Avalon Technologies Limited — Q1 FY27 earnings call

Ladies and gentlemen, good day and welcome to Avalon Technologies Limited Q1 FY27 earnings call hosted by DAM Capital Advisors. As a reminder, all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this 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. Tanesha. Thank you and over to you, sir.

Thank you Tanay.

Good afternoon, ladies and gentlemen. A very warm welcome to Avalon Technologies Q1 FY27 earnings call. I want to begin by thanking our investors for your continued trust and support. Your confidence has enabled us to stay focused on what really matters: consistent execution, disciplined investment, and building a long-term profitable business. We are grateful for your trust and our commitment to deliver has only grown stronger.

Q1 FY27 was another strong quarter. This marks our eighth consecutive quarter of improvement in performance and growth across key metrics.

What stands out is the quality and the breadth of this growth. Our revenue growth is well diversified across geographies and industry verticals.

profitability profitability metrics has improved. ROCE has moved up to 23.4% reflecting that we are scaling with discipline. Networking capital has improved and our order book continues to provide good visibility on quarters ahead.

Our three growth engines, our existing business, new program wins, and our expanding opportunity pipeline are all gaining momentum together.

Based on the strong momentum across our business and the visibility we have on programs ramping through the year, we are reviving our FY27 revenue growth guidance upward from 24 to 27% to 26 to 30%.

Moving to the financial highlights, revenue for Q1 FY27 was ₹484 crores, up 50% year-on-year from ₹323 crores in Q1 FY26.

Q1 revenues are marginally ahead of Q4 FY26. A positive start for FY27. During the quarter, India contributed 41% of the revenue and export business contributed 59%.

India business grew 53% year on year and export business grew 48% year on year with both geographies contributing to the growth.

Now on industry vertical revenue contribution. Industry industrial contributed 32% of our revenues, growing 52% year on year. Mobility contributed 25%, growing 36% year on year. Within mobility,

Rail accounted for approximately 15% and aerospace 8%, growing 37 and 47% respectively. Clean energy contributed 29%.

Our gross margins for the quarter came in at 34.7% within a guided range of 33 to 35%. EBITDA margins came in at 12% up from 11.8% in Q4 FY26.

reflecting continued operating leverage as revenues grow. Profit after tax was rupees 35 crores with with with a PAT margin of 7.2%. A meaningful improvement year on year.

As of June 13th, 2026, our order book grew 23.4% year-on-year to rupees 2,208 crores with an average execution period of 14 months.

Long-term contracts with execution timelines ranging from 15 to 36 months stands at rupees 1,256 crores. Order book growth remains well diversified across industry verticals and geographies.

Networking capital days improved to

117 days in June 2026 to 142 days in June 20 versus 142 days in June 2025. An improvement of 25 days year on year. Within this inventory days improved from

104 days to 94 days, receivable days reduced by 13 days and payable days improved by 2 days over the same period. Asset terms are 9.9 times and return on capital employed stands at 23.4%.

India manufacturing operations which serve both domestic and global customers.

accounted for 72% of her revenue in Q1 FY27. Delivering healthy probability at an EBITDA margin of 16.7% and a profit margin of 11.1%. US operations contributed the remaining 28%.

Moving on to our US operations, losses in US manufacturing has continued to narrow, coming in at approximately 4 crores in Q1 FY27.

Our US manufacturing plant has a cleared and deliberate role. It is where new customers come in, validate our capabilities and get comfortable with Avalon as a partner. Once that comfort is established, production progressively transitions to India manufacturing where customers benefit from our cost structure, depth of capabilities and scale.

Our manufacturing presence in both geographies gives customers the flexibility to start in the US or come directly to India.

And we are well positioned to support both. As India manufacturing continues to scale over the coming years, we expect US manufacturing contribution to naturally settle at around 20% of our total revenue.

On revenue guidance, we have previously committed to double revenues from FY24 to FY27, a target of approximately rupees 1,734 crores.

Our trailing 12 months revenue have already crossed that milestone, nearly a year ahead of our commitment.

As highlighted earlier, reflecting on the strong Q1 performance, we are now focused on the next doubling from rupees 1603 crores in FY26 to approximately 3200 crores in FY29.

The products we manufacture and the verticals we build are long-term in nature. Program program life cycles run for years, sometimes decades. Our customer relationships deepen over time and our revenue compound accordingly. We encourage you to evaluate our progress over a multi-

Multi-year period. That is how we manage this business and that is the length through which our strength, performance and value will most meaningfully be perceived.

Now moving to a key key growth drivers.

Our existing business continues to provide a strong and steady foundation with long product life cycles, mission critical programs, and recurring revenues across rail, aerospace, industrial, clean Tanjaji, and communication. On new business wins, the programs we have been building for the last two or three years are now progressing well. Aerospace cabin subassemblies are moving towards volume. Production of locomotive engines and subsystems is now progressing well.

Underway. The Kavach anti-collision system is on track for commercial production.

On semiconductor equipment, we have increased our allocation with one of our world's leading vapor fabrication equipment suppliers, expanding from power box assemblies into other products with production ramping over the next few quarters.

