talbros automotive components ltd -...

CRISIL COMPANY REPORT | 1

Talbros Automotive Components Ltd

GICS Industry: Auto Components l Sub Industry: Auto Parts & Equipment l Website: www.talbros.com

NSE Ticker: TALBROAUTO

Bloomberg Ticker: TALB: IN

Face value / Share: 10.0

Div. Yield (%): 4.5

CMP (as on 09 Mar 2011—Rs/share): 64.1

52-week range up to 09 Mar 2011 (Rs) (H/L): 91.70/49.25

Market Cap as on 09 Mar 2011 (Rs mn): 791

Enterprise Value as on 09 Mar 2011 (Rs mn): 1,846

Div. Yield (%): 0.0

Shares outstanding (mn): 12.3

Free Float (%): 56.1

Average daily volumes (12 months): 14,884

Beta (2 year): 0.9

Key Stock Indicators

Talbros Automotive Components Limited (TACL) is the flagship company of the Talbros group. It

was established in 1956 to manufacture automotive and industrial gaskets in collaboration with

Federal Mogul Sealing Systems (Slough) Ltd of the UK. The company operates in two segments:

auto components and parts and information technology activities.

KEY HIGHLIGHTS

Major supplier of gasket to various OEMs

TACL’s product portfolio consists mainly of gaskets for two- and three-wheelers, cars, tractors, light

commercial vehicles (LCV), heavy commercial vehicles (HCV) and stationary diesel engines. TACL is

a major supplier of cylinder gaskets to original equipment manufactures (OEMs) like Tata Cummins,

Tata Motors, Ashok Leyland, Bajaj Auto, Eicher India, Swaraj Mazda, Hyundai Motors and

international corporates such as Affinia Automotive (USA), Carraro (Italy), Quinton Hazell

Automotives (UK) and Saipa group (Iran)

Strong technical collaboration with global giants

TACL started its journey of manufacturing automotive components and industrial gaskets in

collaboration with the UK’s Federal Mogul Sealing System Ltd. In 2005, the company established a

40:60 joint venture (JV) with Nippon Leakless Corp of Japan to manufacture non-asbestos gaskets

for auto companies. It has an 8% stake in QH Talbros Ltd, a JV with Hazell Automotive Ltd. QH

Talbros, based in the UK, is a market leader in components such as tie rod ends, ball suspension

joints, rack ends, drag links, control arms and steering linkage assemblies. Notable other joint

ventures are with the Affinia group (USA), Presswerk Krefeld and Ahlstrom Altenkirchan (Germany)

and Sanwa Packaging (Japan). These collaborations ensure TACL is well placed to handle any

competition in OEMs segment.

KEY RISKS

• Volatility in price of raw materials such as copper, steel, iron, etc

• Increasing competition from unorganised players

• Cyclical nature of the auto industry

YTD 1-m 3-m 12-m

TALBROAUTO 17 10 -5 12

NIFTY 5 5 -4 8

Returns (%)

Note:

1) YTD returns are since April 1, 2010 to Mar 09, 2011.

2) 1-m, 3-m and 12-m returns are up to Mar 09, 2011.

Mar-08 Mar-09 Mar-10

Revenue (Rs mn) 1,875.0 2,075.4 2,493.4

EBITDA margins (%) 12.4 12.0 11.8

PAT (Rs mn) 86.3 -4.5 87.6

PAT margins(%) 4.6 -0.2 3.5

Gearing (x) 1.2 1.3 1.5

EPS (Rs/share) 7.2 -0.4 7.1

PE (x) 5.7 n.m 9.0

P/BV (x) 0.7 0.3 1.0

RoCE (%) 12.9 9.7 13.0

RoE (%) 12.7 n.m 11.7

EV/EBITDA (x) 5.4 4.5 6.3 n.m.: Not meaningful

Promoter

44%

FII

8%

DII

3%

Others

45%

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Indexed price chart

Shareholding (As on December 31, 2010)

Key Financial Indicators

Stock Performances vis-à-vis market



BACKGROUND

TACL is India’s largest gasket manufacturer. It supplies gaskets to almost all engine and vehicle manufacturers in India, for trucks and buses, light utility vehicles, passenger

cars, tractors, two- and three-wheelers and industrial and stationery engines. Its product range consists of gaskets, heat shields, noise, vibration & harness solutions,

forgings, stampings, rubber components and steering and suspension components. TACL’s products are used not only in domestic market, but also abroad. The company

exports to over 30 countries. Its major clients in the OEM space are Ashok Leyland, Bajaj Auto, Cummins Group, Eicher India, Escorts Group, Force Motors, General Motors,

Hero Honda, Honda, etc and international corporates like Affinia Automotive (USA), Carraro (Italy), Quinton Hazell Automotives (UK) and Saipa group (Iran). Exports

contributed ~10% to FY10 revenue. The company’s manufacturing prowess spans six product businesses and 12 facilities, including a Mercedes-Benz dealership for

passenger cars. The company has four gasket manufacturing facilities, located in Maharashtra, Delhi, Uttarakhand and Haryana, besides a forging plant and an IT and

material division at Delhi.

