Ajax Engineering Limited — Q1 FY26 earnings call

Call held 4 Aug 2025

Management summary

Ajax Engineering reported a flat revenue of ₹467 crores in Q1 FY26, impacted by a slowdown in infrastructure projects and the transition to new CEV-5 emission norms. Profitability metrics saw compression, with gross margin at 25.8% and EBITDA at ₹61 crores, primarily due to higher CEV-5 production costs and product mix changes. Despite these challenges, the company successfully transitioned to CEV-5, with these machines comprising 90% of SLCM sales, and maintained a strong cash position, while focusing on strategic growth initiatives and market share recovery.

Highlights

  • FY25 revenue growth of 19% driven by volumes.

  • Successful launch of new CEV-5 emission-compliant machines in Q4 FY25, with CEV-5 contributing roughly ₹300+ crores (90%) of SLCM revenue in Q1 FY26.

  • Non-SLCM volumes grew 25% YoY in Q1 FY26, driven by batching plants and associated transit mixers.

  • Spares & Service business grew 8% YoY to ₹37 crores in Q1 FY26.

  • Company remains debt-free and maintains a robust cash position, with an investment portfolio of ₹650 crores and ₹30 crores in sweep-in accounts as of June.

Concerns

  • Q1 FY26 revenue from operations was flat at ₹467 crores compared to ₹469 crores in Q1 FY25.

  • Gross margin compressed to 25.8% in Q1 FY26 from 30.3% in Q1 FY25, primarily due to increased CEV-5 production costs and product mix shift (absence of high-ticket pavers).

  • EBITDA declined 23% to ₹61 crores in Q1 FY26 from ₹80 crores in Q1 FY25, with EBITDA margin at 13.2% compared to 17.1% in Q1 FY25.

  • PAT declined to ₹53 crores in Q1 FY26 from ₹67 crores in Q1 FY25.

  • Slowdown in infrastructure projects, with PMGSY road construction reduced by 37% and highway construction by 9% from FY24 to FY25, impacting industry demand.

Key financials

  1. Revenue from Operations ₹467 Cr -0.43%YoY
  2. Gross Margin 25.8%
  3. EBITDA ₹61 Cr -23.8%YoY
  4. EBITDA Margin 13.2%
  5. PAT ₹53 Cr -20.9%YoY

What they filed

Q1 FY27: revenue up 1.7%, net profit up 5.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue301 548 756 467 445 +48%434 −21%758 +0%475 +2%
EBITDA39 88 111 61 45 +15%44 −50%115 +4%59 −3%
Net profit34 68 91 53 39 +15%38 −44%95 +4%56 +6%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenueYoY Growth
SLCM₹385 Cr-0.26%
Non-SLCM——
Spares & Service₹37 Cr8%

Order book

low confidence
Management discussed sales and volumes of machines, but did not provide specific order book or order inflow figures in the traditional capital goods sense.

Source: Inferred

Capital allocation

high confidence
  • Debt Gross ₹0 Cr · Net ₹0 Cr
    On the balance sheet front, we continue to remain debt free and have a very strong cash position.
  • Liquidity Cash ₹30 Cr Investment portfolio of ₹650 crores also held.
    Cash balance as of June, I mean, the investment portfolio was about Rs. 650 crores, and we had about Rs. 30 crores, which was in sweep-in accounts.

Guidance & targets

Volume

  • Volume Growth Volume · FY26 · Medium confidence early double-digits
    I think we do not typically give a forward-looking, sacrosanct statement. But Pritesh, just to call it out that we do not anticipate the volume growth to be 18% this year, we expect it to be more, let's say, in the early double-digits.

    — Tuhin Basu

Operational

  • New facility commissioning Operational · H2 FY26 · High confidence commission in the second half of FY '26
    We also have our new facility coming up in Adinarayanahosahalli... This, we expect to commission in the second half of FY '26.

    — Shubhabrata Saha

Market Share

  • SLCM Market Share Market Share · deeper into the year · Medium confidence revert to the erstwhile range
    We expect our overall market share in SLCMs to revert to the erstwhile range as we go deeper into the year.