In aerospace, we have secured incremental box fill business with a leading aerospace company, further strengthening our engagement in the export market.

On the opportunities pipeline, we continue to see a healthy expanding set of opportunities across geographies and verticals. Southeast Asia and Europe continue to add a new dimension to our geographical reach. All three growth engines are gaining momentum together.

On a manufacturing footprint, a new manufacturing plant focused on domestic demand in Chennai is now complete and will commence commercial production from Q2 FY27.

As we deepen our presence in semiconductor equipment and advanced electronics, the need for world-class infrastructure becomes increasingly important. We are in the process of acquiring a large pulse of land in Chennai that will support Avlon's growth over the next decade, catering to both domestic and export opportunities.

We shall share more details as it crystallizes.

We are now building the organization for the next phase of growth. We are investing in leadership, process automation, IT systems, and AI enabled capabilities across functions. Some of these investments are being made now ahead of the drop.

As I close, let me offer a broader perspective. Global supply chains are being realigned, customers are looking for reliable manufacturing partners beyond traditional geographies. India is emerging as a credible and competitive destination. We are well placed in this environment.

Avalon is building a global integrated electronics manufacturing business, focused on complex box build solutions for machine critical application across high growth industries. Our continued goal is to build an enduring institution that customers trust, that is deep in engineering capability and that is built to last. We remain committed to efficient capital allocation, strong governance, disciplined execution, and of course profitable growth.

With that, I hand over to our CFO, Suresh Veerappan, for a detailed overview of our financial performance.

Thank you.

Thank you, KB.

Good afternoon everyone. Let me take you through the financial performance in detail.

Revenue for Q1 FI 27 was rupees 484 crores, up 49.8% year-on-year from rupees 323 crores in Q1 FI 26, and up 0.9% sequentially from rupees 480 crores in Q4 FI 26.

Our average revenue growth over the last eight quarters has been 46%. Box bill contribution has increased from 44.5% in FI22 to 59.9% in Q1 FI27, reflecting our continued focus on complex high value manufacturing.

Gross margin for Q1 FY27 was rupees 168 crores at a margin of 34.7% within our guided range of 33 to 35%. Representing year-on-year growth of 46.3% from rupees 115 crores in Q1 FY26.

EBITDA for Q1 FI 27 was rupees 58 crores with a margin of 12%. Up from 9.2% in Q1 FI 26 and 11.8% in Q4 FI 26, reflecting operating leverage as revenue scale.

Adjusting for the tariff pass-through impact, our EBITDA margin would have been approximately 0.9% higher.

Pack for Q1 FY27 was rupees 35 crores with a margin of 7.2%, up 145.3% year on year from rupees 14 crores in Q1 FY26.

We continue to invest in talent, capacity, and inventory to support upcoming growth in new programs. These initiatives strengthen our foundation for long-term growth and are expected to enhance operating efficiency as business volumes continue to scale.

Moving on to the balance sheet, networking capital improved to 117 days in June 2026 from 142 days in June 2025, an improvement of 25 days year on year. Within this, inventory days improved from 104 days to 94 days. Trade receivable days reduced from 87 days to 74 days. Trade payable days improved from 49 days to 51 days. On a sequential basis, networking capital moved from 112 days in March 2026 to 117 days in June 2026.

Cash flow from operations was positive at ₹32 crores in Q1 FY27, and improvement from ₹16 crores in Q4 FY26.

As of June 30, 2026, total debt was INR 196 crores, with cash and investments of INR 171 crores, resulting in a net debt position of INR 24 crores.

Net debt to equity ratio stands at 0.03, a comfortable position.

Capital for Q1 FY27 was rupees 16 crores. Asset turns remained strong at 9.9 times. Return on capital employed improved to 23.4% from approximately from 10% approximately two years ago. A consistent and meaningful improvement.

With improved business visibility, we have revised our FY27 revenue growth guidance upwards to 26 to 30% from the earlier guidance of 24 to 27%.

To summarize, Q1 reflects continued progress across our key operating and financial metrics, demonstrating the strength of our execution.

As we move forward, our focus remains on delivering sustainable profitable growth, improving operational efficiency, and strengthening long-term customer relationships.

With that, I request the moderator to open the floor for questions. Thank you.

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 one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, please wait for a moment while the question queue assembles.

The first question.

Question comes from the line of Santosh Seshadri from Avendus Park. Please go ahead.

Yeah, hi, good uh good evening, sir. Uh congratulations uh for great set of numbers. Uh uh my uh first question is on uh long-term uh steady state gross margin. Uh uh you know, we have we have been historically talking about uh 33 to 35 percentage kind of margins. And uh just as we think about uh some of these uh new you know, newer businesses like uh semiconductor equipment and uh and the power modules and coverage uh that we are working on. Uh so as it scales up,

Uh, how should we think about, uh, you know, structural impact of these businesses on margin profile? Uh, do you think of these businesses like inherently, uh, are on the margin curve and, uh, any scope for margin improvement? Uh, so that's my first question. I have a follow up.

