30-Oct-2026 17:25:26
MENON BEARINGS Q2 CONCALL: EXPECTS 30%+ REVENUE GROWTH IN FY27 & FY28, TARGETS 23% EBITDA MARGIN NEXT YEAR & SEES ₹500 CR REVENUE MILESTONE POSSIBLE BY FY28–FY29
• FY27 Revenue Growth Guidance: Management expects revenue growth of more than 30% in FY27, supported by domestic OEM demand, exports, aftermarket sales and new product orders. • FY28 Revenue Growth Outlook: Management expects another year of 30%+ growth in FY28, subject to market conditions and execution of its business pipeline. • ₹500 Cr Revenue Aspiration: Management indicated that reaching approximately ₹500 Cr in annual revenue could be possible in FY28 or FY29, ahead of its earlier long-term expectations. • FY27 Revenue Outlook: Management expects to exceed its earlier revenue expectations of approximately ₹360–370 Cr, supported by stronger-than-anticipated H1 performance. • H2 FY27 Outlook: Management expects Q3 and Q4 performance to be stronger than H1, supported by improving customer schedules and seasonal demand. • FY28 EBITDA Margin Target: Management targets an EBITDA margin of approximately 23% in FY28. • EBITDA Margin Outlook: Management expects to sustain margins around 20–22% in the near term, with potential improvement through operating leverage, productivity gains and raw material price pass-through. • Volume Growth Outlook: Management expects more than 20% volume growth to contribute to its overall 30%+ revenue growth ambition, with the balance partly supported by pricing and product mix. ORDER PIPELINE & EXPORT OPPORTUNITIES • FY27 Additional Business: Management indicated approximately ₹30 Cr of additional business opportunities for FY27 based on its existing customer pipeline. • FY28 Additional Business: Management indicated estimated additional business potential of approximately ₹131 Cr for FY28, subject to order conversion and execution. • FY29 Business Pipeline: Management highlighted approximately ₹157 Cr of potential additional business for FY29, excluding certain opportunities under discussion in Europe. • European Business Opportunity: Management identified more than ₹35 Cr of potential new business from European customers, with conversion expected over FY28–FY29. • Europe Expansion: Company is pursuing new customers across Europe, supported by enquiries, RFQs, commercial discussions and sample approvals. • Europe Revenue Timeline: Management clarified that European business under development has not yet contributed meaningfully to revenue, with initial commercial contributions expected in the next 1–2 years. • China Plus One Opportunities: Management highlighted increasing interest from European and global customers looking to diversify procurement toward Indian component suppliers. • Export Contribution: Exports currently contribute approximately 34–35% of revenue, with the share remaining relatively stable because domestic business is also expanding. • US Market Exposure: Approximately 80% of export revenue is derived from the US market, prompting management to expand its European customer base. • Q2 Export Growth: Management indicated export business growth exceeding 75% YoY, supported by new customer programmes and increased volumes. • Domestic OEM Growth: Management indicated approximately 50% YoY growth in domestic OEM business during Q2. • Replacement Market: Management expects higher demand from replacement-market bearings and brake products to support growth. MENON ALKOP, EV & PRODUCT DEVELOPMENT • Alkop EV Business: Management expects EV-related revenue to meet or exceed its earlier target of approximately 8–10% of Alkop revenue in FY27. • EV Revenue Mix: The percentage contribution may remain broadly stable despite higher EV sales because other Alkop businesses are also growing. • New Product Development: Menon Alkop has developed approximately 54 new components over the past two years, with commercial production already commenced. • EV Customer Programmes: Management highlighted electric pump covers supplied through Concentric, components for Tata-related programmes and export business linked to Eaton Poland. • US Export Business: Alkop continues supplying components for industrial and home automation applications, including business associated with Honeywell. • Agricultural Equipment: Company is expanding its component portfolio for John Deere applications, including harvesters, tractors and seeding equipment. • Non-Auto Diversification: Management is pursuing opportunities in oil and gas, industrial automation, generators, compressors, refrigeration, air conditioning and other engineering applications. • Auto Revenue Contribution: Automotive applications contribute approximately 60–65% of consolidated business, with the remainder coming from industrial and other applications. • Tractor Dependence: Management highlighted that the contribution from tractor-related business has declined substantially over the years as the product portfolio diversified. MARGINS, COST SAVINGS & AUTOMATION • Segment EBITDA Margins: Management indicated EBITDA margins of approximately 30–35% in brakes, 23% in bearings and 18–19% in Menon Alkop. • Raw Material Inflation: Management highlighted price increases of approximately 72% in tin, 50% in copper and 12% in steel, creating pressure on material costs. • Price Pass-Through: Company follows customer pricing arrangements that allow raw material price increases and decreases to be passed through, generally with a quarterly lag. • Productivity Improvement: Management reported approximately 25% productivity improvement, supporting better overhead absorption and profitability. • Robotic Automation: Company is investing in automated machining cells and robotic systems to reduce manpower requirements and improve manufacturing efficiency. • AI-Based Inspection: Management is introducing automated camera-based inspection systems for component quality checks, with further deployment planned over the next 9–12 months. • Automation Capex: Management outlined approximately ₹5 Cr of investment in Menon Alkop and ₹4–4.5 Cr in Menon Bearings over roughly the next 12–15 months. • Automation Payback: Management expects payback on automation investments in approximately 2.5–3.5 years, depending on the project. • Employee Productivity: Management indicated that employee headcount increased by only approximately 5% despite substantially higher business growth. • Manufacturing Efficiency: Company plans to convert several bearing production lines to single-piece-flow operations, reducing manpower requirements. • Energy Cost Savings: Management is also focusing on rooftop solar, process improvements and material-consumption reduction to sustain margins. WORKING CAPITAL, CASH FLOW & DEBT • Cash Position: Cash, bank balances and mutual fund investments stood at approximately ₹25.69 Cr. • Capex Funding: Management indicated that recent capital expenditure has been funded through internal accruals, without taking fresh term loans during the preceding six months. • Working Capital Outlook: Management expects working capital efficiency improvements to be largely sustainable as overseas inventory cycles stabilize. • US Inventory: Company generally maintains approximately three months of inventory at US customer warehouses to ensure uninterrupted supplies. • Inventory Outlook: Management expects inventory to increase only moderately in line with business volumes, rather than requiring another significant stock build-up. • Export Financing: Company indicated access to packing-credit finance at approximately 4.65–4.75%, helping manage export working capital requirements. • Freight Cost Management: Company follows customer-specific shipping arrangements, including ex-works, FOB and delivered-duty-paid terms, depending on commercial agreements. Q2 & H1 FY27 FINANCIAL HIGHLIGHTS • Q2 Total Income: Consolidated total income increased approximately 57% YoY. • Q2 EBITDA: Management reported EBITDA growth of approximately 91–92% YoY. • Q2 PBT: Profit before tax increased approximately 122% YoY. • Q2 Net Profit: PAT increased approximately 117% YoY. • Q2 EPS: Earnings per share increased approximately 117% YoY. • H1 Total Income: Consolidated total income stood at approximately ₹191.56 Cr, up 43% YoY. • H1 EBITDA: EBITDA increased approximately 63% YoY. • H1 PBT: Profit before tax increased approximately 79% YoY. • H1 PAT: Net profit increased approximately 74% YoY. • Key Monitorables: Conversion of the European RFQ pipeline into orders, execution of additional business opportunities, raw material volatility, export freight costs, automation benefits and sustainability of EBITDA margins.
MENON BEARINGS LIMITED