COMPETITIVE POSITION

Peer Comparison

Talbros Automotive

Components Limited

Enkei

Castalloy Ltd. Bharat Gears Ltd

ANG Industries

Limited

Mar-10 Mar-10 Mar-10 Mar-10

Revenue (Rs mn) 2,493.4 2,121.4 2,501.1 1,236.8

EBITDA margins (%) 11.8 17.2 11.4 15.9

PAT (Rs mn) 87.6 134.0 61.4 50.3

PAT margins(%) 3.5 6.3 2.5 4.1

Gearing (x) 1.5 1.0 1.0 1.4

EPS (Rs/share) 7.1 19.8 7.9 4.0

PE (x) 9.0 5.1 6.6 8.2

P/BV (x) 1.0 1.8 0.9 0.5

RoCE (%) 13.0 21.5 19.7 13.8

RoE (%) 11.7 24.9 15.3 6.1

EV/EBITDA (x) 6.3 4.4 2.7 7.8 n.m: Not meaningful

FINANCIAL PROFILE

Strong top-line growth in FY10; operating margins maintained

TACL’s top-line grew by 20.1% to Rs 2.4 bn in FY10, from Rs 2 bn in FY09, mainly on

account of a ~20% growth in the auto components and parts segment, year-on-year

(y-o-y). Exports, however, fell ~26% y-o-y, on account of economic slowdown in the

US and European economies.

EBITDA margin remained flat at ~12% in FY10.

Higher operating profit and non-operating income (including profit on sale of assets

and investments and interest income) and lower taxes pushed net profit to Rs 87.6

mn in FY10, from a loss Rs 4.5 mn in FY09.

Units Mar-08 Mar-09 Mar-10

Revenue Rs mi l l ion 1,875.0 2,075.4 2,493.4

EBITDA margins Per cent 12.4 12.0 11.8

PAT Rs mi l l ion 86.3 -4.5 87.6

PAT margins Per cent 4.6 -0.2 3.5

Revenue growth Per cent 11.2 10.7 20.1

EBITDA growth Per cent 28.3 7.1 18.5

PAT growth Per cent 10.3 n.m n.m

Gearing Times 1.2 1.3 1.5

RoCE Per cent 12.9 9.7 13.0

RoE Per cent 12.7 n.m 11.7

Key Financial Indicators

INDUSTRY PROFILE

Auto Component

The auto components industry production, in India, is estimated at around Rs 1212 billion in 2009-10. The industry has been reducing its dependence on the domestic

automobile industry over the long term; it also continues to maintain its ability of being cost-competitive and technically proficient in niche segments. These factors along

with foray of Indian auto component players in the international markets through acquistions have enhanced the industry`s popularity among international original

equipment manufacturers (OEMs) in terms of their outsourcing needs. Currently, domestic OEMs account for around 67% of the total auto component production off

takes, whereas the replacement and export segments account for around 21% and 12%, respectively. The industry is largely fragmented with over 558 players operating in

the organised segment and many unorganised players catering to the replacement demand. However, with auto OEMs adopting vendor rationalisation, proportion of the

organised segment is likely to increase over the long term. In the long term, exports are expected to grow at a faster pace as global OEMs are expected to implement cost

rationalisation strategies by increasing their sourcing from low cost regions. The bargaining power of players is moderate with OEM's and has been historically high in the

replacement market. The technological edge of a particular auto component segment determines the bargaining power of its players. Further, players with higher

exposure to replacement segment are able to have better margins given higher bargainning power in the segment. However, increasing competition from imports is

impacting the ability to pass on input cost increases in replacement market as well.