Okay. Thank you, thank you Santosh. that's an interesting question. So if you look at in the last five years or so, we've always maintained this range. Sometimes we are a little bit higher and sometimes a little bit lower, but this is a comfortable range. Saying this certain set of our industries and products have much higher margins and certain industries have lower margins. So what you're seeing is a blended range. So as you see

the higher margin business kick in, you will see some difference, but as of now, you know, just rate us at 33 to 35 with a few quarters being up or down.

Got it. So there is scope for improvement in the long run, but as of now we are maintaining at 33 to 35%. So is that the takeaway?

That's a that's a respiration as you very well know it, yeah.

Okay

Got it. And and uh my second question is on the cost structure uh below the gross margin line items. So here we have been talking about uh roughly uh 50-50 uh split between uh fixed and variable cost. Uh so uh my question here is uh given the strong revenue growth and uh the kind of ongoing investments that we have in the manufacturing footprint uh uh that you mentioned in the opening remarks. Uh so what's the issue you think some of these uh

These fixed costs become semi-variable in nature and what would be the implication on operating leverage over the medium term for FY27 and FY28?

Hi Santosh Suresh here.

You've always been told that between 45 and 50% of the expenses below the gross margin are semi-fixed or fixed in nature. And some of the expenses, most of the expenses are semi-fixed in nature.

Hi there.

What we believe is with scale and revenue, with growth in revenue, we believe the operating leverage will continue to play out. If you look at our India manufacturing business, it has delivered an EBITDA of 16.7%. And it is it is a continuing

delivery in terms of profitability over the last few quarters. So we expect the operating leverage to play out. We do not give any particular guidance per se for EBITDA margins.

But otherwise, I would add to what KB said, that we have consistently maintained our gross margin percentage in the range of 33 to 35. We believe we can continue to do that.

thank you. and just one last question. some of your peers have recently spoken about you know, opportunities in the data center space and you know, ramping up business starting from FY27. Could you share your perspective on this particular opportunity? Are you currently in talks with any of the potential customers and also do you see you know, and and also where do you see your

Self positioning within this value chain, will it be more mostly into servers or rack systems or power management? Any thoughts on that?

So, as you know Santosh that, you know, the one piece is the world is going through a super cycle in power where the HVDC systems and all that. See we are playing with some of the leaders and we started production with a couple of them. So that's going to be a part of that, but saying that with we're also working with multiple customers who supplied power off-grid power into the data centers, okay? And that

That is bound to grow, and also now into the future you will see us work more towards the rack and the cooling systems, okay, which we have not won the business yet, but we are still working towards that.

and of course the you know all this growth comes with the semiconductor industry. Okay equipment industry. We are well positioned for that in the near future. So so we are not going to make server boards as of now. Okay not saying that we won't do that in the future. But anything around it which is probably the fastest growing element we are we intending play and we are playing in some of those areas. Did I answer your question Santosh?

Absolutely. Thank you very much, sir, and all the very best.

Thank you. Thank you, Santosh.

Thank you. The next question comes from the line of Siddharth Bera from Nomura. Please go ahead.

yeah, hi sir. thanks for the opportunity and congrats on a great set of numbers. Sir, first question is on the two segments AGDC and semi SPE. where are we in terms of the other win cycle? When should we expect that to come through for us this year? And second is on the clean energy side, we did have seen a very strong

growth in this quarter on a wire by basis. So is there any new customer addition or it is more from higher share of business from the existing customer if you can throw someone like this?

Yeah, on the on the first piece, we've I mean the full revenue is not started, but revenue has started for both the sectors, okay? For HUDC as well as semicon equipment, revenue has started, but the it will gradually grow. It is not, you know, switch on and off. And because we have multiple systems, multiple products. So it it's started, okay? It started this quarter and we'll see the ramp.

in the following quarters. On your second part of your question, clean energy has been, you know, fluctuating for us over the years. And this has been a great quarter for that. And we will continue to see the growth, but certain quarters you may see clean energy up, that's why we are diversified. Certain quarters you may see the mobility up. Certain quarters industrial, industry has always been up. Okay, so it's it's not that it's it could be since everything

Everything is growing and certain curtains and certain production happen at various time frames. Um, so you will continuously see growth in all sectors. What we are happy is that every sector is growing. Except communication we had a dip.

What you then, would you be able to share the US laws for this quarter? Have you already turned around or here where are we in terms of the plans?

So in terms of US manufacturing, we have reported a PAT losses of approximately ₹4 crores in Q1 FY27.

Market has largely narrowed down. 2 years ago, it was approximately around 14 crores. 1 year ago, it was around 9 crores losses, and now it has narrowed down to 4 crores losses at that level.

Got it. Thanks a lot sir, I'll come back in a minute.

Thank you Sudha

Thank you. The next question comes from the line of Shramit Sinha from Macquarie. Please go ahead.

