Timken India Limited (TIMKEN) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Trimkin India Q2FI27 Earnings Conference Call hosted by Avendis. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Krupashankar. Thank you. And over to you, sir.

Good evening.

I appreciate everyone joining in for the 2QFI27 conference call of Timken India. We have with us Mr. Sanjay Kaur, Chairman and Managing Director, and Mr. Sujit Kumar Patnaik, the CFO of the company. I'll now hand over the call to them.

And over to you, sir, for opening remarks.

Thank you so much. Thank you very much. Rupaji, so formally, good afternoon, and thanks a lot for joining this conference call today. I formally welcome you to the Timken India Investor Call to discuss the financial results for the second quarter, and also half-year ended September 30, 2026. So when we entered the FI27, it was on a positive note, as you know, And I am pleased to report that the momentum is continued into the second quarter as well. During Q2, we delivered, I think, a strong double-digit revenue growth accompanied by a nice little growth in profitability. The performance reflects continued demand across all the key end markets and a little bit delay in the rail. The contribution from our expanded capacity and the discipline execution across both domestic and export businesses. Update on this Q2 FI 2627 standalone. Revenue from operations stood at 969 crore, representing a growth of 25.4% over the corresponding quarter last year. So, quarter compared to the last year was 25%. Revenue also grew almost 4.3% over Q1 27. Thank you. 27% EBITDA margin for the quarter is at approximately 19.2%. So I think improvement and profitability is increasing for the company. And obviously, there are cost pressures that is in the background. We have new assets, so depreciation is there, cost of fuel has gone up, gas has gone up, and against that, this is pretty increasing. So quickly on the half-year performance, for the first half of FI27, Standalone revenue from operations stood at 189, 1898, 4 million, and increase of almost 20% of year-on profit. Profit before tax was almost 306 crore, while profit after tax at 231 crore. So, an increase of 19%. Quickly on the consolidated numbers, the quarter stood at 986 crore, compared to 786 in Q2, FI26, PBT 162 million, 162 million, so 162 crore, while profit after tax was 120 crore and approximately increase of 29 YOY. For the first half of FI27, the consolidated revenues are 1.929 crore rupees, while consolidated net profit after tax stood at 2.40 crore rupees. So, overall, new Baruch facility continues to progress through its ramp-up phase. With the lines capitalized, we are focused on improving utilization. I am sure that would be a question, but we are progressing on that. We are increasing the utilization. Our investment towards rail expansion at Jamshirpur and plane bearing at Baruch, they are on target. So very soon, we should be able to commission and start the PPAPs and things like that. Also, the amalgamation of Timken GGB technology, Private Limited with Timken India Limited is progressing smoothly. So that regulatory process is on. So the proposed integration is aimed at driving, obviously, synergies, efficiencies, and simplifying the overall structure. On the cost side, cost is going up. So that is the focus area. So we are working on cost reduction, et cetera. So as you know, that cost is going to be a challenge in coming months and years also. The external environment remains mixed. Global industry activity continues to be influenced by geopolitics. So that is a challenge, as we all know. Trade-related uncertainties are very much there, and supply chain alignments are happening with every passing week. So we are connected to our customers. At the same time, demand from our key customer segment is okay. We continue to monitor development. So I would say that domestically, we should be pretty much okay as the demand looks to be solid. Execution remains the key. So, I would say that overall, it is a fairly nice picture as we walk into the next quarter as well. With that, I would throw the line open for questions, please.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Paracitans are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Raghunandan Enel from Novama Research Private Limited. Please go ahead.

Thank you, sir, for the opportunity. Congratulations on the strong all-round performance. Sir, can you please share the segment-wise revenue for Q2, which you generally do?

Yeah, sure, why not? So, on the front-end-wise unit, U2FA27, rail was at 156.7 crores, so that was 16% of the PI. Mobile others was 204 crores, that was 21% of the PI. Distribution remained at 148.8 crore, which was 15% of the pie. Process stood at 190.9 CR, which was 20% of the pie, and exports was at 262.7, which was 27%. And then we had some export incentives. So that is how the Q2 969.3 spread out.

