Diffusion Engineers Limited — Q2 FY26 earnings call

Call held 17 Nov 2025

Management summary

Diffusion Engineers reported a mixed Q2 FY26, with standalone revenue growing 7.60% YoY and PAT increasing 13.74% YoY. Consolidated revenue growth was modest at 1.33% YoY, primarily due to the long lead times of roller press roll orders impacting current quarter execution. The company maintains a healthy order book of ₹209 crores, with significant contributions from heavy engineering, and is targeting to double its top-line in 3-4 years, aiming for mid to late teens revenue growth in FY26. Capacity expansions are progressing well, with B33 expected online by November 2025 and Nimji by Q4 FY26.

Highlights

  • Standalone Q2 FY26 Revenue increased 7.60% YoY to ₹79.96 crores, demonstrating continued growth.

  • Standalone Q2 FY26 Profit After Tax (PAT) grew 13.74% YoY to ₹9.91 crores.

  • Consolidated Q2 FY26 PAT saw a significant increase of 19.49% YoY to ₹10.17 crores.

  • The company reported a robust total order book of ₹209 crores, with ₹170 crores specifically from the heavy engineering segment.

  • Capacity expansion projects at B33 and Nimji are on track, with B33 expected to be online by November 2025 and Nimji by Q4 FY26.

Concerns

  • Consolidated Q2 FY26 Revenue growth was modest at 1.33% YoY, reflecting a relatively flattish top-line.

  • Standalone Q2 FY26 EBITDA (excluding other income) growth was only 2.83% YoY, impacted by execution delays of long lead-time roller press roll orders.

  • Consolidated Q2 FY26 EBITDA (excluding other income) saw a slight decline of 2.48% YoY to ₹12.37 crores.

Key financials

  1. Standalone Revenue ₹79.961 Cr +7.6%YoY
  2. Standalone EBITDA ₹11.186 Cr +2.8%YoY
  3. Standalone EBITDA Margin 14%
  4. Standalone PAT ₹9.913 Cr +13.7%YoY
  5. Consolidated Revenue ₹83.566 Cr +1.3%YoY
  6. Consolidated EBITDA ₹12.367 Cr -2.5%YoY
  7. Consolidated EBITDA Margin 14.8%
  8. Consolidated PAT ₹10.165 Cr +19.5%YoY
  9. Standalone H1 Revenue ₹153.333 Cr +8.3%YoY
  10. Standalone H1 PAT ₹24.116 Cr +58.9%YoY
  11. Consolidated H1 Revenue ₹164.231 Cr +7%YoY
  12. Consolidated H1 PAT ₹22.43 Cr +42.1%YoY

What they filed

Q1 FY27: revenue up 35.8%, net profit up 41.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue82 79 103 81 84 +2%101 +28%142 +38%110 +36%
EBITDA11 10 15 11 12 +9%14 +40%21 +40%14 +27%
Net profit9 7 13 12 10 +11%12 +71%16 +23%17 +42%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

₹209 Cr

as of 2025-09-30 quantified

Execution

Out of the ₹209 crores order book, ₹130 crores are to be executed this year (FY26) and approximately ₹80 crores will go to next year (FY27).

Composition

  • Heavy Engineering (segment) ₹170 Cr 81.3%
The order book has significantly improved year-on-year and quarter-on-quarter, driven by strong demand in heavy engineering and cement sectors. Margins on these orders are expected to be stable or slightly better.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed Entirely through internal accruals and reserves, without long-term debt.
    • Heavy engineering capacity expansion at Nimji plant ₹70 Cr
    Current investment that we are doing is roughly around 70 crores in the heavy engineering area in Nimji plant. And that is almost doubling our current capacity... we don't have any long-term loan and any term loans. So, we have the financial capability.
  • Debt Debt disclosed
    This is a working capital loan which we have taken. We don't have any term loan in this financial year.

Guidance & targets

Revenue

  • Top-line growth Revenue · 3 to 4 years · High confidence Double
    We expect to do that in 3 to 4 years.

    — Prashant Garg

  • Revenue Growth Revenue · FY26 · High confidence Mid to late teens (double-digit)
    We would be in mid to late teens.

    — Prashant Garg

Profitability

  • EBITDA Margin Profitability · Medium term · High confidence 15% to 17%
    Anywhere between 15% to 17%.

    — Prashant Garg

What to watch in Q3 FY26

Roller Press Roll Order Execution

Q3/Q4 FY26
Current Orders from H1 last year not yet recognized in H1 FY26
Target Contribution to Q3/Q4 FY26 revenue

Why it matters

Directly impacts revenue growth and addresses current quarter's flat top-line, indicating execution velocity.

So that's why Q2 looks flattish this year. But other parts of the business has shown improvement and it's only mainly because of the reduction in the roller press orders that Q2 has come out to be flattish.

Risks & concerns

  • Execution delays for long lead-time orders (roller press rolls)

    medium

    Orders from H1 last year for roller press rolls, which have 8-9 month lead times, did not contribute significantly to H1 FY26 revenue, making Q2 look flattish. Expected to contribute in Q3/Q4.

    Management acknowledged

  • Increased competition due to industry consolidation

    low

    Consolidation in the industry means fewer customers and more suppliers focusing on them, leading to increased competition, though it also offers opportunities for cross-selling.

    Management acknowledged

Q&A highlights

8 direct
Flat Top-line and Execution Challenges in Q2 Direct
So that's why Q2 looks flattish this year. But other parts of the business has shown improvement and it's only mainly because of the reduction in the roller press orders that Q2 has come out to be flattish.

