Diffusion Engineers Q1 FY27 earnings call

Diffusion Engineers Limited reported a robust Q1 FY27, with consolidated revenue from operations increasing 36.5% YoY to INR110.11 crores (INR1101.08 million). Consolidated Profit After Tax (PAT) also grew 35.98% YoY to INR16.68 crores (INR166.77 million). This strong performance was primarily attributed to healthy demand across core industrial segments, improved execution capabilities, and a significantly higher order book at the start of the quarter, with growth predominantly from domestic sales.

The company's consolidated order book stood at INR209 crores as of June 30, 2026, marking a sequential increase of 20.4% from INR174 crores in March 2026. This diversified order book includes INR159 crores in Heavy Engineering, INR26.42 crores in Wear Plates and Wear Parts, and INR24.22 crores in Welding Consumables. Management indicated that over 80% of the current order book is executable within FY27, with increasing requests from customers, particularly in the power sector, to prepone deliveries.

Consolidated EBITDA margin (excluding other income) moderated slightly to 12.85% in Q1 FY27 from 13.12% in Q1 FY26. This was primarily due to higher raw material and employee costs, influenced by global uncertainties and commodity price movements. However, management expects EBITDA margins to return to previous Q1 levels and increase by 100-200 basis points over the next 1-1.5 years, as raw material prices stabilize and cost increases are effectively passed on to customers.

Diffusion Engineers is progressing with a roughly INR100 crore expansion program to materially increase manufacturing capacity across electrodes, wear plates, and heavy engineering. Heavy Engineering capacity is being expanded from 9,000 metric tons to 18,000 metric tons. Phase-wise utilization of the new manufacturing infrastructure at Nagpur has already commenced, with full ramp-up and significant EBITDA contribution anticipated within 2-3 years. This expansion is crucial for strengthening the integrated manufacturing model and moving up the value chain towards specialized engineering solutions.

The company is actively expanding its international footprint, with its Turkey business already operational and generating increasing revenue. The UAE facility is also set up and running, with revenue expected from Q2 FY27. Furthermore, Diffusion Engineers is pursuing new growth opportunities in the railways sector, including the Vande Bharat ecosystem, and in the defense sector through its 10% stake in Tejorup, which is developing a prototype for the Very Short Air Defense System (VSHORADS).

Approximately INR67 crores of IPO proceeds remain unutilized, but the company expects these funds to be fully deployed by year-end. Management indicated that any savings from the IPO proceeds would be utilized for other purposes with shareholder approval. The company's strategy for future capex involves initiating new expansions promptly once the newly installed capacity reaches 70-80% utilization, based on historical experience that faster expansion is more beneficial.