Thank you so much for that. And with regards to Baruj plant, can you indicate how was the revenue utilization for Q2? How do you see the ramp-up going ahead? Have we reached 70% as of now, which was earlier target for September?

So the work is in full bloom, and the capacity utilization is not yet at 70. But the certification, MOCs, because, you know, they were served from different plants, so MOCs are pretty much dependent on the sales side, which is the customer side. We are roughly at, Suji is currently at what?

Yeah, so overall plant, if we look at it, we are anywhere close to, I would say, 60%. 60%. But if you look at it, specifically the SRB plant, which the chairman told in the last meeting, where the capacity is slightly higher than our CRB lines. So, SRB lines, we have already reached 70% for the quarter, what we promised in the last quarter. CRB lines are still below 60%, I would say. So, on an average, it is at 60%, and from a revenue perspective, for this quarter, it was very close to 75 crore rupees.

Noted, sir. That's a good improvement compared to Q1. Q3 should be much better.

Yeah. SRV, you know, the SRV lines are getting more traction.

And, sir, Exports has seen a very strong growth of 60% YOY and 30% QOQ. Thank you. Can you indicate how is the traction, which regions would the U.S. be the key driver of growth, and how do you see the momentum continuing?

And the momentum is going to be pretty healthy in quarters to come, for sure. And very soon, with North American rail market, also Timken companies are getting aligned to the buying behavior of those customers. I think more better days in terms of export are going to be there. That rail piece would have more traction, and water is going to be immediate. But overall, on bearings, it is going to be pretty healthy.

Good to hear that, sir. Just the last question. On the cost inflation, can you indicate how much was the impact in Q2? And we can see that from material cost, QOQ has gone up 130 basis points as percentage of revenue. And other costs like fuel, gas has also gone up. Would the entire cost be passed on to customers? Would there be some negotiation? Would there be some absorption expected, especially with the...

So, I'll ask Sujit to reply, but generally, the cost is going up, and still nobody can absorb it. Industry, you know, bearing industry cannot absorb it. They might absorb it for rec water or so, but overall, they have to pass it on. So, the ender is actually to pass it on. That is the job of the same people in the bearing industry, because this is not a one-time cost or a small cost. The carbides have gone 200% up. Steel is going up. And then your gases have already gone up. Then if you look at the labor, labor is going up. So you name the area, the cost is going up and going only up. And you can only do that much, you know, CI improvement, you know. So, it has to be passed on. Our endure is to pass it on, and we'll continuously work on that. Both auto and non-auto, the industry cannot absorb it, not forget about typical India. Everybody has to, you know, for their sake of survival, pass it on. And our major customers understand it. They are passing out. But, you know, automotive, they will kind of, you know, delay a little bit here, there. Industry people, otherwise on the industrial side is coming up. And over to Sujit for a little bit more mathematical equation.

Yeah, maybe just one additional point there, that 130 basis point, what we talked about, I think you talked about that cross margin impact. So, that's not necessarily entire thing is coming because of the input cost inflation. So, you have a little bit of unfavorable mix also, which is playing the role there. Basically, the mix, the way you sell it in the front end units. So, there is a little bit of input cost in place in there, which we are continually working on to pass it over to the customers. You will always have a timing gap, cost and price difference, but there is also an unfavorable mix there, which is playing a role. So, probably I would say 50%, 50%, 50% is because of unfavorable mix, and 50% is because of input cash, input cost difference between price and cost timing difference.

That is very helpful, sir. Just a clarification, unfavorable mix refers to lower shade of rail distribution.

Yeah, rail was low in the quarter, that is the unfavorable mix, because the global, the rail tender was delayed.

You got it, sir. Thank you so much. I'll fall back to the queue. Very helpful, sir.

You're welcome. Thanks.

Thank you. The next question is from the line of Varun Jain from Dollar Capital Private Limited. Please go ahead.

Yeah. Hi, sir. Good evening. So, I have a couple of questions. So, first question is, sir, in this quarter, your depreciation declined to $289 million from $314 million in Q1. While your capital work in progress increased, it almost doubled. So why is that?

Very good question. If I had a Nobel Prize for a question, I would give it to you. So, Sujit.

Yeah, so that depreciation is a little bit of accounting noise, I would say. It's a reclassification between last quarter and current quarter, between other expense and depreciation. So it has been too low in this quarter. So there is no structural reduction in depreciation. It was more of an accounting declassification from other expense. Very close to 1.3 crore.

Okay. Got it, sir. And, sir, the other questions were on Bharuch. So, what was the Bharuch revenue in this quarter, and what are the margins we are realizing on CRB and SRB versus what we get on TRBs?

So, 75 crore? R&B, CRB generally go to the industrial segment. Industrial segment is always better than the automotive segment in terms of holistic margin behavior.

Yes, sir, I understand. I directionally understand that they are higher margin, but is the difference like 300, 500 bps or more than that?

That obviously we don't state, so I will just tell you the directionally.

Sure, sir, sure. But, sir, also... Yeah, go ahead. Sir, yeah.

Hello. Hello?

Yes, sir, please go ahead.

Please go ahead. Sorry, we lost you. Hello? Hello? Yeah, please go ahead.

Yes, sir, my question, other question was that this railway expansion of 120 crore, is it still expected to start commercial production by December? And secondly, on this side, there were railway tenders which were delayed. So, now, have this started converting into orders?

So, the new line would start getting into the trial runs in November and December, then the PPAS would start, and then we will qualify those lines. So, that is all online as for the target. And as far as tender is concerned, so tender was delayed, and the tender hopefully should get into, in terms of pure, because committee has not been set yet. Committee will be set and all that. Stuff will happen in next two, three weeks. But in the meantime, there is some interim orders which are placed on wagon builders. So now the movement and traction on wagons and the tender is pretty much in full swing. So, another three weeks of tender, sir, those things will materialize into orders. Okay, sir. Got it.

Sorry to interrupt, Mr. Jain. I requested you follow back to Q for more follow-up questions.

Sure.

The next question is from the line of Rashi Hora from Kotec Securities Private Limited. Please go ahead.

Yeah. Hi, sir. Thank you for the opportunity. My first question is just regarding SRB and CRB. While you said that 75 crores was the quarterly contribution, like what would be the mix between the domestic and the export in this business?

Currently, it is heavily tilted towards export, and the domestic endeavor is on because those PPAPs and other things are happening. But these quarter sales is more tilted towards in the company, which is exports.

Understood. So, how should we think about, let's say, year-end utilization levels? Should it reach 80-85% by end of this financial year?

Yeah, when we talked on the last quarter, when we have the investor call after the last quarter of the financial is over, so currently CRBs are roughly 50 to 60, SRBs is 70. I would say it will be between overall, now it will be between 70 to 75.

Okay, understood. And so just in terms of obviously you said that industrial generally makes better margins. When this retains a certain utilization levels, will the margin overall be accretive to our business or will it also depend on the domestic and the export mix at that point in time? I'm assuming that export would be accretive at this point in time as compared to domestic.

So, directionally, industrial is always better than the automotive, and as we reach that critical mass, you will see a positive effect. Now, how much, all that, time will tell us, but overall would be positive. Sujit, any comments?

No, I can answer, but just one additional comment there, for the last quarter, or which is quarter three of the financial years.

Sorry to interrupt, sir. You sound very distant from the mic.

No, I was just telling from you. One minute, you can come this way. One minute, one minute.

Yes, sure, sir.

Sujit is coming closer to the phone.

I was telling just one additional point. Since quarter three of the financial year, we have the year end as well. So, generally, the seasonality for the last quarter of the calendar year is always a little bit of softening because of the export and the year end of December, so on and so forth. So, that has to be considered as well while calculating the capacity utilization on the segment.

Understood. And, sir, just second question on the process industries, X, CRB, SRB, like, can you just give some color on, you know, which segments during the quarter did well, and what's the outlook in some of the key segments within process industries?

Within process industries, wind is going well.

Sorry, sir?

Wind.

Wind, wind. Okay, okay. And like, how should we think about the growth rates going forward for this business, excluding TRV, HRV?

Yeah, it will be pretty stable. It is in a very nice spot currently. The Chinese and others are moving a lot of production of the gearboxes into India, and we are in a nice spot there.

Okay, sir. Thank you. I'll get back into the queue.

Thank you, Rishi.

Thank you. The next question is from the line of Ashish from Leo Capital Limited. Please go ahead.

Congratulations on a good set of numbers. I have two questions. The first question would be, how is the overall global demand environment for various parts of the bearing business? Is demand likely to continue to be strong over the next few years, and which segments are seeing maximum demand momentum? That would be my first question.

So, one is that the domestic demand is going to remain robust. You know, GDP is at 7. Infrastructure still is in full swing. Steel, I think last quarter was a little bit down the steel production, but overall, I would say that the domestic demand in coming years is going to be pretty much good. Now, geopolitics is there, so nobody can predict that. What is going to have the impact of those things? But otherwise, the American market is also pretty much in a nice spot there. For us, the good attractive market in months and years to come, both domestically, export would be rail for sure, and then the heavy truck segment across the board. Also, the off-highway segment is behaving well globally and also in India. So I would say that the demand looks globally. Obviously, Indian GDP is 7, US would be 2, their base is huge. All that is very much there. The ASEAN is at 4, GDP growth and all that stuff. So I would say that domestic demand would be the kingmaker. But overall, bad days of exports, I think, are slowly getting over.

And secondly, how does the cost of production compare the Indian operation versus some of the global manufacturing in Europe and other parts of the world? Is India meaningfully cost competitive?

Yes.

Short answer, yes. By how much? Would that be quantifiable?

So, it is in a good spot, I can tell you, with a lot of confidence.

All right, all right. Good luck. Thank you.

And you should also look, you know, not for Timken India, you know, in general, you should look at not only cost, you have to look at the capability, cost, and delivery in one space when you do global export business. So, it is not only the cost. You can have the best cost, but then you have the worst quality. You have the best cost, but your delivery is not right. So, all that has to be seen in one. So, that way, India scores over many, many countries.

Thank you. Okay. Thanks.

Thank you. The next question is from the line of Rakesh from Access Asset Management Company. Please go ahead.

Yeah, hi, Tim. Firstly, congratulations to execute the kind of profitability in this environment. First question is on the wind business. Fairly, you know, new business, which we have been executing now. I mean, if you can elaborate how to think about our market share for the wind business, either in domestic or the export market going forward, and where do you think you can, you know, what kind of capacity expansion would you require maybe three years out?

So, on the wind business, this wind, especially the domestic wind consumption, was very sluggish. So, all the ZFs and the cylinders of the world were making gearboxes mostly for export. The good news is that now the domestic wind market is also picking up, and domestic Indian wind companies are also picking up. So, this market is going to be pretty much relevant in India for some more years, Given the fact that we want to reduce the, you know, converting electricity through thermal, that has to be reduced. And the need of the power is only going to go up and up and up. As you see, the data center is coming up and the rest of the stuff coming up. So the need of power is going to go up. And the need to have clean energy is also going up, which is no rocket science. So, the local wind market for local production and consumption is going to go up. So, that is pretty much okay. And Timken India Limited does not make the wind bearings. We buy from the sister concerns, and sister concerns are investing in large sizes domestically.

So, I mean, could you double-click on that and tell us, you know, what segment or sub-segment are we addressing today? And where I'm coming from is your, one of your competitors recently made a comment where they are going very selective on the market they are choosing for the win due to a lot of low margin business going on.

Yeah, so, yeah, so, yeah, so, that is, who has made the comment has made a valid comment. So, we are also into the gearboxes and not on the main shaft generally. If we make money on the main shaft, then we go out with it. That is a little bit commoditized. But the gearboxes is what we have always been serving and we will keep on serving.

