Diffusion Engineers Limited

Diffusion Engineers reported a robust consolidated revenue of INR 4066.28 million for FY26, marking a 21.28% YoY increase from INR 3352.76 million in FY25. Consolidated EBITDA grew by 21.18% to INR 571.42 million, with a margin of 14.05%. Consolidated PAT surged 39.87% YoY to INR 504.1 million, demonstrating resilient operational performance despite market challenges^🌐. This growth was supported by healthy demand across core industries like cement, steel, power, mining, and engineering.

The company successfully commissioned a new 10-ton-per-day electrode plant, expanded wear plate capacity by approximately 25%, and installed an in-house strip-slitting line. These initiatives, funded through IPO proceeds, are expected to support marginal improvement and better supply chain control. The heavy engineering facility (Unit 4 expansion) is in its final stages, with the plant and building expected to be ready and new machines installed by Q1 FY27, enabling increased execution capacity.

Diffusion Engineers maintains a healthy order book of approximately INR 200 crores as of April 30, 2026, providing strong revenue visibility for the coming quarters. Management expects 80-90% of this order book to be executed within the current financial year (FY27). The company's order book has grown from INR 100 crores on March 31, 2025, reflecting strong order inflows and customer trust in product quality and engineering capabilities.

The company is making encouraging progress in the railway sector, having achieved L1 status in multiple contracts and received letters of intent for developmental orders linked to the Vande Bharat supply chain. Substantial orders from this sector are anticipated from next year. Additionally, Diffusion Engineers invested in Tejorup Sunmay Systems Private Limited to participate in the manufacturing and integration of advanced VSHORADS systems for defense, a strategic move with a longer gestation period but significant long-term potential in the Indian defense ecosystem.

For FY27, the company anticipates revenue growth exceeding 20%, driven by new capacities and strong order inflows. It targets a medium-term revenue platform of INR 650 crores plus with sustainable EBITDA margins in the 15-16% range, expecting an 80-100 basis points improvement in EBITDA margins for FY27. This improvement is projected to come from operating leverage, backward integration benefits, and a richer product mix, with the INR 100 crores capex sufficient to propel revenue to INR 800-900 crores in coming years.

Management is actively working to optimize working capital, targeting a reduction in debtor days from 98 in FY26 to 80-85 in FY27, and maintaining inventory days at 60-65. The higher debtor days in Q4 FY26 were attributed to a significant portion of sales occurring in the quarter. This focus on tighter control is crucial for improving cash flow efficiency, especially given the long project cycles in the capital goods sector.

Despite ongoing volatility in key raw material prices like tungsten, nickel, cobalt, molybdenum, and chromium, the company employs strategies to mitigate impact. For subsequent contracts, price increases are passed on to customers. For fixed-price contracts, raw materials are booked immediately upon order confirmation. Additionally, offers for highly volatile materials are given with very small validity periods to manage risk, though a time lag in passing on costs can still affect margins.