Tube Investments of India Ltd (NSE:TIINDIA) (Q1 2027) Earnings Call Highlights: Strong Revenue ...

Negative Points

• Tube Investments of India Ltd ( NSE:TIINDIA ) experienced margin compression in the engineering and metal form segments due to significant steel price increases, with recovery expected only after a lag of two to three quarters.

• The metal form products segment saw a decline in profit before interest and tax to INR28 crores from INR37 crores year-over-year, despite revenue growth, due to cost pressures and a drag from the railway and Hyundai businesses.

• Shanti Gears, a subsidiary, reported a sharp drop in profit before tax to INR14 crores from INR31 crores, with revenue declining to INR115 crores from INR135 crores.

• The company faces ongoing challenges in the optoelectronics business, which has yet to make significant inroads into customer approvals, particularly for exports.

• The EV business continues to face headwinds from rising cell prices, which are expected to persist for at least two to three quarters, impacting margins.

• The greenfield plant expansion in the Western region is delayed by six months, affecting capacity and revenue growth in the metal form segment.

• The company's CDMO business is still in early stages, with customer inspections and regulatory filings expected only next financial year, delaying significant revenue contribution.

• The JM (Jayant) business in the EV segment is facing headwinds in its core design and development business, though diversification into battery manufacturing is expected to help.

• The company has significant capital expenditure commitments, with INR350 crores planned for the current financial year, which may pressure cash flows.

• The company's standalone revenue growth was partly offset by higher other costs, including fuel and freight, which are yet to be fully recovered from customers.

Q & A Highlights

Q: Can you quantify the extent of under-recovery in the quarter due to steel price inflation, and what is the sustainable margin for each segment? A: Mukesh Ahuja, Managing Director, stated that while they do not provide a specific number, the company is confident in fully recovering the steel price increases with a lag of two to three quarters. He reiterated the guidance of achieving double-digit EBIT margin growth, with margin neutralization expected in the coming quarters.

Q: Is it fair to assume that the company is past the peak quarterly losses for the EV business, and what is the timeline for breakeven? A: Mukesh Ahuja, Managing Director, confirmed that directionally, the company is past the peak losses as volumes increase quarter-on-quarter. He noted that breakeven timelines vary by business, with one business expected to break even this year and two more next financial year.

Q: What drove the significant reduction in negative EBIT for the e-mobility segment, and can you share the volume details for each product? A: Jalaj Gupta, Managing Director of TICMPL, reported the highest-ever quarterly turnover of close to INR240 crores, with traction across all four businesses. He highlighted record volumes in the small commercial vehicle business and a 64% improvement in three-wheeler volumes over Q4. Billing volumes were: big trucks at 86, three-wheelers at 1,924, small commercial vehicles at 347, and tractors at 22.

Q: The wholesale volumes for three-wheelers appear higher than retail registrations on the Vahan website. Is this due to a time lag? A: Mukesh Ahuja, Managing Director, explained that there is always a 30-45 day lag between billing and Vahan registrations, but the numbers tally over a period of three to six months. He cited last year's figures where billing was 6,700 units versus 6,500 registrations, attributing the current discrepancy to a growing business with a lower opening pendency.

Q: What is the outlook for the TI Medical business, including the recent IV cannula acquisition and the CDMO (3xper) facility? A: Mukesh Ahuja, Managing Director, stated that the core surgical business grew nearly 20% in Q1. The IV cannula acquisition is expected to start generating revenue from August or September. The company remains confident in achieving 20% revenue growth year-on-year for TI Medical. Govindarajan Narayanan, AGM-IT, added that the 200 KL CDMO reactor capacity is commissioned, with validation batches ongoing and customer inspections expected next financial year.

Q: What is the status of the optoelectronics (lenses) business? A: Mukesh Ahuja, Managing Director, acknowledged that the business is yet to make significant inroads. The company is focusing on customer approvals for exports, as domestic manufacturing of lens modules and camera modules has not yet started.

Q: What is the planned capital infusion into subsidiaries for FY27? A: Mukesh Ahuja, Managing Director, confirmed that after infusing INR250 crores in Q4 of the last financial year, the company anticipates infusing another INR250 crores in Q3 of FY27, as part of a total planned infusion of INR750 crores.

Q: How is the company managing cost inflation beyond steel, and what is the outlook for the cycles business? A: Mukesh Ahuja, Managing Director, stated that discussions are ongoing with OEMs to recover other inflationary costs like fuel and freight. For the cycles business, Q1 is seasonally strong due to school openings, and the company has improved its market share, expecting at least a 2% margin improvement for the full year.

Q: What is the plan for the recently acquired 'Orange' business (metal injection molding)? A: Mukesh Ahuja, Managing Director, described it as a small step towards additive manufacturing. The company will study the market and target segments over the next one or two quarters before providing guidance on scaling the business.

Q: What is the current CapEx plan for the group, excluding CG Power? A: Mukesh Ahuja, Managing Director, outlined that TI's planned CapEx for the current financial year is around INR350 crores, with Shanti Gears at around INR100 crores. The total group CapEx, excluding CG Power, is approximately INR700 crores, directed towards the engineering division, FPD division, TI Medical, and the 3xper CDMO business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .