 9.5% last quarter of last year to 11.7% this year.
  • Forging segments power consumption which used to be 18% to 19% of company’s topline power cost come down 10% due to use of grid power.
  • The company secured an order from Maruti Suzuki to supply control arm assembly for the tractor suspension with estimated annual revenue of Rs.24 Cr p.a.
  • The company received increased business from SML ISUZU for moulded hoses and started supplies of hoses to Japan Mitsubishi.
  • Talbros enjoys the success of the Baleno and Breza and the S-Cross where it is present both in Marelli as well as Talbros Marugo

 Magneti Marelli Talbros

  • Company has 50:50 joint venture with MagnetiMarelliChassis Systems, a Fiat Group company with the scope to design and develop complete chassis for OEMs.
  • MMT saw a 27.81% revenue growth this quarter because of higher volumes.
  •  Total portion of revenue to TACL in Q3 of FY2018 was around Rs.13.6 Crores.
  • Revenue grew by 28.96% from Rs.29.5 Crores in nine-month of FY2017 to Rs.38 Crores in nine-month of FY2018.
  • Margins improved on account of improved volumes achieved from the sales to Maruti Suzuki
  • Jaguar Land Rover business which is roughly about Crores and half a month has been successfully implemented.
  • Capacity utilization as well as exports on JLR have jumped to 7% for the quarter an EBITDA versus 5.6% in last year same quarter

 Talbros Marugo

  •  Company entered in a new joint venture with MarugoRubber Industry in Japan, which caters to antivibrationcomponents and hoses.
  •  TMR saw a 41.16% revenue growth in Q3 of FY2018 over Q3 of FY2017.
  • Total revenues share attributable to TACL was at Rs.5.2 Crores.
  •  Revenue has grown by 18.33% from Rs.9.99 Crores in nine-month of FY2017 to Rs.13.3 Crores in nine-month FY2018.
  • TalbrosMarugo has shot up to 7.39% for the EBITDA versus 2% of the last quarter due to better capacity utilization
  • The company started supplying hoses to Marugo Rubber Japan in Q3

Capex

  • The company is in the phase of expanding its capacity to approximately Rs.28 Crores to Rs.30 Crores per month.
  • The company’s special plant will be finalized by the month of March and company may require Rs.10 Crores to Rs.12 Crores for that
  •  In the forging business, company has just put up a facility of press 700 tonnes last month.
  •  A 1000 tonne press will be operational this month and by putting additional four or five machining lines capacity will be around Rs.12 Crores per month with a growth of another 25% to 30% next year.
  • •In Magnetti Marelli company is looking for capex in Jaguar and Maruti and expects a capacity of Rs.8 Crores to Rs.9 Crores.
  • Capex of presses and robotics will be around Rs.8 Crores to Rs.9 Crores and Rs.250 Crores will take care of the MagnettiMarelli
  • The company is looking at a capex of Rs.10-Rs.12 Crores in the gasket, Rs.5-Rs.6 Crores in forging, Rs.8-Rs.9 Crores in MMT, Anti-Vibration Rs.2-Rs.3 Crores, and in Marugo Rs.2-Rs.3 Crores for next year.

Capacity utilisation

  •  Nippon Leakless has a spare capacity line in Uttaranchal which can be used
  • Company is taking up a small facility in Manesar and putting up some robotics welding machines there with a capex of around Rs.1 Crore or Rs.2 Crores
  • Marugo Rubber has the capacity of up to Rs.20 Crores in hose business
  • Utilisation levels for the gasket are 80%, forging is at 85% to 90% level, MMT also 80%, Nippon Leakless is about 70% and TalbrosMarugo Rubber in the Anti-Vibration it is 80% to 85%

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