Yes, thank you very much and congratulations on another incredible quarter. I guess a couple of questions here. So, can we I was really happy to see about how you spoke about bolstering your operations and leadership. Because usually, you know, when smaller companies grow at this pace, we do a great job with execution, but at some point, you know, things start to fall by the wayside. So, if you can just talk a little more, provide a little more color to the topic, I would be very happy.

care about what you're doing with sort of leadership positions you're hiring for. I think that will be really helpful. Secondly,

you you know, historically most of your products have been PCBA and box build. Do you think you have an opportunity to go into new product categories or you'd rather just service with these products because you know, demand obviously is there and you're executing on on the pipeline. Or maybe you'll tell me that you know, coverage and aerospace and all I have different new products. So I'd like to know more about the skews that you have. And third question is

So generally, um, your business, the second half of your, uh, you know, of the year, your business does better than the first half. So with 50% growth in Q1, uh, how should we think about the second half? I know the guidance implies it's kind of 25% growth, uh, in the next three quarters, but if you can provide some clarity more around the second half versus first half, uh, dynamic. Thank you.

Hi Samit, nice to talk to you again. So I'll if I missed out any any part of your questions just, you know, just remind me once. The first part was leadership. See, as we grow each of our divisions and capabilities and verticals, we need leadership. These are growing from, you know, 20 to 100 million dollars, however you want to look at it. So we have taken a

a dedicated or a very focused approach to get leadership I believe the first level of leadership is there already with our CEO, CFO, CSO and we adding you know probably five or six new

candidates at the VP level to either lead a BU or lead a capability, okay? And that work is already started. So, so we're trying to plan for the next three years of growth at least, who are the right leaders. The same thing we did three years back when we started with the C levels to get the company going the right direction. And so we are, you know, looking for the right candidates. We maybe we're not going to

to rush to it because that candidate is very important to us. Okay. Yeah, so you want to add something?

Yeah, Sriram. Yeah, thanks, KB. Savit, so a couple three pieces of fundamental building blocks, right, of growth. One is people. Second, I think what KB touched upon processes internally. And third are is automation, right? So the focus is to build capability in all three areas and that's work that's underway. I think KB's given you the highlights on the leadership. I just want to touch make sure that, you know, it's across all three areas.

S Sriram

And and the second question if you could remind me, Sumit.

Yeah, it was more around the product. So, you know, historically you've done PCBA, box based.

Box page.

Okay, got it, got it. So, um, uh, so we are vertically integrated. So that's why you see our box build move from, you know, what 43% to 59% in a, you know, year or two. So we are building a lot more metal, we are building a lot more cables, we are building a lot more plastics, we are building a lot more magnetics to get into the, uh, uh, into our own final product and that's why you see our box build ratio going up. Saying that, you know, there's one or two areas, uh, actually,

Actually one which we may announce, you know, I don't want to reset that. We will enter into one area which is well within our capability and that I think in the next two quarters we'll make that announcement. So there's one area we'll add because we see a lot of opportunity in that and it'll add to our box full capabilities.

So that.

Just to add to that, we are getting into newer newer industrial verticals as well as newer geographies like Europe, Southeast Asia. So in terms of getting increasing our target market, the work is already underway and we will start seeing the results of that in the coming quarters.

And last question about guidance.

So you know we are conservative. The the problem we have to be honest is you know when we get these into these large programs, for example, it may cut in in February of next year. Okay. This or it could you know customer may delay to April. So we're trying to be conservative. So if it comes it cuts it in February, everything is well and good. Okay, if it cuts it in April, it's the next year thing. But look at us from a three year lens, right? Like we said you know, our business is not quarter to quarter because

the customers look at us over a multi-year period and are we a good partner over the next 10 years, right? So, but just we're trying to kind of get that all together and try to give you a feel of the what our what we can be. But in a three year period as we have done in the last time we said we'll double with instead of three years within two years. But aspiration is always to do faster. So you need to look at us from that rather than, you know, what's going to happen next quarter or the following year.

Four.

Got it. Thank you very much. All the best.

You're welcome Swami, Thank you.

Thank you.

The next question comes from the line of Balasubramanian from Arihant Capital. Please go ahead.

Good evening sir, thank you so much for the opportunities. follow follow up on the previous participant on the guidance side. Sir, we are doing 50 to 60 crore annual CAPEX with 10 10x of asset and it's a right way to understand every year 500 to 600 crore additional revenue. I think if you're adding that it will comes nearly 3100 to 3400 crore top range range 5 by 29. And secondly, this sunrise sectors like clean energy and aerospace and

designs and these also same kind of 10x asset and

Hi Suresh here Bala. So firstly on the CAPEX side, last year we did a CAPEX of 56 crores and Q1 it is 16 crores. But like what KB highlighted in his opening remarks, we are looking at expanding our manufacturing footprint in Chennai. So whenever that happens, we will do it in a modular fashion and that will involve incurring additional CAPEX to an extent there. Having said that, we are we are

focused on capital efficiency. If you look at our ROCE is a couple of years back, approximately two to two and a half years back, it was around 10%. Today it is 23.4%. Our goal is to improve that even further. But every asset, new asset, new plant, it comes into picture, it will take its own time frame for it to reach its optimum capacity in terms of utilization. So it will gradually get to that, but our focus is to improve our ROCE.

