TIMKEN - Timken India Ltd Share Price

For Q4 FY '25, Timken India reported sales of INR 940 crores, reflecting a 4.7% year-on-year growth and a significant 40% increase compared to the previous quarter. The profit before tax also saw an uptick of 8% year-on-year, nearly doubling from the previous quarter, with margins improving by 70 basis points year-on-year.

Looking ahead, management provided a cautiously optimistic outlook for FY '26. The rail segment is expected to grow at a steady pace, with double-digit growth aspirations, although it won't be explosive. The company maintained an order book that's stable, particularly in freight, locomotives, and metro passenger segments, and is expanding its rail production capacity with advanced machinery.

Key forward-looking points include:

1. Segment Revenue Share for FY '25: Rail (24.5%), Mobile (18.5%), Distribution (18.7%), Process (19.3%), and Exports (18.6%). Overall revenue from INR 2,909 crores to INR 3,148 crores for an 8.2% growth.

2. New Product Investment: Timken is investing in the first line for plain bearings using composite materials, with plans for assembly expected by the end of this year or early next year.

3. Capacity Utilization Plans: The ramp-up at the Bharuch facility is anticipated to reach approximately 45% by the end of FY '26, with an even split expected between domestic and export markets.

4. Market Trends: The management noted mixed signals from various markets; China shows potential recovery, while larger markets like Europe are sluggish. Overall, exports are facing challenges, and domestic markets remain more favorable.

5. Commercial Vehicle Growth: A mid-single-digit growth in commercial vehicle demand is projected, with the expectation of a 4-5% increase in this sector.

These insights indicate that while Timken India is navigating through a variable global landscape, its focus remains on strategic expansions and leveraging technology to sustain growth.

Q&A Section Summary from Timken India Limited Q4 FY'25 Earnings Transcript:

1. Question by Abhishek Jain:
Can you provide the segment-wise revenue for FY '25?

Answer:
For FY '25, our total revenue was INR 3,147 crores. Rail accounted for 24.5%, mobile 18.5%, distribution 18.7%, process 19.3%, and exports 18.6%. This represented an 8.2% Y-o-Y growth. Rail grew by 17%, mobile was flat, distribution grew 11%, process 8%, and exports saw a 3% rise.

2. Question by Mukesh Saraf:
What is the current order book status and expected growth in the rail segment for FY '26?

Answer:
We anticipate steady growth in rail, not drastic spikes. Our order book is decent, and we run 6 days, 3 shifts to meet demand. With ongoing expansions, including high-tech European machines, we aren't concerned about our rail growth prospects.

3. Question by Abhishek Jain:
What is the outlook for exports in FY '26 after recent slowdowns?

Answer:
The landscape is mixed; Europe and North America are sluggish. However, markets like South Africa and parts of Asia show promise. While small markets may perform well, the large markets are still uncertain. We expect exports to remain subdued generally.

4. Question by Viraj:
What competitive landscape do we face in the rail segment, and how is tendering activity?

Answer:
Competition remains robust with established players. We're seeing steady tendering for rail projects, especially with government focus on infrastructure. We're adapting to enhancements in technology, which keeps us competitive.

5. Question by Vimal Gohil:
What is the ramp-up status at the Bharuch facility?

Answer:
By the end of June, we plan to produce and expect around 45% capacity utilization by year's end. Demand is present, and we aim for balanced domestic and export supply, targeting 50-50 by financial year-end under current conditions.

6. Question by Rajakumar Vaidyanathan:
Can you clarify the drop in margins from 21% to 19%, particularly regarding ramp-related costs?

Answer:
The margin drop is noted, but ramp-related costs are not significantly impacting us. Our operations have improved from last quarter's 14.6% margin. We view this drop in context, focusing on overall strategic growth rather than just percentages.

7. Question by Rajakumar Vaidyanathan:
Is there any impact from tax-related reversals this quarter?

Answer:
Yes, there is a tax-related reversal primarily concerning prior M&A activities. This adjustment impacted our financials, but we're managing it as part of our overall strategy moving forward.

These summaries encapsulate the key questions and detailed answers, ensuring clarity on Timken's financial performance and strategic outlook.