After a period of consolidation, Talbros Automotive Components Ltd (Talbros) is all set to resume its high growth trajectory. The introduction of heat shields and export orders from new client additions to its forgings business augurs well for revenue visibility over the medium term. Further its JVs are also expected to contribute positively. We expect revenues to grow at a 14% CAGR from Rs 328.8 crore in FY17 to Rs 487.1 crore in FY20. EBITDA is expected to grow by 16.5% CAGR from Rs 40.8 crore in FY17 to Rs 64.5 crore in FY20. The earnings (including the share of profit in joint ventures) are set to grow at a faster CAGR of 33.5% from Rs 15.3 crore in FY17 to Rs 36.4 crore in FY20.
Notwithstanding the fact that EVs are a threat to its business, we do not see the impact of the EVs coming into play prior to CY 2023. We initiate coverage on Talbros as a BUY with a price objective of Rs 353, representing a potential upside of 38% over a period of 24 months.
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