Virtuoso Optoel.

Virtuoso Optoelectronics Limited reported strong year-on-year sales growth of 32.5% for FY25, closing the fiscal year with a revenue of ₹702 crores. Over the last five years, the company has achieved a revenue CAGR of 43%, with EBITDA growing at 37% CAGR and PBT at 58% CAGR. While PAT growth appeared lower, this was primarily due to a significant deferred tax provision in FY25, resulting in a high tax percentage of 78%. Management expects the tax rate to normalize to 30-32% in FY26.

The company is actively diversifying its product portfolio. Commercial production of freezers commenced in Q4 FY25, with a revenue target of ₹100-150 crores for FY26, contributing 10-15% to overall revenue. Virtuoso has also entered the compressor business, with commercial production anticipated in Q3 FY26, following machinery installation and customer sampling. The Chennai plant for EPS manufacturing under Virtuoso Polymers is operational, and a new unit for refrigerator components in Sanand is planned to be operational by Q3 FY26. Additionally, plans are in place to start semi-automatic washing machine production by end of Q3 or early Q4 FY26.

To support growth, Virtuoso is significantly expanding its AC capacity. ODU capacity is increasing from 800,000 to 1 million units, and IDU capacity from 400,000 to 1 million units, aiming for a total set capacity of 1 million by August or September 2025. This expansion is expected to be fully live by Q3 FY26. Freezer capacity, currently at 150,000 units, is targeted to reach 60-70% utilization by the end of FY26, after which further CapEx for expansion will be initiated. EMS and lighting capacity will also see marginal increases, with significant growth planned for next year to cater to internal PCB/controller board requirements and external customers.

The company has outlined a CapEx plan of approximately ₹250 crores for FY26-FY27. This includes ₹50 crores for the new compressor business, ₹50-60 crores already invested in the freezer business, ₹50 crores for AC capacity addition and backward integration, ₹20 crores for the component business, and ₹15 crores for the washing machine segment, with the remaining ₹15 crores allocated to general backward integration. Management noted that ₹150 crores has already been invested, with another ₹100 crores planned for this year.

For FY26, Virtuoso expects EBITDA margins to be in the range of 8.5-9%, with a projection of exceeding 9% in FY27 due to an improved product mix. The PAT margin for FY26 is guided at 2.5-3%. The company anticipates accruing ₹15-20 crores in PLI benefits for FY26, an increase from ₹6 crores in the previous year. These PLI benefits are factored into pricing and act as a buffer against potential margin shrinkages. The cost of debt, primarily due to invoice discounting, is currently around 8.75-9%.

Virtuoso has partnered with Jiaxipera and Huayi, two Chinese companies, as exclusive manufacturing partners for refrigeration compressors in India. Huayi is a global leader in refrigeration compressors. The company aims to revive the market for these compressors, which previously saw 4-4.5 million units imported before BIS certification expiry. The strategy involves localizing production and focusing on building strong customer relationships. Management indicated that the cost differential between importing and local manufacturing is estimated to be 3-5%.

The company provided a positive update on its share listing process on BSE, stating that they are receiving positive feedback and expect the process to be completed by next week. This follows previous delays due to internal approvals at BSE. The paid-up share capital after conversion of warrants is expected to be around ₹29.5-29.6 crores. The reduction in promoter holding is attributed to the conversion of warrants into shares, increasing the total number of shares, rather than any share sales by promoters.