    — Shubhabrata Saha

Profitability

  • EBITDA Margin Profitability · as volume progresses · Medium confidence closer to 15%
    Yes, to that extent, you can say that, the EBITDA will start getting closer to 15%. That's correct.

    — Tuhin Basu

Pricing

  • CEV-5 Pricing Adjustment Pricing · towards end of Q2 · Medium confidence nudging the pricing up
    We anticipate that we will be able to start nudging the pricing up towards end of Q2.

    — Tuhin Basu

What to watch in Q2 FY26

CEV-5 Pricing Strategy Implementation

End of Q2 FY26
Current Pricing not fully adjusted to cover CEV-5 cost increases.
Target Nudging prices up.

Why it matters

Successful implementation of price increases is crucial for margin recovery and overall profitability, which was impacted in Q1.

We anticipate that we will be able to start nudging the pricing up towards end of Q2.

Risks & concerns

  • Slowdown in infrastructure project execution

    medium

    PMGSY road construction reduced by 37% and highway construction by 9% from FY24 to FY25, impacting industry demand.

    Management acknowledged

  • Unseasonal rainfall and cash flow delays for customers

    medium

    Unseasonal rainfall in May and cash flow delays experienced by customers negatively impacted industry demand in Q1 FY26.

    Management acknowledged

  • Inability to fully pass on CEV-5 cost increases

    medium

    Transition to CEV-5 standards led to increased material costs, impacting gross margins, and pricing adjustments have not fully occurred yet.

    Management acknowledged

  • Competitive pressure on pricing and market share

    medium

    Q1 FY26 saw 'unsustainable business practices' in the industry, and competition behavior will influence future pricing strategy.

    Management acknowledged

  • Sector cyclicality and seasonality

    low

    Business is skewed towards the second half of the fiscal (65% revenue), and quarterly EBITDA margins are not comparable due to inherent seasonality.

    Management acknowledged

Q&A highlights

6 direct
Non-SLCM volume growth drivers and product mix Direct
So, on the non-SLCM front, as I mentioned in my opening remarks as well that pavers last year played a significant part and that had a contribution to the revenue. This time, volume growth has been driven by batching plants and associated transit mixers.

Clarifies the specific products driving non-SLCM volume growth and the shift in product mix compared to the previous year.

Asked by Mohit Kumar

CEV-4 vs CEV-5 sales mix in Q1 FY26 Direct
So, CEV-5 in Q1 contributed, let's say, roughly Rs. 300 plus crores of revenue versus CEV-4 of around Rs. 25 crores. So, that kind of gives you that 90:10 broadly is the revenue mix of CEV-V and CEV-IV in Q1.

Provides a clear quantitative breakdown of sales by emission standard, demonstrating the rapid adoption of new CEV-5 machines.

Asked by Mohit Kumar

Gross margin compression and future pricing strategy for CEV-5 Partial
The 450 basis points I will attribute roughly 50%-50% or 60:40, 60% to the DMC or direct material cost change for the CEV-5 and the paver kind of having a significant contribution as well in terms of the gross margin decline. ... We anticipate that we will be able to start nudging the pricing up towards end of Q2.

Explains the dual factors (CEV-5 cost and product mix) behind margin decline and outlines management's plan to recover margins through pricing adjustments.

Asked by Raghunandhan NL

Dividend policy, cash utilization, and M&A strategy Direct
We have a dividend distribution policy. At the current time, the Board has not decided to go forward with the dividend for a reason that we are in the growth phase and they believe that the management and collectively the company should reinvest the money to funnel their growth phase, whether it's organic or inorganic.

Offers insight into the company's capital allocation philosophy, prioritizing reinvestment for growth over immediate shareholder returns, and confirms active M&A exploration.

Asked by Raghunandhan NL

SLCM market share recovery in July Direct
So, I think as far as July is concerned, I think we have returned back with a very strong number upwards of 75%.

