Menon Bearings LtdQ1 FY24Auto Components

Menon Bearings Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Order

Yes

Capex

Yes

2 of 5 growth signals are positive.

Revenue guidance

Category 2

→Consolidated revenue expected to grow at ~25% CAGR for next 2 years.
→Standalone Menon Bearings projected growth at ~15% CAGR for next 3 years.
→Aluminium division (Alkop) expected to grow 40%-45% CAGR for next 2 years, then 16%-17% in the third year.
→Brake division anticipated to grow at 70%-75% CAGR for the next 3 years.
→Additional order inflows of around ₹130-140 crore over next 1.5-2 years to support growth.
→Capacity expansions in bearing and aluminium segments to accommodate higher volumes (bimetal capacity from 486 to ~550 lakhs; aluminium capacity from 1440 to 2500 tonnes).
→Growth driven by export orders and aftermarket demand, with new business opportunities in braking and casting segments.
→Tractor business expected to recover gradually, Japan exports slowly improving, supporting sales growth.

Category 3

→Menon Bearings Ltd expects a consolidated year-on-year growth rate of approximately 25%-26% for the next two years.
→Standalone Menon Bearings segment is projected to grow about 15% per year for the next three years.
→The Aluminium division (Alkop) is anticipated to grow around 40%-45% for the next two years, with 16%-17% growth in the third year.
→Brake division growth is forecasted at 70%-75% over the next three years.
→Incremental order book of around Rs. 130 crores (over and above current run rate) expected to support growth.
→EBITDA margins are expected to revert to around 23%-24% after current pressure due to input cost increases.
→Sample approvals and orders from customers like John Deere and Honeywell are driving future growth.
→The company aims to reach approximately Rs. 400 crore revenue in the near future, supported by capacity expansions.

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→There is no explicit mention of any current or planned fundraising through equity in the call transcript.
→The company has increased debt by about ₹19 crores primarily for capital expenditure (CapEx) related to Menon Bearings and cash balances.
→Cash and bank balances stand at around ₹24 crores, and some funds have been invested in mutual funds and subsidiaries.
→No specific plans for new debt or equity fundraising were discussed or indicated in the transcript.
→The focus remains on organic growth and capacity augmentation funded through existing resources and debt taken for CapEx.

Yes

→The incremental order book for FY 2025 is around ₹130 crore, additional to the current run rate.
→This comprises approximately ₹90 crore in Alkop (including ₹70 crore plus ₹18-20 crore from Honeywell) and ₹40 crore in bearings.
→These orders are expected to be executed over the next 1.5 to 2 years.
→Orders include tooling orders for which advances have been received.
→The company anticipates additional order inflows driven by customers preferring sourcing from India due to "China Plus One" and "Europe One" policies, amounting to about ₹140 crore within two years.
→In the brake lining business, anticipated growth is about 70-75% year-on-year for the next three years based on existing export and aftermarket orders; discussions with Brakes India are ongoing but not included in current estimates.
→Metallurgical bimetal orders are expected to start regular supplies by Nov-Dec 2024.
→Sampling and testing are ongoing for some new orders, with potential contract wins expected in the near term.

Yes

→Menon Bearings is undertaking CapEx of Rs. 30 crore to increase capacities.
→Bearing capacity augmentation and aluminium division expansion are key focus areas.
→Aluminium capacity (Alkop) is planned to increase from 1440 tonnes to 2500 tonnes by adding high-pressure die-casting machines, CNC, and VMC machines along with building expansions.
→Bearing division capacity will also be expanded.
→Capital work in progress (CWIP) of Rs. 14 crore is expected to be fully capitalized in the current year.
→Menon Bearings New Ventures subsidiary is created to explore attractive projects; currently, no finalized investments but proposals include engineering businesses and chargers for electric vehicles.
→No plans to hive off existing verticals.
→Discussions ongoing with Brakes India for possible growth, but not included in current growth estimates.

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