ANNUAL RESULTS

Income Statement Balance sheet

(Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10

Net Sales 1,873.5 2,072.7 2,491.9 Equity share capital 119.4 123.5 123.5

Operating Income 1,875.0 2,075.4 2,493.4 Reserves and surplus 601.5 602.3 646.0

Tangible net worth 720.8 725.8 769.4

EBITDA 232.8 249.2 295.2 Deferred tax liablity:|asset| 55.4 75.5 69.4

EBITDA Margin 12.4 12.0 11.8 Long-term debt 389.9 410.6 553.5

Short-term-debt 445.7 545.0 555.3

Depreciation 72.3 91.7 95.4 Total debt 835.6 955.6 1,108.8

Interest 76.5 132.3 137.7 Current l iabilities 656.1 557.4 636.6

Other Income 32.1 20.1 34.0 Total provisions 42.8 47.5 60.7

Total liabilities 2,310.7 2,361.8 2,644.9

PBT 114.2 32.6 104.8 Gross block 1,343.3 1,588.8 1,738.7

PAT 86.3 -4.5 87.6 Net fixed assets 949.3 1,019.9 1,081.4

Investments 87.0 86.0 87.5

PAT Margin 4.6 -0.2 3.5 Current assets 1,274.4 1,255.8 1,476.1

Receivables 487.9 437.2 530.0

No. of shares (Mn No.) 11.9 12.3 12.3 Inventories 469.7 498.8 636.1

Cash 69.3 52.4 53.7

Earnings per share (EPS) 7.2 -0.4 7.1 Total assets 2,310.7 2,361.7 2,645.0

Cash flow Ratio

(Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10

Pre-tax profit 116.1 45.2 96.1 Revenue growth (%) 11.2 10.7 20.1

Total tax paid -24.2 -17.0 -23.2 EBITDA growth(%) 28.3 7.1 18.5

Depreciation 72.3 91.7 95.4 PAT growth(%) 10.3 n.m n.m

Change in working capital -58.1 -92.4 -126.5

EBITDA margins(%) 12.4 12.0 11.8

Cash flow from operating activities 106.1 27.5 41.8 Tax rate (%) 12.6 52.1 13.8

Capital Expenditure -258.4 -158.7 -158.7 PAT margins (%) 4.6 -0.2 3.5

Investments and others 0.7 1.0 -1.5

Dividend payout (%) 20.7 n.m 41.5

Dividend per share (Rs) 1.5 1.3 2.9

Cash flow from investing activities -257.7 -157.7 -160.2 BV (Rs) 60.4 58.8 62.3

Equity raised/(repaid) 36.1 26.7 0.0 Return on Equity (%) 12.7 n.m 11.7

Debt raised/(repaid) 211.0 120.0 153.2 Return on capital employed (%) 12.9 9.7 13.0

Dividend (incl. tax) -20.9 -18.5 -42.4

Others (incl extraordinaries) -23.9 -15.0 9.0 Gearing (x) 1.2 1.3 1.5

Interest coverage (x) 3.0 1.9 2.1

Debt/EBITDA (x) 3.6 3.8 3.8

Cash flow from financing activities 202.3 113.2 119.8

Change in cash position 50.7 -17.0 1.4 Asset turnover (x) 1.5 1.4 1.5

Opening cash 18.6 69.3 52.4 Current ratio (x) 1.1 1.1 1.2

Closing cash 69.3 52.4 53.7 Gross current assets (days) 235 211 207

n.m : Not meaningful;

QUARTERLY RESULTS

(Rs million) Dec-10 % of Rev Dec-09 % of Rev Sep-10 % of Rev Dec-10 % of Rev Dec-09 % of Rev

No of Months 3 3 3 9 9

Revenue 801.2 100.0 637.5 100.0 809.9 100.0 2,353.5 100.0 1,789.5 100.0

EBITDA 107.0 13.4 88.8 13.9 98.9 12.2 296.3 12.6 236.7 13.2

Interest 41.5 5.2 35.2 5.5 39.2 4.8 119.4 5.1 102.7 5.7

Depreciation 28.6 3.6 24.7 3.9 28.3 3.5 83.5 3.5 72.2 4.0

PBT 36.9 4.6 28.9 4.5 31.3 3.9 93.4 4.0 61.9 3.5

PAT 34.0 4.2 25.7 4.0 28.3 3.5 84.7 3.6 51.4 2.9

Profit and loss account



FOCUS CHARTS & TABLES

Mar 2010 Jun 2010 Sep 2010 Dec 2010

Promoter 41.1 41.6 43.3 44.0

FII 6.8 9.8 9.0 8.0

DII 2.8 2.7 2.6 2.6

Others 49.3 46.0 45.2 45.5

Shareholding Pattern (Per cent)

Director Name Designation

Naresh Talwar (Mr.) Non-Executive Chairman, Promoter-

Director

Umesh Talwar (Mr.) Managing Director

Varun Talwar (Mr.) Jt.Managing Director, Wholetime Director,

Promoter-Director

Amit Burman (Mr.) Non-Executive Director

Navin Juneja (Mr.) Non-Executive Director

Anil Kumar Mehra (Mr.) Non-Executive Director

Venkatraman Mohan (Mr.) Non-Executive Director

Rajive Sawhney (Mr.) Non-Executive Director

Brian Gwilym James Williams (Mr.) Non-Executive Director

Board of Directors

Additional Disclosure

This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

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OPM NPM

talbros automotive components ltd -...

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