TIMKEN - Timken India Ltd Share Price

In the earnings call for Q1 FY 2025-26, Timken India Limited management provided a cautious yet optimistic outlook for the company's performance. Mr. Sanjay Koul, Chairman and Managing Director, noted that revenue from operations reached INR 808.8 crores, reflecting a 3.2% year-on-year increase and marking the best first quarter to date. PBT stood at INR 130.4 crores, flat compared to the previous year, with a PBT margin of 16.1%, slightly down from 16.6% in Q1 FY 2024.

Key updates highlighted by management included the stabilization of the Bharuch plant and the capitalization of one CRB line, which commenced commercial production in late June. They reiterated a commitment to capacity building and operational efficiency. The investment in rail expansion in Jamshedpur and the ramp-up of plain bearings in Bharuch continue as planned.

For their core industrial sectors, Mr. Koul emphasized a cautious optimism regarding the demand environment despite macroeconomic uncertainties. The growth forecast for rail segments is expected to be steady, although he ruled out double-digit growth, suggesting high single digits instead. For the process sector, growth prospects remain mixed.

Management also indicated that they are closely monitoring geopolitical factors, economic conditions in the U.S., and tariff impacts, which pose potential challenges but are not seen as insurmountable. They affirmed plans to enhance capacity through investments totaling INR 155 crores for rail and plain bearings, aiming for a utilization target of around 45% by the end of FY 2026. Additionally, they confirmed that the majority of initial revenues from the Bharuch facility would be directed towards export markets. Overall, they remain focused on execution excellence while navigating these challenges.

Question 1: "If you could give us the mix in the first quarter? How much was from railways and the other segments?"

Answer: In Q1 FY '26, the revenue mix was as follows: Rail contributed INR196.5 crores (24%), Mobile INR156 crores (19%), Distribution INR146 crores (18%), Process INR142 crores (18%), and Exports at INR164 crores (20%). Overall, we achieved revenues of INR808.8 crores.

Question 2: "Could you kind of give an update on the new plant utilization plans? Does that stay the same or is there some change to that estimate?"

Answer: We expect to maintain our target of reaching about 45% utilization by year-end. The first line has been capitalized, and other lines will follow shortly. We are focused on training our team and qualifying new lines, so a slight variation in percentage may occur, but we're on track for our previous estimate.

Question 3: "What are your expectations for the rail and process markets? Which will influence growth more?"

Answer: Rail is expected to grow steadily but not explosively; we anticipate high single-digit growth, as it's cyclical. The process market is mixed. While sectors like wind are doing well, mining and steel are sluggish. Infrastructure spending will be key, but overall, I remain cautiously optimistic about both sectors.

Question 4: "Is it reasonable to assume that rail probably grows in double digits and process maybe in high single, mid-single?"

Answer: I don't believe rail can achieve double-digit growth, but both rail and process could see growth in the high single digits. The overall economic forecast suggests a modest trend as we advance into FY '26.

Question 5: "What are your thoughts on the CV industry growth expectations? What has changed?"

Answer: The CV industry growth outlook remains unclear. Typically, it could range from 0-9%. There are various scenarios"”poor, average, or optimistic. The economic climate will largely dictate the growth trajectory in this sector.

Question 6: "Regarding Bharuch ramp-up, would it be fair to assume that current billing is primarily for export markets?"

Answer: Yes, that's correct. The billing initiated in July focused primarily on export markets, which aligns with our strategy of rooting for increased export capacity from the Bharuch facility.

Question 7: "Can you share our geographical mix of exports and how tariffs might affect pass-through?"

Answer: Our export mix is about 50% towards North America, primarily in heavy trucks and rail, with other markets like Europe and Asia also significant. Regarding tariffs, they are factored into our pricing strategy, but the key concern is the broader economic context in the U.S.

Question 8: "Any order visibility for CRB and SRB in the domestic market?"

Answer: Yes, we're working on customer qualifications (PPAPs) and have received the first order for locomotive applications from Indian Railways. We have strong visibility and anticipate gaining further traction in domestic markets.

Question 9: "What is your expectation for FY '26 capex?"

Answer: For FY '26, we expect capex of around INR120 crores for rail expansion and approximately INR35 crores for the first phase of plain bearings. The total immediate expansion capex will be about INR150 crores, including maintenance that will follow standard norms.

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