Detailed Narrative
Q1 FY26 Performance Overview
The Anup Engineering Limited reported a robust Q1 FY26 with consolidated revenue growing 20% YoY to ₹175.2 crores. EBITDA increased by 22% to ₹40.4 crores, and PAT saw a 21% rise to ₹26.3 crores. This performance was achieved despite Q1 historically being a weaker quarter due to annual holidays and current supply chain pressures. Exports contributed a significant 72% to the Q1 revenue, although this is expected to normalize to 50%-55% for the full financial year.
Manufacturing Capacity and Product Mix
All three manufacturing locations contributed well, with Ahmedabad accounting for 58% of revenue, Kheda for 37%, and Mabel Engineers for the balance. The Phase-II expansion at Kheda is now anticipated to be completed in Q2 FY26, ahead of the earlier Q3 schedule. This expansion will boost total annual business capacity across all three locations to approximately ₹1,200 crores, comprising ₹600 crores from Ahmedabad, ₹400 crores from Kheda, and ₹200 crores from Mabel. The product mix saw heat exchangers at 46%, vessels/reactors/columns at 44%, and silos at 10%.
Order Booking and Pipeline
Order booking for Q1 was described as 'a touch sluggish' due to global uncertainties, wars, and trade disruptions. However, the company maintains a pending order book of ₹604 crores after Q1 execution, which is fully executable within the current financial year. An encouraging enquiry bank of ₹1,020 crores for global projects, particularly from domestic and Middle East markets, is expected to fuel future growth. Management noted a strong enquiry inflow from the Middle East and domestic markets, with projects like Bina Refinery and Reliance PTA providing good opportunities.
Revised FY26 Guidance and Long-term Outlook
Due to delays in finalizing US orders and execution timelines, the FY26 revenue growth guidance has been revised to 15%-20% (from earlier higher expectations). The EBITDA margin guidance remains at 21%-22%. For the longer term, the company aims for a 15%-20% revenue CAGR over the next three years, supported by diversification plans. Management expressed confidence in achieving the revised guidance, partly due to an opportunity for short-term delivery items.
Strategic Diversification and New Initiatives
The company is actively diversifying its market focus, particularly towards the Middle East, to mitigate risks associated with US trade uncertainties. They have secured their first order for Saudi Aramco, involving 26 heat exchangers to be delivered by Q3 FY26. In new verticals, the services business has secured a small order, with a long-term target of ₹200 crores in three years. The power sector also saw an inroad with an order of ₹7-8 crores, and three enquiries are quoted for AC HE business, with meaningful revenue contribution expected by Q1 FY27.
Working Capital and Profitability Dynamics
The working capital block was slightly higher in Q1 due to increased raw material inventory for specialized orders and lower customer advances, but this is expected to normalize. Management addressed concerns about profit growth lagging sales growth by explaining a strategic shift towards larger volume, potentially lower-profitability products (around 15% profitability) to drive aggressive growth. They also confirmed that there were no order cancellations and that profitability for existing orders is protected against supply chain issues, with 70-80% of raw materials sourced domestically.