Alicon Castalloy Limited — Q1 FY26 earnings call

Call held 8 Aug 2025

Management summary

Alicon Castalloy reported a mixed Q1 FY26, with revenue declining 5% YoY to ₹419 crore amidst a challenging global and domestic operating environment marked by new US tariffs and China's rare earth export restrictions. Despite these headwinds, the company demonstrated resilience with a 4.16% QoQ increase in EBITDA to ₹50 crore and a 16% QoQ rise in pre-tax profit to ₹15 crore, driven by cost optimization and new business wins. The company maintains a healthy order book of ₹9,100 crore and is focused on ramping up volumes with existing customers and strategic investments in advanced manufacturing.

Highlights

  • EBITDA increased to ₹50 crore (Q1 FY26) from ₹48 crore (Q4 FY25), with margin improving to 11.9% from 11.2%.

  • Pre-tax profit higher by 16% QoQ, from ₹13 crore (Q4 FY25) to ₹15 crore (Q1 FY26).

  • Added seven new parts from five customers, including two new logos, with five for international business.

  • Healthy order book of ₹9,100 crore, executable up to FY28-29, with 52% from export market.

  • Resolved production line issues for a prominent Japanese OEM, expecting steady ramp-up over next three months.

Concerns

  • Revenue declined by 5% YoY to ₹419 crore (Q1 FY26) from ₹440 crore (Q1 FY25).

  • Gross margin declined by 165 bps to 45.9% (Q1 FY26) from 47.5% (Q1 FY25) due to aluminum price increase and sales mix.

  • Exceptional item of ₹2.5 crore reported in Q1 FY26 due to a legal settlement.

  • Global headwinds: new US tariffs (25% + 25% penalty for Russia trade) and China's restriction on rare earth materials exports.

  • Domestic market signals mixed, with subdued demand and lower-than-expected growth in auto segments (e.g., 2W at 0.7% vs. 7-8% projected).

Key financials

  1. Revenue ₹419 Cr -4.8%YoY
  2. Gross Margin 45.9%
  3. EBITDA ₹50 Cr +4.2%QoQ
  4. EBITDA Margin 11.9%
  5. Pre-tax Profit ₹15 Cr +15.4%QoQ
  6. Net Profit ₹9.3 Cr
  7. Exceptional Item ₹2.5 Cr
  8. Depreciation ₹24.8 Cr +11.2%QoQ

What they filed

Q1 FY27: revenue up 38.3%, net profit up 22.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue464 392 425 418 428 −8%430 +10%495 +16%578 +38%
EBITDA56 34 47 49 55 −2%44 +29%46 −2%54 +10%
Net profit17 1 9 9 14 −18%3 +200%8 −11%11 +22%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Two-wheelers
    40% Contribution to Sales
  • Passenger Vehicles
    39% Contribution to Sales
  • Commercial Vehicles
    15% Contribution to Sales
  • Three-wheelers
    1% Contribution to Sales
  • Non-auto
    4% Contribution to Sales

Order book

high confidence

Total value

₹9,100 Cr

as of 2025-06-30 quantified

Execution

up to 2028-29

Composition

Mix 4 products
  • Passenger Vehicles 51%
  • Commercial Vehicles 30%
  • Two-wheelers 12%
  • Non-auto 4%

Share of order book by product

Cancellations & deferrals

  • cancelled: EV businesses reduced projections and were eliminated from the order book.
The net order book is ₹9,100 crore after utilizing ₹495 crore in FY24-25, adding ₹1,600 crore last year, and eliminating reduced EV business projections.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹30 Cr this quarter · ₹165 Cr (FY26) planned
    • Investments in machinery, tooling and automation
    • Strategic investments for new orders and current business ramp-up

    Previously planned ₹165 Cr

    during the quarter, we have deployed Rs. 30 crore towards CAPEX. Our target for the Financial Year 2026 remains intact at Rs. 165 crore to Rs. 170 crore.

Guidance & targets

Capex

  • FY26 Capex Capex · FY26 · High confidence ₹165-170 crore
    Our target for the Financial Year 2026 remains intact at Rs. 165 crore to Rs. 170 crore.

    — Vimal Gupta

Revenue

  • Revenue Target Revenue · FY27 · High confidence ₹2,200 crore
    And just one final question. So beyond achieving Rs. 2,200 crore revenue target in FY27, what is the long-term growth strategy and vision for the company? ... Absolutely. You are absolutely right.

    — Yash Dalal (question), Shyam Agarwal (confirmation)

  • Q4 FY25 Revenue Guidance Revenue · Q4 FY25 · Low confidence ₹190 crore
    My first question would be on the line of revenue and margin guidance, which you gave in Quarter 4 that you are targeting to achieve Rs. 190 crore of revenue with 13%, 13.5% margin. Obviously there have been a lot of headwinds in the industry. What is your current estimation for the internal targets for the current targets? ... Yes, Preet, thank you. Thanks for the question. So, you rightly said like we given the guidance in the last con call. But now you can see things have changed a lot from the last con call.

