Talbros Automotive Components Limited (TACL)

Summary from Q1’24 Results Concall

• The company aims to achieve a group turnover of INR2,200 crores by FY27, with an export contribution of about 35%
• This Rs. 2,200 Cr target for FY27 does not factor in any inorganic growth
• Rough distribution of how this Rs.2,200 Cr revenue target will be achieved from different divisions – Forging – INR500 crores plus; Magneti Marelli – around 700; Gasket and heat shield – around INR700 crores; Margo – INR200 crores plus. Even though it does not sum up to 2,200 but closer to it.
• More Elaboration on achieving Rs. 2,200 Cr target FY’27 – They have got new orders worth Rs. 1,000 Cr last year; Now the orders are being converted into commercial sales; New orders and new conversions this year, for these orders revenue will be added in next 1-2 years; Economic growth will add to revenue; More customers are added which will contribute going forward; JLR which is the customer added last year, is being converted to commercial sales; Number of Maruti models are increasing which will also help; Company thinks China+1 strategy of global companies helping them; They see opportunity of growth in the US, UK and Germany.
• Capacity utilization is in the range of 80-90% at the moment and able to support the revenue of Rs.1,300 Cr. By FY’24 with the additional capex, the capacity will be increased to support the revenue of Rs. 1,500 Cr. Capacity addition happening every quarter. For achieving the target of FY’27- They foresee capex of ~ Rs.200 Cr.
• With regards to revenue growth for FY24 and FY25, the management guided for over 20% growth on consolidated revenue, with Ebita margins at 15% for FY24; Whereas for FY25 management guided for 15-20% growth based on current visibility; The analyst, rightfully challenged that – the guidance for FY24 and FY25 does not really align with the target for FY27. Because with Rs. 650 Cr revenue in FY23 – with 20% guidance they can reach to Rs. 940 Cr by FY25. To that management answered that they are confident of reaching that Rs. 2,200 Cr by FY27. Considering they are talking about Rs.1300 Cr possible with current capacity and they are increasing capacity during this year itself, implies they want to be conservative while providing guidance for FY24 and FY25.
• Guidance on ROCE for 2025 – Management answered RoCE-40% (FY23 – 20%) & ROE – 25%(FY23 – 17.8%). I presume, they have given number for FY25 and not FY27
• On the question of reducing the % of Ebita conversion to cash, Management suggested that due to increase in export the cash conversion cycle elongates.
• Net net – Management seem to be seeing good traction in exports. The orders that they have own over past 12-15 months will get commercialized over next 12-18 months. With china+1, they are hopeful for getting more business and that is leading them to believe in achieving the ambitious target of Rs.2,200 Cr. with slight improvement in margins (~15%). If the tailwind remains intact and management executes well, there is a bigger multibagger in the making.

Disc – Invested from lower levels; Not transaction in last 1 month.