By Talbros Automotive Components Ltd, a leading manufacturer of automotive and industrial gaskets and other auto parts, has announced a capex plan of INR 205 crore over the next three to four years to increase its capacity and sales across all its businesses. The company expects to achieve a sales turnover of INR 2,000 crore by FY27, up from INR 650 crore in FY23.
The company, which has four business segments, namely gaskets, forgings, anti-vibration products, and joint ventures, plans to spend INR 205 crore on capex over the next three to four years, with INR 75 crore allocated for FY24. The capex plan will focus on expanding the capacity and diversifying the product portfolio of each segment, as well as improving the operational efficiency and quality standards.
The gaskets segment, which accounts for about 50% of the company’s sales, will see an investment of INR 65 crore to increase its capacity by 25% and to add new products, such as heat shields and sheet metals, to cater to the growing demand from the domestic and export markets. The company is also planning to set up a new plant in Gujarat for gaskets, which will be operational by FY25.
The forgings segment, which accounts for about 20% of the company’s sales, will see an investment of INR 55 crore to increase its capacity by 50% and to add new products, such as crankshafts and connecting rods, to serve the automotive, defence, railways, and new energy sectors. The company is also planning to set up a new plant in Maharashtra for forgings, which will be operational by FY26.
The anti-vibration products segment, which accounts for about 15% of the company’s sales, will see an investment of INR 35 crore to increase its capacity by 40% and to add new products, such as chassis systems and rubber hoses, to serve the passenger car, two-wheeler, and commercial vehicle segments. The company is also planning to set up a new plant in Tamil Nadu for anti-vibration products, which will be operational by FY26.
The joint ventures segment, which accounts for about 15% of the company’s sales, will see an investment of INR 50 crore to increase its capacity by 30% and to add new products, such as engine bearings and cylinder liners, to serve the domestic and export markets. The company has two joint ventures, one with Nippon Leakless Corporation of Japan for gaskets, and another with Magneti Marelli of Italy for suspension systems.
Sales Growth to be Driven by Domestic and Export Markets
The company expects to achieve a sales turnover of INR 2,000 crore by FY27, up from INR 650 crore in FY23, with a compounded annual growth rate (CAGR) of 32%. The company expects to see a strong growth in both the domestic and export markets, as the demand for automotive and industrial products recovers from the impact of the COVID-19 pandemic.
The company expects the domestic market to contribute about 70% of its sales by FY27, up from 65% in FY23, as the company benefits from its long-term relationships with major OEMs (original equipment manufacturers), such as Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Bajaj Auto, and Hero MotoCorp, as well as from its presence in the aftermarket and replacement segments.
The company expects the export market to contribute about 30% of its sales by FY27, up from 35% in FY23, as the company expands its presence in new geographies, such as Europe, North America, and Southeast Asia, as well as in new sectors, such as defence, railways, and new energy. The company also expects to leverage its joint ventures and technical collaborations to gain access to new customers and technologies in the global market.
Company Outlook and Valuation
The company has a positive outlook for the future, as it expects to benefit from the recovery and growth of the automotive and industrial sectors, as well as from its capex plan and product diversification. The company also expects to improve its profitability and return ratios, as it focuses on operational efficiency and cost optimization.
The company’s stock is currently trading at a PE (price to earnings) ratio of 28.6x, based on its FY23 earnings per share (EPS) of INR 13.9. The company’s stock has gained 140% in the past year, outperforming the BSE Auto Index, which has gained 42% in the same period. The company’s stock has also received a buy rating from several brokerage firms, such as ICICI Securities, HDFC Securities, and Motilal Oswal, with a target price ranging from INR 450 to INR 500.