And any plans to localize this bearing in the future?

So, Timken India Limited is not localizing it. But the other Timken entity in India is localizing it. And they are already producing it at a certain size range, and they are further doing stuff on that, and we are buying and selling.

You got it. You got it. Thank you, sir.

Okay, we can take the last question. We've got two minutes left. Any last question, please?

Yes, sir. The last question is from the line of Nikhil from I Thought BMS. Please go ahead.

No idea. Thanks for the opportunity. So, I have a couple of questions. First is on wind turbine upsizing. So, Indian OEMs are moving away from 2, 3 megawatt to 4, 5 megawatt platforms. So, at these sizes, gearbox makers are using hydrodynamic plane bearings instead of roller bearings, and they're also, many of them are making them in-house, I believe. So, how is Timken's bearing content per megawatt changing as these turbines increase in size? And are you seeing any substitution of your TRBs or CRBs in J-Boxes made in India?

So, yeah. So, on this wind, so obviously India used to be a sub-megawatt market. Then they started making, you know, 3 megawatts. There is no 4 megawatt in India, but 5 megawatt is coming into picture. And globally, it has gone even up to 14, 15 megawatt. You know, 8 megawatt is also pretty common. But India, I think 3 and 5 is going to be a common one for a long, long time. On the gearbox, there are many stages. On the initial stage where your need on the bearing is lower is a plain bearing. So now plain bearing can be made out of brass, which is like a sleeve and has no technology in it. But if you have a technology where alternate material can be made, which is called Generation 3, Generation 4, And Timken has a company called GGV, which is pretty much heavily investing in the research for this in global arena. And that market is what can become a little bit different than the current plane bearing, which is nothing but a sleeve, does not give you the optimal results out of the gearbox. But when you go beyond the carrier bearing, staple rollers cannot be replaced. As per the current technology available, and then as they become 5 and 6 megawatt bigger gearboxes, bigger larger taper roller bearings will be needed, and the lower stage might be and is being done plane bearings. As you know, one of the listed companies who are doing cages, doing plane bearings, and some of the, as you rightly said, are doing this plane stuff themselves. But then there is a technology intervention into that in which hopefully companies like Timken India Limited would be able to sell through alternate. But currently, we are concentrating on the upstage of carrier tapers, which is pretty much going to stay. The plane bearing at the lower stage is a sleeve, was a taper roller bearing before, has become a sleeve, and can become in future a Gen T alternate stuff into that. So, there is further opportunity in that.

Okay, okay. Thanks for such a detailed answer. That was very helpful. So, just one more question. So, has GGB currently won or qualified any orders in this space?

We have not yet capitalized. The machines are here. We still have to run them, and we are in the process of doing that. But we are already, you know, winning orders and supplying from our overseas by-brand. We are buying from them, our GGB brand. But very soon, it will be, you know, produced here. So, there will be a combination of selling imported product of GGB and produced in India at our produce facility.

Okay. And what kind of share do you expect from the wind sector versus distribution and process once Baruch reaches full utilization?

I did not understand the question. This is regarding…

So, once Baruch reaches full utilization, how much of the overall revenue potential is going to be fulfilled by wind compared to other segments?

If you look at it, if your question is specific to GGB today, I think if you look at it, our statement, I think very close to there into 70-75 crores, and this Baruch investments for GGB, what's going on for both FRC and metal polymer put together I think 35-35-70 crores of investments, and the asset term is anywhere we do close to 1.5 crores. So, you can do the math. I think that is what the numbers will be coming out with the investment, which has been approved and undergoing as we speak.

Okay, got it. Thank you very much. On the bit. Okay, all right.

Thank you. We take that as the last question for today. I now hand the conference over to the management for closing comments.

Thank you so much for joining us today. It was a pleasure hosting this call. for quarter two of the financial year, and we will again catch up for the next quarter.

Thank you. On behalf of Evendus, that concludes this conference. Thank you for joining us, and you may now disconnect your line.