Ajax Engineering

Ajax Engineering reported robust financial results for Q2 and H1 FY26. Q2 revenue grew by 48% year-on-year to INR 445 crores, while H1 revenue reached INR 911 crores, an 18% year-on-year increase. This growth was significantly propelled by the SLCM segment, which saw a 51% year-on-year volume growth and 55% year-on-year revenue growth in Q2, partly due to a large government contract for over 110 machines. The non-SLCM segment also contributed positively with 8% volume growth and 12% revenue growth in Q2, alongside a 26% increase in spares and services revenue.

Despite strong top-line growth, profitability faced headwinds in Q2 and H1 FY26. The Q2 EBITDA margin declined by 280 basis points to 10.2%, and the H1 EBITDA margin contracted by 380 basis points to 11.7%, with H1 EBITDA declining 11% year-on-year to INR 107 crores. This margin pressure was primarily attributed to the increased cost of production for the new CEV5 machines and the company's decision not to implement price hikes in Q1 and Q2. Additionally, aggressive pricing on a large government contract in Q2 further impacted margins.

Ajax successfully navigated the transition to new emission norms, selling out all CEV4 inventory by June 2025 and launching CEV5 machines in Q4 FY25. The CEV5 product portfolio accounted for 90% of Q1 FY26 volumes, indicating strong market acceptance. The company's market share improved to 71% on a year-to-date basis, with recent months seeing it inch closer to 80%. Management noted that some competitors engaged in 'substandard' and 'aggressive' pricing strategies to liquidate older CEV4 inventory, which impacted market dynamics in Q1.

Management anticipates a traditional demand upswing in H2 FY26, following the extended monsoon season. They expect government impetus on infrastructure projects and improved cash flows for contractors to drive demand. To mitigate margin pressure, the company plans to implement a price increase of approximately 4 percentage points starting in Q3. This, combined with operating leverage, is expected to improve H2 EBITDA margins to 14.5-15%, aiming for a full-year EBITDA margin decline of 150-200 basis points compared to FY25.

Ajax Engineering maintains a robust financial position, with a return on invested capital (ROIC) exceeding 40% for H1 FY26 and a strong balance sheet. The company reported a cash balance in investments of INR 710 crores and a liquid cash balance of INR 35-37 crores. While a temporary buildup in receivables was observed towards the end of September due to retail offtake delays, management stated that this situation is normalizing, and cash flows are improving, indicating no long-term concerns regarding the health of receivables.

The company's capital expenditure includes approximately INR 35 crores in Capital Work-in-Progress (CWIP) for its fourth plant in Hosahalli, with an additional INR 10-15 crores planned for FY26, targeting H2 closure. Ajax is also expanding its product portfolio, with plans for initial distribution of smaller SLCM products in 4-6 key markets during H2. The focus remains on strengthening leadership in the SLCM segment while building capabilities in non-SLCM areas like boom pumps, concrete pumps, and batching plants.

The company acknowledged external challenges^🌐 such as a slowdown in infrastructure project execution, cash flow delays for customers, and the impact of extended monsoons. Management also noted that lower government capex was influenced by geopolitical events and state governments prioritizing social sector spending, which impacted demand in states like Maharashtra and Karnataka. Conversely, states like Bihar, Uttar Pradesh, northern markets, and Gujarat demonstrated strong performance, partly due to solar-led applications and election-related impetus.