    — Preet (question), Shyam Agarwal (response)

Margin

  • Q4 FY25 Margin Guidance Margin · Q4 FY25 · Low confidence 13-13.5%
    My first question would be on the line of revenue and margin guidance, which you gave in Quarter 4 that you are targeting to achieve Rs. 190 crore of revenue with 13%, 13.5% margin. Obviously there have been a lot of headwinds in the industry. What is your current estimation for the internal targets for the current targets? ... Yes, Preet, thank you. Thanks for the question. So, you rightly said like we given the guidance in the last con call. But now you can see things have changed a lot from the last con call.

    — Preet (question), Shyam Agarwal (response)

What to watch in Q2 FY26

Clarity on US tariff situation and OEM strategy

Next quarter
Current Uncertainty, awaiting final tariff numbers and OEM decisions.
Target Finalized US tariff numbers and clear OEM strategies for sourcing.

Why it matters

Direct impact on export competitiveness and customer purchasing decisions.

So, every OEM, they will wait that what is the final contract signed between Indian government and the U.S. government. That is the first part... until then, we have to wait and watch.

Risks & concerns

  • Global operating environment volatility and new US tariffs

    high

    New US tariffs (25% + 25% penalty for Russia trade) are causing widespread caution and reassessment of supply chains, leading to a slowdown in demand from export customers.

    Management acknowledged

  • China's restriction on rare earth materials exports

    high

    Restrictions on rare earth exports, impacting magnets for EV motors, are causing production delays and shutdowns, with effects expected to intensify.

    Management acknowledged

  • EV volume decline due to China's magnet license restrictions

    high

    China has not approved single license for magnet supply, leading to dry customer lines and expected significant decline in EV volumes until September.

    Management acknowledged

  • Slowdown in demand from export customers (US, Europe)

    medium

    Anticipating changes from tariffs, customers have already begun reassessing purchasing decisions, leading to an experienced slowdown in demand.

    Management acknowledged

  • Subdued domestic auto market demand

    medium

    Indian automotive industry growth is lower than OEM predictions, with mixed signals, tight liquidity, and monsoon impact affecting sales.

    Management acknowledged

  • Reduced projections from EV businesses impacting order book

    medium

    Some EV businesses have reduced their projections, leading to their removal from Alicon's order book.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Revenue mix and domestic demand recovery for Q2/H2 FY26 Direct
So, out of the revenue mix for the automobile, so two-wheeler is contributing 40%, three-wheeler 1%, passenger vehicle 39% and commercial vehicle 15%. And remaining is the non-auto. And regarding your second question about the growth of the Indian automotive industry, you rightly mentioned that demand is subdued, and it is much lower than what all OEMs have predicted or released the schedule to us.

Provides current revenue segment breakdown and confirms subdued domestic auto demand, impacting future outlook.

Asked by Jyoti Singh

Export outlook and impact of US tariffs Partial
But if we see, like, in all our supplies to U.S. customer, duty is paid by the customer. So, Alicon is not directly impacted because of the increase in duty. However, in the long run, we have to see the competitiveness of the India vis-à-vis the tariff on the other countries like China, Vietnam, Canada, and Mexico. So, once it will be finalized, then only it will be more relevant to see the strategy from the OEM side. And until then, we have to wait and watch.

Addresses the immediate impact of new US tariffs on Alicon (limited direct impact) but highlights uncertainty and need to monitor OEM strategy.

Asked by Jyoti Singh

Reason for exceptional loss Direct
That exceptional loss, actually, we are having a legal case in U.S. court with one of our sales agent... at the end, we made an out-of-court settlement with them. And finally, it was agreed to be $300,000 as a one-time compensation to that agent. So, that is a cost we have taken as an exceptional cost.

Clarifies the nature and one-time impact of the ₹2.5 crore exceptional item.

Asked by Yash Dalal

Impact of new product rollout on growth trajectory and margin profile Direct
So, as we mentioned, our strategy is to work more with the passenger vehicle or the commercial vehicle side so we can increase our margins. And we are working on that, and major volume will come from the passenger vehicle and the commercial vehicle side. So, definitely in the coming quarters, you will see that our PV and the CV numbers will increase and definitely the margins will also improve.

Explains the strategy to improve margins and growth through higher-value PV and CV segments with new product ramp-ups.

Asked by Yash Dalal

Mitigating US tariff impacts by routing exports through Illichmann (Europe entity) Partial
Yes, we thought about this option also. We have an entity in Europe. But you know, it will be too early to decide anything until anything is signed off. Because you know how he changed the decision... So, we should also have something robust for the long term and then only we can decide, Yash.

Reveals management is considering alternative export routes but is cautious due to policy uncertainty, indicating potential strategic flexibility.

Asked by Yash Dalal

Long-term growth strategy and vision beyond FY27 revenue target Evasive
Yash, you asked very relevant question, but now you see the current environment is quite challenging, both on the domestic as well as on the global level... Internally, we have made the plan for three years and five years. But it can only be further reviewed once we get the final numbers for the tariff. We talk to our customers, get their strategy on the long term for India.