And I'll add to this, as we go into this bigger box build solutions, space is a premium. So we are building up, you know, land and buildings before we actually put machines so that, you know, we are comfortable with that and then we'll add the machines when, when required.

Oh, Mr. Subramaniam answered, Mr. Subramaniam.

Okay.

yes sir and the qualitative perspectives is been answered. And sir my second question I think we have in Q1 nearly 50% top line growth order book also increased nearly 23%. but if you look at our working capital it is it's came down to 142 to 117. See generally with growing order book and revenue it leads to working capital strain for example building inventory for new programs. So I just

We are trying to understand how we managed to improve the working capital base and how do you look at incoming years.

Thank you for that, Ambala. So that was a consistent and continuous effort over the last 2-3 years.

On each bucket, inventory, receivables, and payables. Inventory days, it actually improved to 94 days from 104 days. Same is the case with receivable and payable.

But like again what we said in the opening remarks and in the previous quarters, we are also having some new programs going parallelly. So for new programs, we may have higher networking capital.

At the start, and you will find our efficiency over a period of time. For existing businesses, you would have already found our efficiency in networking capital. But overall, what was our guided range in the previous quarters were around 120 to 130 days. So we are well within that range.

Okay sir. So my last questions, I think US lost it's around 4 crore in this quarter. Last year it was 9 crore. So I'm trying to understand what is the minimum revenue run rate required to achieve a break even, whether we can expect by Q3 or Q4.

If you've not given any particular quantum at which we will reach the break even, but what we have highlighted in the earlier calls also is by the end of this week earlier, we would like to see a steady state EBITDA break even and then following that a FAT break even. But what I would like to highlight here Bala is the important way to look at our US businesses, US manufacturing operations is that is that is our that is our plans to reel in the customers, make the customers comfortable and then as it ramps up, transition.

to India manufacturing. So it is our reach here from that perspective.

Hope they answered the question well.

Okay Sir, Thank you.

Thank you.

Thank you. The next question comes from the line of Praveen Sahai from PL Capital. Please go ahead.

Yeah, hi, thank you for the opportunity. My first question is related to the box built. As from the last four quarters, we are continuously seeing the increase in the contribution from the box built and also you had highlighted the way forward also, we will see this trend to continue. How you are seeing the gross margin profile with these box built contribution to increase the way forward?

Yeah, see we are always, you know, our business model is, you know, to get to the box fill, right? We may start with the PCB, we may start with the metal, we may start with the cable. But our goal two to three years from where we start with the customer is to do the whole box. If he doesn't give give it to us in the beginning. Of course, the gross margins are better in box fill. Okay, and some of these, you know, it takes time for the gross margins to improve. It's over a period of time.

and it's not as soon as you start. When the program starts, the gross margin may be a little lower, okay, but over a period of time, it it does increase as we processes and our quantum wise help. The other piece is, you know, with the status, we're still maintaining the gross margins, okay. It it does have an effect. Though not a big effect, it does has an effect. So in spite of that, we have maintained the gross margins.

So, so if you'll maintain this, you know, the contribution of 60%, we may see the improvement in the gross margin. Is it fair understanding?

the the way to understand it is if you ask do we do we anticipate our box will percentage to go up the answer is yes because that is one of our strength points building complex boxes.

But on one side you will have new programs which will start maybe at a lower percentage and other side you will have existing business which may be at a higher percentage. What you see as a 33 to 35% is a blended mix of both of that. So I think it is best to assume and estimate a gross percentage of 33 to 35% to continue.

Right. Next question is related to the order book. Out of your 2200 odd crore, can you give some indication that's how has been mixed up segments?

It's broadly based on the segments and the growth or the the percentages we have kind of declared. It's across across verticals. Some certain quarters, some may be higher than the others and we always aspire to be around 25%. But the industrial right now is around 30, 30, 32%. Our total order book if you look at it, you know, we only look at the three or four.

And we have orders from 3 to 15 years. We don't count that. That itself is ₹3465 crores. And in the short term, which is the order book for the next 12 months or so, it's ₹2208 crores. So we're very comfortable on what we need to do in the near term. And we have long-term contracts which we don't count in this.

Right. Uh, lastly one clarification. Uh, so, uh, in the international business, which now, uh, the US is 60% of your business, is that the majority is, uh, from the clean and the mobility businesses?

no, it's a cross. it's in see a lot of the clean is done in the US, but the rest of it is done in India. A lot of it is industrial. we don't have rail in the US. Aero industrial communications as well as clean you know, a big chunk is there because of the subsidies in the US. But again, the sub subparts of these US build is done in India. Okay.

So it's a mix.

I mean even in US we have a well balanced and diversified growth across verticals.

Okay, okay, got it. Thank you, sir. All the best.

Thank you.

Thank you for listening.

Thank you. The next question comes from the line of Vipra Srivastava from Philip Capital. Please go ahead.

