Azad Engineering Q1 FY27 earnings call

Azad Engineering Limited reported a robust start to FY27, with standalone revenue growing 26.8% year-on-year to ₹170.5 crores, up from ₹134.5 crores in Q1 FY26. Standalone EBITDA expanded at a faster pace of 32.1% year-on-year to ₹64 crores, with EBITDA margins reaching a robust 37.6%, an expansion of 150 basis points year-on-year. Standalone PAT grew 21.2% year-on-year to ₹36.4 crores, maintaining a 21.3% PAT margin, and EPS stood at ₹5.63 per share.

The company achieved a significant national milestone by successfully manufacturing, assembling, and delivering India's first indigenous expendable turbojet engine to the Gas Turbine Research Establishment, DRDO, and the Ministry of Defense. This accomplishment represents a 'profound architectural shift' for Azad, transforming it from a precision component manufacturer into a fully integrated propulsion system player. This move significantly expands Azad's total addressable market and solidifies its position as a trusted partner in India's aerospace and defense sector, with expectations for 'massive production' in the coming months^⏳.

Azad's multi-facility expansion roadmap at Tuniki Bollaram Industrial Park is progressing as planned, with the new 7,600 square meter facility for Baker Hughes commencing operations in Q1 FY27. Management reported that 80% of the new initiatives are stabilized, with the remaining major activities on track for mid-Q2 completion and full closure by Q3. The manufacturing infrastructure is now running at 'full throttle,' and the company anticipates accelerated growth from Q3 and Q4 onwards as these new lines begin to contribute substantively to revenue in H2 FY27.

On a consolidated basis, revenue grew 25.9% year-on-year to ₹172.6 crores. The Aerospace and Defense sector registered a 24.7% year-on-year growth, reflecting an increased share of wallet with global aviation majors and initial tailwinds from advanced propulsion systems. Concurrently, the Energy, Oil & Gas vertical grew 26.7% year-on-year, driven by healthy demand for gas turbine components and the operational launch of new customer-dedicated production lines, aligning with global megatrends for energy security and defense self-reliance.

The company's standalone EBITDA margin expanded to 37.6%, up 150 basis points year-on-year and 90 basis points sequentially, demonstrating the compounding benefits of operating leverage. This margin progress is attributed to efficient absorption of fixed corporate overhead as production scale rises. Core material margin sourcing efficiency also contributed, driven by cost indigenization efforts and increasing backward integration through subsidiaries, including qualifying Indian suppliers for critical raw materials, which provides price and transportation cost benefits of 4-5%.

Other income moderated sharply to ₹4 crores in Q1 FY27 from ₹17 crores in Q4 FY26, primarily due to volatile foreign currency dynamics. Management clarified that rupee depreciation benefits are not built into EBITDA margins. The company is actively working to improve its working capital days, targeting around 200 days in H1 FY27 and further reducing to 160-180 days by H2 FY27, utilizing bill discounting lines and foreign currency loans for natural hedging of export receivables.

Azad reiterated its long-term annual revenue growth guidance of over 25%, while maintaining its industry-leading profitability profile with an EBITDA margin guidance of 32-35%. The company is evaluating future capex needs for the next 5-6 years, with each new plant at Tuniki Bollaram poised to generate ₹150-180 crores in revenue at full utilization, implying a total capacity of ₹1,200 crores from the new facilities. Management expects accelerated growth from Q3 and Q4 onwards as the new infrastructure fully stabilizes and production scales up.