Provides a positive, real-time update on market share recovery in the core SLCM segment, indicating resilience after Q1 challenges.

Asked by Vaibhav Shah

Reasons for high CEV-5 sales (90%) in Q1 despite CEV-4 deadline Direct
In Q4, already 30% was sold of CEV-5 and that was done with the strategic view that we get into the market earlier. The customers and the end consumers start to experience the machine, and that obviously allowed us to push CEV-5 also with equal earnest in Q1.

Explains the strategic approach and factors (early market entry, customer experience, brand trust) that led to the successful and dominant adoption of CEV-5 machines.

Asked by Nidhi Shah

Dip in other expenses and sustainability of cost savings Direct
So, Raghu, in Q1 of FY '25, we had, let's say, a one-time expense on certain business promotional activity, which in Q1 FY '26, we do not have. ... Whether it's sustainable or not, I think after Q2 we will definitely be able to tell whether we need to spend this separately or not this year.

Clarifies the reason for the YoY decline in other expenses and indicates that the sustainability of this 'saving' is yet to be determined, impacting future expense forecasts.

Asked by Raghunandhan NL

2 min read 7 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Ajax Engineering reported a flat revenue from operations of ₹467 crores in Q1 FY26, compared to ₹469 crores in Q1 FY25. The SLCM segment revenue remained flat at ₹385 crores. Gross margin compressed to 25.8% from 30.3% YoY, leading to a 23% decline in EBITDA to ₹61 crores and a PAT of ₹53 crores. This decline was attributed to product mix changes and increased production costs for new CEV-5 machines.

Emission Norms Transition and CEV-5 Adoption

The transition to CEV-5 emission standards, effective July 1, 2025, significantly impacted the quarter. Ajax successfully launched its CEV-5 machines in Q4 FY25, and in Q1 FY26, CEV-5 models contributed roughly ₹300+ crores, representing about 90% of SLCM revenue. The remaining CEV-4 inventory was cleared in Q1 FY26. Management noted that strategic early market entry and customer experience with CEV-5 machines contributed to their dominant adoption.

Non-SLCM Segment Growth and Strategic Focus

The non-SLCM segment demonstrated strong volume growth of 25% YoY in Q1 FY26, primarily driven by batching plants and associated transit mixers. Despite this, non-SLCM revenue declined by 8% due to a product mix change, specifically the absence of high-ticket slip-form pavers sold in Q1 FY25. The company is augmenting its go-to-market strategy by building a B2B channel in the top eight metro cities to further scale this segment.

Operational Initiatives and Future Capacity

Ajax is establishing a new facility in Adinarayanahosahalli, close to its existing Obadenahalli plant, which is expected to commission in the second half of FY26. This expansion aims to support the growth of the non-SLCM business. The company also highlighted its focus on offering better reliability, reduced downtime, lower operating costs, and ready availability of spare parts and machine service for its non-SLCM products.

Market Conditions and Outlook

The on-ground execution of infrastructure projects experienced a slowdown, with PMGSY road construction reducing by 37% and highway construction by 9% from FY24 to FY25. Unseasonal rainfall and customer cash flow delays further impacted demand in Q1 FY26. The business is seasonally skewed towards the second half of the fiscal, with 65% of annual revenue typically generated then. Management expects early double-digit volume growth for FY26 and anticipates nudging prices up towards the end of Q2 to recover margins.

Capital Allocation and Liquidity

The company remains debt-free and maintains a robust cash position. As of June, its investment portfolio stood at approximately ₹650 crores, with ₹30 crores in sweep-in accounts. The board's philosophy is to reinvest cash for organic and inorganic growth rather than declaring frequent dividends, having done so only twice in the last decade. Management is actively exploring M&A opportunities but has not found suitable matches recently.

Other Expenses

Other expenses saw a 17% YoY dip in Q1 FY26. This reduction was attributed to the absence of a one-time business promotional activity that occurred in Q1 FY25. Management stated that the sustainability of this 'saving' and the need for similar promotional spending will be evaluated after Q2 FY26.

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