Hi sir, good evening. It's just two quick questions. Firstly on the order book side. So for the last three quarters your order book has been hovering around 2000 crores. This quarter also it's around 2200. So I mean in that sense, given that your revenue growth is exceeding order book growth, any reasons for that? Why is this order book growth slow and or or am I missing something? So yeah.

No, so if you look at it, right? It's always consistent and it's growing, but it's year to year it's grown 23.4%. Okay. The so we are very well covered for the next 12 months to 36 months, okay? In the sense of what we want to achieve, if you look at it, you know, we are saying we're going to do 3200 crores in three years. More or less that order book is covered, right? If you look at it from if you look at it with 2208 crores in 12 months.

and 1,256 crores in 12 months to 36 14 months to 36 months. And again, we have five year contracts, we have 10 year contracts. It's easy to add them, but it's not the right message to give that, you know, these orders are there for years, right? So, so we like to keep it in this range, which is 14 months to 36 months so that, you know, you get a realistic perspective rather than

Uh, a high perspective of, you know, I got orders worth so much because some of these if you multiply this into 10 years what you do in one year, it's, uh, it's, uh, it's a huge number. We don't want to put that out.

And another important perspective to have on this is some of the new programs may be on pilot stage and so whenever they move from pilot stage to ramp up production, the larger sum of orders will come and fall there. But for us the benefit and advantage what we see in our business is

The annuity fail of orders what we receive, the long-term nature of the life cycle of the products as well as the customer relationship with us. Hope that answers the question, my friend.

sure sir. So just just a quick follow up on this. So given that you're again please correct me if I'm wrong. Given that your current order book is around 2200 crores and your average execution period is 14 months. So so that that is very close to what the guidance you have given. So is this understanding correct?

See, some

We already finished one quarter, right? So you need to.

Yeah. The the way to look at it is our order book is executable over an average period of 14 months. So for some customers it may be 3 months, some customers it may be 6 months, some customers it may be 10 months. So it's not a straightforward straight line number over there, but yeah, you can have the fair assumption over there.

Dare

Yeah, last question from I on the clean energy side. So obviously that has seen a very rapid growth in quarter one. So you've been going forward for FY 27 and 28. Obviously, since the IRA incentives for solar projects in US ends on December 31, 27. So, I mean, you expect such growth to continue for next couple of years or you plan to offset that by onboarding new client.

new projects. Any thoughts on that?

So, Sriram here, just a quick point here, the you know, the subsidies and the support continues until 2032 because this is you know, storage solution. So these have a longer you know, sort of subsidy support in the US at this point. Suraj, .

So, you probably like we have discussed in the last four or five quarters, we are not in the solar panel business, we are in the energy storage solutions business, that is number one. And number two, if you look at the growth across verticals, industrials has grown by 52%. Aero has grown by 47%, rail has grown by 37%.

medical has gone by 15%. So the growth is across verticals. It's just that in some quarters one vertical may have a lumping growth and it goes on like that. But for us the comfort what where from where we derive is

The long-term annuities trail of business. So that's where it's a kind of business what we are targeting.

Uh sure sir, just a quick follow up on what Sriram sir said. Sir, you rightly mentioned that battery energy storage incentives is till 2032, but as far as I know, again, please correct me if I'm wrong, majority of battery installations in US happens along with solar. It's not in isolation. That's what the data says. So even if the incentives continue till 2032, if a panel is not being installed, what are your comments on the future of the battery energy storage industry?

Uh, we're happy to answer this offline, yeah. There's a, there's a method to this situation. Uh, we're happy to take this offline and, um, answer you. It's quite comfortable for us.

Hello guys.

For us, over the last 2 years, even this vertical has grown along with all the other verticals.

Yes.

Sure sir, thank you, no worries, thank you.

Thank you

Thank you.

The next question comes from the line of Bhavik Mehta from JP Morgan. Please go ahead.

Hi, thank you. Just one question again, going back to the guidance. Obviously, after a very strong one Q, one would have assumed that the guidance would have been upgraded to at least more than 30%. But given the range is more 26 to 30% right now, let's try to understand what are the various scenarios you are baking into the guide. Is this new guide like the worst possible outcome you even if everything goes wrong, you could still deliver on this guidance and this is like the worst case to assume and there could be some upside to it if if you are the project what you

comes to.

So this is Kunamit. The way we look at this, you know, I know everybody loves quarter to quarter, but as a business, when we plan, we plan on a three year horizon. And that's what we try to deliver, okay? Some quarters may be used, some quarters will be lower. But saying that we are conservative, to answer your question, we are conservative. We don't want because some of the reasons are when these new projects will kick in into volume, right? Like I can

Explained before, it could be, you know, in February of this year, or it could be in April of next year. It's 2 months, it doesn't matter to the customer, but it does matter to us. So we do have some conservatism in this, and that's what we're comfortable with, to be honest, rather than go out with flying numbers and chase batting.

And we have demonstrated that in the last seven, eight quarters.

