Talbros Automotive Components Q4 FY24 results: A stock worth considering?

The automotive component industry is a critical aspect of the machinery that drives the global automotive sector. These companies are the backbone that supports the industry’s growth and innovation, providing the essential components that power the vehicles of today and tomorrow. 

Talbros Automotive Components, a renowned name in the sector, has been at the forefront of this evolution and has recently released its Q4 results for FY24. Judging by the numbers, it is clear that Talbros Automotive Components continues to raise the bar. 

But is the stock worth investing in today? Let’s find out. 

Also read: India’s auto component industry: A case study in innovation and excellence

About Talbros Automotive Components Ltd.

Talbros Automotive Components Ltd. has been around since 1956 and has a solid reputation all across the globe. Talbros has always prioritised meeting the needs of its clients by going above and beyond to provide them with high-quality products and cutting-edge technology.

Making automobile parts is Talbros Automotive Components Limited’s main line of business. A few of the products offered by the firm include gaskets with electronic controls, heat shields, rubber moulded gaskets, exhaust manifold gaskets, cylinder head gaskets, and multi-layer steel gaskets.

Through a technical agreement signed in 2008, Talbros and Sanwa Packing Japan were able to improve thermal management solutions for multi-layer steel gaskets (such as Heat Shield) and other NVH products. In 2011 and 2012, the company partnered with Magneti Marelli and Marugo Rubber Co. Ltd. to offer a comprehensive product portfolio. 

Talbros Group is laying the groundwork to become a major participant in the international car business. In addition to a combined workforce of over 2,000 people who are both hardworking and creative, the company has a strong presence in 500+ countries. 

Talbros Automotive Components Q4 results

In Q4 FY24, Talbros Automotive reported a revenue from operations of ₹202.7 crores. bolstered by ‘Other Income’ amounting to ₹ 4.8 crores, leading to a total revenue of ₹207.5 crores. The company achieved an EBITDA of ₹35.5 crores, translating to an EBITDA Margin of 17.1%. After accounting for depreciation of ₹7.7 crores, the EBIT was ₹27.8 crores with an EBIT Margin of 13.4%. 

Despite a finance cost of ₹3.1 crores and incorporating the share of profit from JVs at ₹4.0 crores, the profit before tax was a healthy ₹28.7 crores.

Talbros Automotive showcased a strong financial outcome with a profit after tax (PAT) of ₹49.8 crores, which is quite impressive. This resulted in a PAT margin of 24%, indicating a robust bottom line and reflecting the company’s ability to effectively translate revenue into actual profit. 

Combined with the previously mentioned operational revenues and costs, these figures highlight Talbros Automotive’s successful strategies and operational excellence, contributing to its significant profitability during the quarter.

Recognising this remarkable performance, the board of directors recommended a final dividend of ₹0.50 per equity share, with a face value of ₹2 each. 

That said, here’s a brief summary of the company’s performance over the four quarters in FY24.

Also read: What does the EV boom mean for auto stocks?

Financial summary: FY24 growth over FY23

Talbros Automotive share price news

On May 22, 2024, Talbros Auto shares increased by 11.47% during the trading session, reaching ₹350.70, up from the previous close of ₹314.60, after the Q4 results. A total of ₹1,815 crore is now in the company’s market valuation (as of May 28, 2024). 

Talbros Auto’s share price is at ₹287.85 as of May 28, 2024. According to the Talbros Auto share price history, the stock has increased a whopping 659.10% in the past 5 years and 167.90% in the last 1 year.

Current financials

Competitor information of Talbros Automotive Components

Shareholding pattern of Talbros Automotive Components

The shareholding pattern (as of April 2024) of Talbros Automotive Components is as follows:

Also read: Automobile industry in India

Investing in Talbros Automotive Components

Pros

• Robust financials 

The company has shown a 21% YoY increase in Total Revenue from Operations in FY24 and a 32% rise in EBITDA in Q4 FY24, indicating enhanced operational efficiency and revenue growth. Improved operational performance often leads to higher profitability. This translates into higher profits, which ultimately benefit shareholders.

If we consider the current year’s performance, Talbros Automotive has reported a PAT of ₹49.8 crores in Q4 FY24 and ₹110 crores in FY24 with a 98% YoY change, showcasing strong profitability and the ability to effectively convert revenue into profit.

The company’s financials reflect a comfortable position with a healthy EBITDA margin (16.1%) as well, which suggests a stable financial profile with the potential for sustained growth.

• Powerful alliances with well-known global corporations

Among the well-known firms that TACL has partnered with are Nippon Leakless Corporation and Fiat Group, to name a few. The Talbros company has established a track record of successful collaboration with globally renowned partners, which has allowed them to create cutting-edge technology and introduce new items annually.

Cons

• The operations require a significant amount of working capital: 

Working capital is essential to TACL’s operations because of the specific nature of their business. With an increase in raw material cost of ₹106.1 crore in FY24 from ₹96.9 crore, the business now has to keep an inventory of around three to four months’ worth of gaskets, each made from one of forty different types of raw materials.  

• The automobile industry’s cyclical nature:

Sales of automotive component suppliers are strongly related to sales of vehicle original equipment manufacturers (OEMs), and the automotive sector as a whole is cyclical. Additionally, there are an extensive number of competitors in the auto-ancillary business, both in the organised and unorganised sectors, making it an extremely competitive sector.

Conclusion 

The outstanding financial results achieved by Talbros Automotive Components in the fourth quarter of fiscal year 2024 is  a clear reflection of the company’s strategic vision and ongoing success. While the competition is high in the industry, it is safe to say that TALC is gradually solidifying its position in the market.