Buy Talbros Automotive Components; fair value of Rs 850: HDFC Securities

HDFC Securities' research report on Talbros Automotive Components

Talbros Automotive Components Ltd. (TACL) manufactures gaskets and forgings products which are used across the automobile industry as well as in the industrial segment. India’s domestic automobile demand is expected to remain strong including in the CV and tractor/off-road segments. The Government is also looking to promote manufacturing of auto components in India by offering various incentives. TACL has established relationships with globally reputed companies. With continuous innovation in new products like heat shields, strengthening EV portfolio, growing orders from non-automotive segments, strong clientele, and manufacturing E20 biofuel hoses, TACL is likely to achieve strong growth. It is aiming to double its group level revenue to Rs 2,200cr by FY27 led by increasing exports and strong order booking. TACL has made substantial investment in new technologies, expanding new capacities, diversified its product portfolio, broadened its customer base, and have entered additional markets.

Outlook

We expect TACL’s Revenue/EBITDA/PAT to grow at 18/22/20% CAGR over FY23-FY25E, led by strong growth in CV and off-road/tractor segment and realization from the recent order wins. We believe investors can buy the stock in the band of Rs 715-735 and add on dips in Rs 645-660 band (9.75x FY25E EPS) for a base case fair value of Rs 800 (12x FY25E EPS) and bull case fair value of Rs 850 (12.75x FY25E EPS) over the next 2-3 quarters