To add to that, Bhavik Suresh here, to add to that, the kind of new programs what we have gotten, whether it is semiconductor equipment or in the industrial sector or in the power vertical or in terms of new geography getting into Southeast Asia or into Europe.

That is an exciting case for us because it may not be fully reflected in the P&L today, but it is there either as a pipeline or a proto or waiting to be into a waiting to get into a commercial ramp up perspective.

So Babik, just to kind of echo on what Suresh said, I think we have never been this excited on the possibilities. It might not show in the PNR. Okay? The type of products which are coming in and the type of geographies which are coming in. At least, you know, in 25 years of doing this, I have not seen that. Okay, so we are very on a long term, we are very, very midterm and long term, we are very, very positive.

Okay, got it. That's helpful. Thank you.

Thank you boss

Thank you Bobby

Thank you. The next question comes from the line of Archit Shah from 361 Capital. Please go ahead.

thank you for the opportunity and sir congratulations for the good set of results. Sir just one question that the growth that we are seeing the 40% growth and the guidance that we are giving. So is this fundamental question that is there any split or is that is that a you know there are pricing growth because of the components price that has gone you know has increased so much and like tomorrow if if they correct or let's say if they remain stable will our growth remain the same will we

still be able to beat the guidance that we are doing right now.

Hi Suresh um our last eight quarters average revenue growth is 46% and uh over the quarters across verticals across geography this growth has been reached and even now if you look at this quarter it is well diversified in both the US markets as well as export market as well as India market. So if you if your question is if there is there any one off growth in this the answer is no the answer has been the same over the last past quarters also.

Just to get that, just to, we don't have exposure to memory as much. Okay, very limited because we are not in the consumer space or we are not in the server space.

Okay, so, like if let's say if other components like if you have copper and PVC and everything. So if tomorrow if those prices continue to rise or increase, will it show higher growth in the numbers and versus if they stay stable or maybe decline a bit is like just that I wanted to understand.

Yeah, actually Sriram here. So, you know, all of these components you talk about form a part of the, you know, biller material, right? So, you'll have metals, you'll have cables, you'll have PTB, you'll have a lot of other things. So, on the whole, you know, we don't believe this is driving the increase in prices, right? Ultimately, as Suresh said, right, this is broad-based growth. It's been driving for the last eight quarters, you know, and you know, the margins are holding big.

33 and 35%. So this is sort of inherent business growth that you're seeing.

Yeah, okay, that's what I was looking for. Thank you so much, sir. Thank you very much.

Thank you Arjun. Thank you Arjun.

Thank you. We have the next question from the line of Sanesha from Dam Capital Account.

Please go ahead.

I said I will be there.

Hello Mr. Sanay, can you hear me?

Shall we go to the next question?

Done, okay, so we'll move to the next question.

The next question comes from the line of Siddharth S from Napa. Please go ahead.

you know, focused there or what's your stance on it?

Thank you Siddharth for that question. we have nothing against the defense business, but it's it's a very lumpy business. It's it's all a feast of famine, right way I should say. saying that we do defense, we do defense in India as well as in the US, okay? And it's one of the verticals we are looking at to focus. We have done the first set of hiring for looking at defense as a segment three years from now, okay? Because that is the time frame we

need to spend to get the larger chunks in, okay? So again, whether the whole world is, you know, out of ammunition, right? So the difference will grow and I'm pretty sure we'll be a part of it and we've taken the first steps to look at it as a vertical, not saying that we have created the vertical, starting to look at it, how do I expand to get into this space, yeah?

In a meaningful way, we are still doing quite a bit of it, but not in large numbers.

Understood, understood. Thanks for the clarity and wish you all the best.

Thank you, Suja.

Thank you sir

Thank you. The next question comes from the line of Tanesha from Dam Capital Advisors. Please go ahead.

Yes, Tanaji Wah.

You don't want to put anything else.

So as we grow, as our top lines grow and over the next few years, we our goal is to keep it US manufacturing around 20%, okay? So I'm not saying the more the best growth for us is made in India for export and made in India for India, okay? So but to get these margins in made in India, I need the US manufacturing. So in the in the short term, so we want to cap it at 20, you'll have a few quarters which goes up and down.

most of the significant growth what we anticipate over the next two three years is going to be made in India. Okay. saying that we are also opening up two geographies, right? Which which we are very excited about. Okay. which is Europe which was a very small percentage of exports. The next two years we see that hopefully growing in a very very meaningful way. And Southeast Asia. I mean that is the foray which which I

I believe will take us to the next level. So you're basically competing with the best in the world with the best products you can make made in India. And this comes with relatively very decent margins. We're not doing commodity type stuff. We are doing complex systems. So saying that, you know, US will always be there. And again, it is a treadmill, you know, I feel bad for the US guys because every time there's a good number coming there is always more profitable to move to India.

So as a group, we tend to do that. So you see certain spikes and that has helped us through the tariff situation if you look at it, right? It has given a lot of solace to our customers that we are in the US. And if they want to launch there, they're more than welcome to launch there, the higher cost.

