Alicon Cast.

Alicon Castalloy reported a strong rebound in Q4 FY25, with revenues growing 8% sequentially to Rs. 426 crore. This performance helped the company achieve a 10% year-on-year revenue growth for FY25, reaching Rs. 1,724 crore. EBITDA for Q4 stood at Rs. 48 crore, up 36% from Q3, with the EBITDA margin improving significantly from 8.9% to 11.2%. Despite a one-time^📎 provision of Rs. 4 crore for receivables written off, the company posted a Q4 PAT of Rs. 9 crore, a significant recovery from Rs. 1 crore in Q3.

The improvement in Q4 gross margin to 47.5% was primarily driven by a higher share of Passenger Vehicle components in the sales mix. For FY25, the revenue mix saw PV contribute 39% (up from 33% in FY24) and 2W contribute 35% (down from 40% in FY24). The company's EV share in revenue increased from 12% in FY24 to 19% in FY25, including hybrid vehicles, indicating a strategic shift towards higher-value and future-oriented segments. The order book of Rs. 9,000 crore is heavily skewed towards 4-wheelers (82%), with PV accounting for 50% and CV 32%.

Capital expenditure for FY25 was approximately Rs. 165-170 crore, primarily directed towards machinery upgrades and new product development for both ICE and EV platforms. This represents the largest CAPEX outlay in two decades, focused on critical components. The company plans a similar CAPEX of around Rs. 170 crore for FY26, emphasizing customer-specific investments for growth drivers in FY26-27. These investments are crucial for ramping up volumes from key Japanese and European OEMs, including products for JLR like the eAxle.

The company revised its FY26 revenue guidance downwards from an earlier target of Rs. 2,200 crore to a new range of Rs. 1,900-1,950 crore, translating to 12-14% top-line growth. This recalibration is due to macroeconomic volatility, geopolitical uncertainties, and customer-specific disruptions. Factors include a 1% decline in the global automotive market in FY25 (Europe down 6%, North America down 3%), lower-than-anticipated EV growth, and election-related tender cancellations in India. Management expects FY26 EBITDA margins to be around 13%.

Export markets, particularly Europe and the U.S., faced ongoing challenges. The US economy saw a -0.3% GDP growth in Q1 2025. While US tariffs (10% on parts) are paid by OEMs, the uncertainty surrounding these tariffs is causing customers to pause decisions and commitments. Exports constitute 22% of Alicon's revenue, with 8% from the US and the remainder mainly from Europe and the UK. The export mix is predominantly 4-wheelers (CV 60%, PV 40%), with negligible 2-wheeler contribution.

Alicon is actively implementing measures to improve its working capital cycle, focusing on inventory and receivables. Management expects these actions to yield further improvements in FY26. Regarding debt, the company aims to fund the majority of its CAPEX through internal accruals, anticipating only a small increase in debt, partly offset by gains from working capital improvements. The company maintains a balanced customer portfolio, with no single customer contributing more than 15% of revenue, to mitigate risk.

The company's new advanced production lines, featuring robotics and automation, contributed to the Q4 margin improvement. Alicon is focused on scaling these assets to enhance fixed cost absorption. Capacity utilization, which was about 75% in Q4, is expected to reach around 80% in the next year and year after, leveraging existing CAPEX. In sustainability, nearly 30% of the company's electricity consumption is now met through solar power, demonstrating ongoing efforts in environmental responsibility.