Management Meet
Talbros Automotive Components: Multiple triggers for growth – Not Rated
CMP (Rs) 135
We interacted with Mr Anuj Talwar, Joint Managing Director and Mr Naveen Juneja, Group CFO of Talbro Automotive Components Ltd (TACL). TACL has a near monopoly status in two-wheeler gaskets, while it has a 40% market share in CV gaskets. It has a meaningful presence in forged components, hoses, anti-vibration products and chasis/suspension components. It has strong tie-ups through JVs and technical assistance with industry leaders such as Magneti Marelli, Nippon Leakless, Marugo Rubber, Sanwa Packaging and Interface Solutions.
TACL had seen flattish revenues in the past five years as two-wheelers where it has 92% market share in gaskets saw tough times, its forging segment utilization was under pressure owing to power availability issues and new JVs took time to scale up operations. However, going ahead the company believes that it would see a sustainable 12-13% CAGR in revenues led by 1) strong 2W/CV demand for gaskets on back of rising auto sales, 2) entry into passenger car segment for gaskets, 3) scale up of the heatshields (a new product) business, 4) revival of orders in forging business as power costs recede, 5) Magneti Marelli (MMT) JV revenues to see revival as new products and new OEs get enrolled and 6) scale up of hoses business in the Marugo Rubber (MRT) JV.
Margins should see steady increase as utilization improves across segments and contribution of high margin MMT JV rises. Resultant robust earnings growth along with limited capital expenditure requirements would allow the company to prune its debt (net D/E of 0.8x). Return ratios will also improve on the back of higher asset turnover and improvement in margins. P/E of 17.2x on FY16 EPS of Rs7.9 looks reasonable but is not reflective of the ensuing strong earnings growth.
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.
No comments:
Post a Comment