Is this answer your question, sir?

Hey there, I'm here. See, you know, they you have instances and different commodities that go up and down. Uh, we are generally okay. Uh, you know, last quarter and this quarter, we've tried to stay a little ahead of the curve, um, in terms of securing some of the supplies of the commodities that you mentioned. So, uh, for the time being, uh, you know, with the environment the way it is, we think we're okay. But obviously, we, uh, you know, stay on high alert, um, and, uh, you know,

We'll move quickly where we have to if we need to.

Thank you Tanay.

Thank you.

The next question comes from the line of Mayank Pande from MK Global. Please go ahead.

Hi sir, congratulations on a good set of numbers and thank you for taking my question. I have two questions. Question number one is your asset turns 9.9X. Now with our ODM revenues going up to 60% of our total revenues, I would have expected that this would probably be a driver to move up the asset turns. So just want to get a theoretical understanding as to what would you know, cause us to breach this level or put another way what could be the maximum level that we can see on asset turns.

asset turns with the current asset base and the current sort of growth that we are having. That's question number one. And the second question is on the ODM mix itself. If you could just walk us through the segments that we have in the ODM mix and each of those segments if that's possible or if you know what is the main driver which segments are the main drivers for the ODM to grow further from these current levels. Those are my two questions.

Now,

Okay, great. Uh, thank you, Maya. Um, first and foremost, we don't do ODM.

Okay, we do box build, which is custom design by a customer. Even if we do the design for them, the IP is owned by the customer. So we do build to print, and that is the reason why most of these complex systems are coming to us. So we don't want to have a situation where we can do our own products, okay? So end of the day, even though we do design, it is done for the customer. So the ODM piece is not there. What you're referring to is our own product.

a boxable solution, which is where we do the whole product for the sector.

Hello

Okay.

So, um

So we have always strived with our vertical integration to get this number as high as possible and we've been successful so far and we continue to strive and I think that portion of our business will grow. Because we may start with one commodity and then we try to two to three years get the whole box filled as PCB, cable, plastic all in a box, yeah. So that's always been our aspiration as well as our our goal.

Did I miss anything?

Uh, so just want to understand it from a different lens, is it like, uh, can this go up to let's say 10x, 12x, 15x? How should I or like what would be the incremental capex required in that sense further?

Right.

Keep expecting.

in that sense.

you know, we are, you know, probably even if you look at a global market, probably the best in asset terms, you know, what we always commit to is eight to 10 times. Sometimes it goes up and down when you do an investment in a building or so. That eight to 10 times is what we should look at and we we want to stay in that range because we have to make investments also, right? So that's our goal. I think you should look at us eight to 10 times.

And we are looking to improve our ROCEs even from here. So to answer that.

Yeah, yeah, yeah, of course. And if you could, uh, sorry, I misspoke earlier on the ODM versus box bills, my bad. Uh, but I think, yeah, if you could just, uh, if you could just help me understand which of our segments have the highest, let's say, percentage of box bills or, uh, how should we look at it from a segment to segment perspective?

Hello

But I think

I think most of the segments except for aero, we can't build a plane, but we build boxes here.

It's spread across various verticals.

All vertical.

It is not focused on just one industry vertical.

For example, railways, you do the, you know, the interlocking systems, breaking systems, the complete box. in the clean energy, we make different type of inverters, battery storage, it's all complete boxes. Only in the aero piece where we do sub assemblies, yeah.

Got it, got it. And sir, just one last question. The ISM 2.0 scheme came out and I know you must have been getting a lot of questions on that, but any any any chance you see that we could be one of the beneficiaries from it given that we will because it specifically calls out equipment suppliers and we might be part of that value chain now with your in in that space. Any any possible benefits you see to have learned from that scheme?

We believe so, but we are yet to look at the final details of that ISM 2.0. but definitely semiconductor manufacturing equipment is one of the key verticals for for us over the coming years. And when the final details come and then we will have more details to share with everyone.

So in short, yes, we are looking at it.

Right. And would you, would you be open to like incremental CAPEX for that, uh, as a separate, uh, carved out sort of structure, or not carved out structure, but let's say just separate CAPEX to that effect, or would you want to continue with the current business model?

You know, opening remarks were highlighted about acquiring a large piece of land in Chennai for our future growth, for the next phase of growth, whether it is with respect to semiconductor manufacturing equipment or advanced electronics.

So both of it. So yes, the answer is yes.

Okay, thank you. Thank you so much.

Thank you very much.

Thank you, Ma'am.

Thank you very much.

Thank you.

Thank you. Ladies and gentlemen, in the interest of time, that was our last question, and I would now like to hand the conference over to the management for the closing comments. Thank you and over to you.

With a healthy order book, expanding customer engagement, and a flexible global manufacturing model, we remain focused on delivering profitable growth. We thank our investors for the continued support and look forward to updating you in the coming quarters. Thank you, thank you very much.

Thank you.

Thank you. On behalf of Dam Capital Advisors, that concludes this conference. Thank you for joining us and you may now disconnect your lines.