Concord Enviro Systems Q3 FY26 earnings call

Concord Enviro reported Q3 FY26 revenue from operations at ₹124.575 crores, showing a marginal 0.2% QoQ decline but a 1.4% YoY growth. EBITDA for the quarter stood at ₹4.3 crores, a significant 43.8% QoQ decline, resulting in an EBITDA margin of 3.5%. The company recorded a net loss after tax of ₹8.177 crores for Q3 FY26. For the nine-month period of FY26, revenue was ₹351.812 crores, a 9.2% YoY decline, with EBITDA at ₹11.069 crores, down 67.7% YoY, and a net profit of ₹0.433 crores.

In Q3, Concord Enviro launched its H-Xtreme heat exchanger, designed for highly corrosive industrial environments, complementing its focus on waste heat recovery for Zero Liquid Discharge (ZLD) and flue gas carbon capture. This product range aligns with government budget allocations for carbon capture and utilization. The company is also expanding beyond wastewater treatment into solar photovoltaic, green hydrogen, and semiconductors, with an active pipeline of ₹800 crores in these new areas, including negotiations with large players in solar and steel ZLD.

The company faced several project execution challenges in FY26, including the Kenya project being revised to FY27 due to client internal issues, and land acquisition delays for a BOO project pushing Q3 execution to Q4/Q1. Additionally, an ongoing SAP re-implementation is creating challenges for Q4 execution. Consequently, Concord Enviro revised its FY26 revenue guidance downwards to approximately ₹600 crores, implying a 2% growth for the year, reflecting a conservative view of current visibility.

The EBITDA margin for Q3 FY26 was 3.5%, a decline from 6.1% in Q2 FY26. Management clarified that gross margins remained stable (48-51%), but the EBITDA compression was primarily due to higher employee costs from new teams for heat exchanger and CBG businesses, and a lower share of higher-margin export projects. For FY26, the EBITDA margin guidance was revised to 10-12%. Looking ahead to FY27, the company targets a return to 14-16% EBITDA margins, driven by the commercialization of new products and stabilization of operations.

Concord Enviro maintains a healthy lifetime order book with meaningful execution expected over the mid-term. The company is actively pursuing an active pipeline of ₹800 crores in new segments like steel, solar, and semiconductor water treatment. For Q4 FY26, the company is targeting an order intake of ₹160-180 crores. Management aims for 1x order book coverage for FY27 by March 31 or June 30, 2027, indicating confidence in converting pipeline into firm orders.

The company made a strategic investment of $2 million for an equity stake in a US-based polymer company, its second such investment in membrane technology, to enhance material science capabilities. Concord Enviro stated it is adequately funded from its IPO and does not foresee a need to raise equity for at least a couple of years. The company also plans to improve working capital efficiency, targeting a 5-10% reduction and bringing net-net working capital days from the current ~127 days to 120-125 days in FY27.

The company's foray into compressed biogas (CBG) last year is gaining momentum, with initial projects moving into execution during Q3 FY26. Management noted good inquiry traction for CBG projects from both standalone and consolidated players. Furthermore, a desalination project where Concord Enviro was previously shortlisted as L1 has now been converted into a firm order and added to the company's order book this quarter.