Menon Bearings Q4 FY26 earnings call

Menon Bearings reported a robust FY26, with total income exceeding INR 300 crores, marking a 23.16% year-on-year increase. Profit After Tax (PAT) surged by 53.41% to INR 38.25 crores, while Q4 FY26 PAT saw an exceptional 108.55% growth year-on-year. Earnings per share (EPS) also significantly improved from INR 4.45 to INR 6.83 per share, reflecting strong operational performance.

The company targets a 25% year-on-year turnover growth for the next few years, aiming for INR 500 crores in revenue by FY28. EBITDA margins are projected to be maintained between 20-22% for the next two years, with potential for higher if external factors are favorable, and a minimum 50 basis points improvement in FY27-28. This is supported by a focused approach on high-value exports, which constitute over 50% of the new business pipeline and offer better margins.

Menon Bearings plans a total CapEx of INR 35 crores over the next two years, allocated as INR 25 crores for Bearings/Bi-Metal, INR 7 crores for Alkop, and INR 3 crores for the Brakes division. The management stated that most of this CapEx will be financed through internal accruals, demonstrating a prudent approach to funding growth without significant reliance on external debt.

The Alkop (aluminium) division, despite facing delays due to geopolitical issues and raw material price volatility in the past, showed significant Q4 FY26 growth of 25% quarter-on-quarter. Management projects a 29% growth rate for Alkop over the next two years, targeting over INR 120 crores in revenue, driven by new parts development for various OEMs and customers. Current capacity utilization is 65%, with a target to reach 90% by year-end, which is expected to enhance productivity and margins.

The braking division is poised for growth with new product developments for two-wheelers, three-wheelers, and OEMs. The crucial dynamometer for testing high-end railway parts, which faced delays, is now expected by August. This will enable the company to commence railway business, projected to contribute 5-10% of total business in the near future, following successful registration and inspections, marking a new diversification avenue.

Exports, particularly to the USA, have increased substantially, but led to extended debtor turnaround times exceeding 180 days and consequently higher interest expenses. To mitigate this, the company is leveraging government export subvention (2.75%) and PCFC limits (4-4.7%), with INR 25 crores in PCFC limits being availed. Management expects these measures to reduce interest costs by approximately 4% on working capital, improving financial efficiency.

The company is actively diversifying its product portfolio and customer base. New development pipelines include 51 new parts across major auto component customers (John Deere, Eaton, Taco Prestolite, Mayekawa) valued at INR 30 crores. The Bi-Metal division has a pipeline exceeding INR 50 crores, and the company is exploring PTFE bush opportunities for EVs, with an expected order of 1 lakh pieces per month soon, scaling to 6 lakh pieces per month this year, indicating strong future growth potential.

Despite significant volatility and increases in raw material prices (e.g., aluminium from INR 240 to INR 280/kilo, copper from INR 1,210 to INR 1,275/kilo), Menon Bearings has successfully passed on these costs to customers through pre-decided formulas and strong relationships with A-grade OEMs. This effective raw material indexing mechanism ensures that the burden of price increases is transferred, thereby protecting the company's margins.