Talbros Automotive Components Ltd. share price target

Forging Segment to be A Major Growth Driver: Revenue for Q2FY19 came in at Rs. 1283 Mn, up by 27.3% YoY driven by higher orders from the forging segment for exports.

Revenue Exceeds Our Estimate: Talbros reported revenue of Rs. 1232 Mn during Q1FY19, up by 37.7% YoY mainly driven by the forgings segment which grew by 109% YoY reporting Rs. 420 Mn. The order book for forgings stand at Rs.1600 Mn as on FY18 constituting a majorportion from exports.

Talbros reported revenue of Rs. 1102 Mn during Q4FY18, up by 32.7% YoY mainly driven by the forgings segment which posted ~ Rs. 372 Mn during Q4FY18, higher by 96.0% YoY. The order book for forgings stand at Rs.1600 Mn led by higher exports.

We recently met with the management of TBA. Company continues to stay on a strong growth trajectory. We expect TBA to benefit from expected healthy automobile demand over FY18-FY20E. Addition of new customers and new orders gives visibility to robust revenue growth in FY19/FY20. Company is also working on new products which is expected to gain acceptance with BSVI implementation. On the EBITDA margin, the company expects to witness improvement through cost reduction, import substitution of raw material, operating leverage and turnaround in one of...

Talbros is a market leader in the gasket segment and

We recently met the management of Talbros Automotive Components (TAL) to understand its business model. TAL enjoys leadership position in gaskets with a market share of 38% in India. Its standalone business accounts for 77% of its consolidated revenue (with gaskets & forging accounting 61% & 16%, respectively) while balance 23% is through three JVs (Nippon Leakless -10%, Magnetti Marelli -10% & Marugo Rubber 3%). Further, 83% of its business is from domestic market (of which 73% is OEM & 10% is aftermarket) & balance 17% is from export market (US & Europe). The management is aiming for higher growth by deepening its...

Company to Gain on Joint Venture Competencies: Consolidated revenue for Q3FY17 stood at Rs.1024 Mn down by 3.5% QoQ due to high supplies to the two-wheeler players where industry sales volume declined by5.9% and 22.0% YoY during the months of Nov and Dec 2016 respectively, much accounted for the demonesation effect. EBITDA margins dropped 50bps QoQ at10.0% impacted by higher employee cost and rupee depreciation which affected margins at their gasket division.

Consistent Addition of New Clients to Drive Top-line: Consolidated Q2FY17 revenues stood at Rs. 1062 Mn up by 8.9% YoY and down by0.9% QoQ. EBITDA margins stood at 10.5% in Q2FY17, strained by 10bps/31bps for QoQ/YoY at 10.5% due to rupee depreciation in the gasket business. EBIT margin recorded 6.9% same as Q1FY17 but 145bps down YoY due to additionalcapex on account of their heat shield plant.

Talbros is a gasket manufacturer which predominantly caters to the Two-wheeler and the Commercial Vehicle (CV) market. Also, they are the main suppliers of suspension products to Maruti Suzuki India Ltd on the passenger car segment. Going forward, the consolidated revenue is expected to grow at a CAGR of 10% during FY15-17E driven by product launches, strengthening exports and synergic joint venture collaborations that nurture technological development.

Talbros Automotive Components Ltd (TAC) is the flagship manufacturing company of the Talbros group established in 1956 as a gasket supplier. TAC is well established gasket manufacturer with over 90% market shares in 2W segment and around 38% market share in overall automobile segment.