Highlights the significant impact of current global and domestic volatility on long-term strategic planning, suggesting a wait-and-watch approach for definitive plans.

Asked by Yash Dalal

Margin differential between export/domestic, PV/CV/2W, and EV/non-auto Direct
Yes, Preet, so, of course, the margins in the export business, of course, much higher than the domestic business. And also, non-auto is always more profitable. However, in the non-auto business, you see the volumes are little bit less. But in regular business, you will see the higher volume. So, export business is, of course, having higher margin.

Provides crucial insight into the profitability differences across various segments and geographies, informing margin expectations.

Asked by Preet

Impact of China's rare earth magnet restrictions on EV volumes Direct
However, we have to see the impact on the EV, electric vehicle segments. Now, you know, China has not approved even the single license for the supply of magnets. And many of our customers' lines are dry. So, there we are seeing that maybe till September, of course, they will be dry. So, until that license issue will be settled down, the EV volume we are seeing, it is likely to decline a lot.

Identifies a significant supply chain risk impacting EV production and volumes, with potential for substantial decline.

Asked by Devang Shah

3 min read 8 chapters

Detailed narrative

Global Industry Headwinds and Tariffs

The quarter was marked by a complex and dynamic operating environment, globally navigating volatility. New US tariffs were announced, including a 25% tariff on goods from India and an additional 25% penalty for trade involving Russia, effectively a 50% tariff. These measures, rolling out from August 7th and 27th, have prompted widespread caution across industries, with customers reassessing purchasing decisions and re-evaluating supply chain strategies. This has already led to a slowdown in demand from export customers in the US and Europe.

Rare Earth Material Restrictions and EV Impact

China's restriction on rare earth materials exports, ostensibly for national security but believed to be a response to US tariffs, is a significant global development. This has created complex procedural requirements and extended clearance processes, particularly impacting the supply of magnets for EV motors. OEMs are urgently exploring alternative sources, but these disruptions are causing production delays and shutdowns, with effects expected to intensify in Q2 and beyond, leading to a likely decline in EV volumes.

Q1 FY26 Financial Performance Overview

Alicon Castalloy reported revenue of ₹419 crore in Q1 FY26, a 5% decline year-on-year from ₹440 crore in Q1 FY25, and a 1.4% sequential decline from ₹425 crore in Q4 FY25. Gross margin for the quarter was 45.9%, a 165 basis points decline from 47.5% in Q1 FY25, attributed to aluminum price increases and sales mix. Despite headwinds, EBITDA improved to ₹50 crore (11.9% margin) from ₹48 crore (11.2% margin) in Q4 FY25, and pre-tax profit increased by 16% QoQ to ₹15 crore. An exceptional item of ₹2.5 crore was recorded due to a legal settlement.

Operational Highlights and Business Wins

The company added seven new parts from five customers, including two new logos, with five parts for international business and two for domestic. New business includes structural solutions for a prominent European luxury sports car manufacturer and a structural part for a domestic two-wheeler OEM. Alicon also secured a cylinder head business from an Indian OEM for the non-auto segment, showcasing its capacity and capability.

Volume Ramp-up and Manufacturing Excellence

Production issues for a prominent Japanese OEM's cylinder heads have been resolved, with steady ramp-up expected over the next three months. Manpower issues for an Indian operation of a European OEM have also been resolved, with production stepping up from 40-50 sets per week to 150 sets, targeting 600 sets per week from January 2026. The company is integrating digital process controls and AI/IoT technologies to enhance productivity and reduce rejection rates, supported by a casting expert from Germany.

Strategic Focus and Order Book

Alicon's strategy focuses on increasing higher-value products for passenger vehicle (PV) and commercial vehicle (CV) customers, with PV and CV contributions to revenue increasing to 39% and 15% respectively. The company maintains a healthy order book of ₹9,100 crore, executable up to FY28-29. The composition of this order book is 51% from PV, 30% from CV, 12% from two-wheelers, and 4% from non-auto, with a geographical split of 48% domestic and 52% export. However, some EV business projections were reduced and eliminated from the order book.

Capital Expenditure and Future Capabilities

In Q1 FY26, Alicon deployed ₹30 crore towards CAPEX, and the target for FY26 remains unchanged at ₹165-170 crore. These investments in machinery, tooling, and automation are crucial for future capabilities, supporting new orders and the ramp-up of existing businesses. Depreciation increased to ₹24.8 crore in Q1 FY26 from ₹22.3 crore in Q4 FY25, reflecting these planned investments.

Domestic Market Outlook and Challenges

The Indian automotive industry experienced only 1.5% growth in volumes, with two-wheelers at 0.7%, passenger vehicles at 3.4%, and commercial vehicles at 2.6%. This subdued demand is lower than OEM predictions, influenced by financing constraints, early monsoon, and persistent inflation. While some customer segments show good demand, the overall market remains challenging, and the company is dependent on OEMs' sales performance.

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