Menon Bearings LtdQ3 FY23Auto Components

Menon Bearings Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 2

→The company expects a growth rate of 12% for the current year and 20%-22% from next year onwards.
→With ongoing capacity expansion, revenue is anticipated to reach Rs.64-70 crores from additional CapEx.
→Bearing division capacity utilization is around 70%-75%, expected to increase with capacity rising from 40-48 million pieces/month to 55 million pieces/month by year-end.
→Total order book stands at Rs.250 crores for one year.
→Brake lining aftermarket business is growing steadily; expected turnover to reach Rs.19-20 crores within 6 months by expanding distributors from 50 to 150.
→Expansion in bearing and aluminum divisions will support growth, with estimated revenue increase of Rs.75 crores.
→The company plans to reach Rs.400 crores revenue within 2-3 years.
→Exports expected to improve, mainly targeting Japan and USA markets.
→EBITDA margins to be maintained above 20%.

Category 3

→Menon Bearings projects a growth rate of 12% for the current year and 20%-22% from next year onwards.
→Post-expansion, revenue from new capacity is expected to be around Rs. 64-70 crores.
→Additional CapEx of Rs. 30 crores is expected to generate above Rs. 68 crores in revenue.
→Brake lining segment aims to grow from current Rs. 7-8 crores to Rs. 16-20 crores in the next year or two.
→EBITDA margins are targeted to be maintained above 20%, specifically between 21%-23%.
→The company expects to sustain a PAT margin between 10%-12% and PBT around 17%.
→Capacity expansions and new product lines (aftermarket brake lining, Alkop segment) expected to fuel exponential growth.
→Expansion in exports and aftermarket segments expected to significantly contribute to earnings growth over the next 2-3 years.

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Yes

→The company has increased debt by Rs.12 crores in the half-yearly balance sheet, primarily for the ongoing Rs.30 crore CapEx in the bearing division.
→Around 50% of the Rs.30 crore CapEx is planned to be financed by debt.
→Currently, there is no indication of additional debt plans beyond the Rs.30 crore CapEx financing.
→The company’s bank balances almost offset the term loans, showing a net difference of around Rs.4 crores, suggesting a balanced financial position.
→No mention was made of any new equity fundraising plans during the call or provided transcript sections.

Yes

→Current order book position: Approximately Rs. 250 crores for a 1-year duration.
→Bearing division RFQs: Received from 8 new customers, mostly for exports, covering 128 parts with a quantity of 1.15 crore pieces annually and potential business of Rs. 36 crores per year.
→Aluminium division RFQs: From 5 customers for 38 parts, around 7.5 lakh parts annually, with potential business of Rs. 28 crores per year.
→Brake lining orders: Currently about Rs. 75 lakhs in hand for H1FY24; expected Rs. 7-8 crores for the current year and Rs. 16-20 crores for the next year.
→Expansion CapEx planned to meet RFQs worth Rs. 60-70 crores, largely for exports.
→Overall, orders and RFQs indicate strong growth prospects across Bearings, Aluminium (Alkop), and Brake lining segments.

Yes

→Menon Bearings Ltd is undertaking a Rs.30 crore CapEx primarily for expanding the bearing division, including constructing a 45,000 sq ft building and adding machinery; expected completion by the end of the financial year.
→This CapEx aims to meet additional RFQs worth around Rs.60-70 crores, largely for export orders.
→The company expects this investment to generate revenue upwards of Rs.68 crores.
→For the brake lining segment, current capacity utilization at Rs.20 crore revenue is 100%, with no immediate plan for further CapEx; any required expansion will be considered after next year.
→Rs.12 crore increase in debt is earmarked for this CapEx; no immediate plans for additional debt.
→Strategic focus on aftermarket growth in brake lining with distributor expansion from 50 to 150 in six months.
→No tie-ups planned with OEM players for brake lining currently; focus remains on aftermarket before OEM approach.

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