Analyst questioned the flat top-line despite Q2 typically being strong; management clarified it was due to long lead-time roller press roll orders from prior periods not yet recognized, impacting current quarter revenue.

Asked by Suyash Bhave

Margins on New Heavy Engineering Orders and Revenue Mix Shift Direct
So, we don't see any reduction in the margins for these orders and going by the current raw material price spends, in fact, if anything, the margins are going to be slightly better only in comparison to what we had executed them before.

Management confirmed healthy or potentially better margins on new heavy engineering orders and indicated a strategic shift towards higher-growth segments like wear plates and heavy engineering.

Asked by Suyash Bhave

Status and Timelines of Capacity Expansion Projects (Nimji and B33) Direct
As far as B33 is concerned, we have already received the 10-ton extruder to increase our manufacturing capacity... So, both these plants are expected to go online from this month onwards, from November 2025 onwards.

Detailed updates were provided on the progress of both key expansion projects, B33 and Nimji, including specific timelines for commissioning and operational readiness, crucial for future growth.

Asked by Sunil Jain

Revenue Contribution from Nimji Expansion and Order Book Execution Direct
Predominant contribution will come from the next year onwards. But as I mentioned, the few machines that we've been able to accommodate in our existing plant which was originally planned for the new plant that has started contributing. They've come live only from October mainly. So, that will start contributing in this year also.

Clarification on when the new Nimji capacity will start contributing to revenue and the breakdown of the ₹209 crore order book's execution timeline (₹130 crores this year, ₹80 crores next year) provided visibility on near-term revenue.

Asked by Sunil Jain

Demand Scenario and Sectoral Outlook Direct
We see increased industrial activity on account of the expansion going on in the steel mining and the cement sector. There is robust demand for new equipment in these four industries.

Management highlighted strong demand drivers from core sectors and new client verticals (mining, railways, defence), indicating a positive outlook for sustained growth.

Asked by Sunil Jain

Nature of Debt and Finance Cost Increase Direct
This is a working capital loan which we have taken. We don't have any term loan in this financial year.

Clarified that the increase in finance cost was due to working capital loans, reassuring investors that there was no new long-term debt taken in the financial year.

Asked by Parth Patel

Future Growth Strategies and Capacity Expansion Beyond Current Projects Direct
The moment we try to outsource our manufacturing activities; we will lose out on margin and more than the margin the quality is a question mark. And that is how Diffusion has developed its capabilities and is basically investing in an in-house facility. So, we don't believe so much in third-party contracting...

Management reiterated its commitment to in-house manufacturing for quality and margin control, and confirmed ample land (30 acres) for future expansions, indicating a clear long-term capacity strategy.

Asked by Parth Patel

Guidance for Doubling Revenues and FY26 Growth Direct
We expect to do that in 3 to 4 years... We would be in mid to late teens.

Management provided specific timeframes for doubling revenues (3-4 years) and narrowed down the FY26 revenue growth guidance to 'mid to late teens', offering more clarity on future performance.

Asked by Vikram

2 min read 5 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

Diffusion Engineers reported a mixed financial performance for Q2 FY26. On a standalone basis, revenue from operations grew 7.60% YoY to ₹79.96 crores, with PAT increasing 13.74% YoY to ₹9.91 crores. However, consolidated revenue growth was more modest at 1.33% YoY, reaching ₹83.57 crores, while consolidated PAT saw a stronger increase of 19.49% YoY to ₹10.17 crores. The standalone EBITDA margin stood at 13.99%, and consolidated EBITDA margin was 14.80% for the quarter.

Order Book Dynamics and Execution Challenges

The company boasts a healthy total order book of ₹209 crores as of September 30, 2025, with a significant portion of ₹170 crores attributed to heavy engineering. Management noted that approximately ₹130 crores of this order book are slated for execution within the current financial year, with the remaining ₹80 crores carried over to FY27. The relatively flat top-line performance in Q2 was primarily due to the long lead times (8-9 months) of roller press roll orders from H1 last year, which are now expected to contribute to revenue in Q3 and Q4 FY26.

Capacity Expansion and Strategic Growth Drivers

Diffusion Engineers is actively pursuing capacity expansion with projects at its Nimji and B33 plants. The B33 plant, which includes a 10-ton extruder and slitting line, is expected to be online by November 2025. The Nimji plant's construction is at the plinth level, with the building anticipated to be completed by Q4 FY26 and a 1.4-megawatt solar rooftop plant going live by January/February 2026. These expansions are crucial for executing the growing heavy engineering order book and supporting the company's target to double its top-line in 3-4 years.

Market Demand and New Client Verticals

Management highlighted robust demand driven by increased industrial activity in core sectors such as cement, steel, power, mining, engineering, and sugar. The company has successfully added new prestigious OEMs in the mining sector and secured contracts for critical parts in the railways (Vande Bharat trains). Demand for wear plates, wear parts, and heavy engineering is expected to grow faster than traditional welding consumables, aligning with the industry's shift towards more integrated solutions.

Financial Strategy and Outlook

The company's financial strategy emphasizes in-house manufacturing to maintain quality and margins, supported by available land for future expansions. Current investments, including ₹70 crores for heavy engineering in Nimji, are funded through internal accruals, with no new long-term debt taken this financial year. Diffusion Engineers aims for mid to late teens revenue growth in FY26 and expects EBITDA margin expansion to 15-17% in the medium term, driven by economies of scale and an enhanced product mix.

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