EMS — Q1 FY26 earnings call

Call held 3 Sep 2025

Management summary

EMS Limited reported a subdued Q1 FY26, with revenue and PAT growth of 3.73% and 1.46% respectively, missing internal targets due to an early monsoon hampering project execution. Despite the slow start, management expressed strong confidence in its full-year guidance for ~25% revenue growth and ~20% PAT margins, anticipating a significant catch-up in the second half of the year. The company maintains a robust order book of ₹2500 crores and a healthy tender pipeline, while strictly adhering to its core philosophy of being a debt-free, organically funded business.

Highlights

  • Q1 FY26 Revenue stood at ₹211.32 crores, a modest increase of 3.73% YoY from ₹203.72 crores.

  • Q1 FY26 PAT was ₹37.38 crores, up 1.46% YoY from ₹36.84 crores.

  • Growth was significantly below expectations due to an early and heavy monsoon impacting underground project execution.

  • Management reiterated its full-year revenue growth guidance of ~25% to reach ₹1250 crores, expecting a strong H2 performance.

  • PAT margin guidance for the full year is maintained at ~20% (+/- 1-1.5%).

  • The current unexecuted order book is strong at ₹2500 crores, with a tender pipeline of ₹4000 crores.

  • The company remains committed to its debt-free policy, funding growth through internal accruals.

  • Promoter pledge increased from ~7% to 11% to fund a personal property acquisition, with a plan to remove it in 1.5 years.

Concerns

  • Seasonality and Weather Impact

Key financials

  1. Revenue ₹211.32 Cr +3.7%YoY
  2. PAT ₹37.38 Cr +1.5%YoY
  3. EBITDA Margin 23%
  4. Unexecuted Order Book ₹2,500 Cr
  5. Tender Pipeline ₹4,000 Cr

What they filed

Q1 FY27: revenue down 34.3%, net profit down 60.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue233 245 270 239 173 −26%200 −18%120 −56%157 −34%
EBITDA69 71 65 54 37 −46%31 −56%18 −72%26 −52%
Net profit50 51 47 38 28 −44%19 −63%6 −87%15 −61%
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.

Guidance & targets

Revenue

  • Full Year Revenue Growth Revenue · FY26 · High confidence around 25%
    No. We will achieve our revenue growth, the projection for our revenue that is around Rs. 1250 crores. And in terms of percentage, it will be around 25% for this year.

    — H.K Kansal

  • Full Year Revenue Revenue · FY26 · High confidence around Rs. 1250 crores
    Yes, so just to be very clear. So, let us say about last year it was in the range of Rs. 1000 crores, Rs. 972 to be exact. But I am holding Rs. 1000 crores. And we say that 20%, 25% growth will be there. So, somewhere around Rs. 1200 crores, Rs. 1250 crores revenue will be there.

    — H.K Kansal

  • Long-term Revenue Growth Revenue · long-term · Medium confidence 25% to 30%
    We will try to grow by 25% to 30%. So, that is our target as a long-term perspective.

    — H.K Kansal

  • Subsidiary (Paper Co.) Revenue Revenue · per year · Medium confidence about Rs. 100 crores
    I think revenue-wise, I think it is going to generate revenue of about Rs. 100 crores per year.

    — Management

Profitability

  • PAT Margin Profitability · Ongoing · High confidence 20% +/- 1.5%
    But 20% plus, minus 1%-1.5% is our target for every time as far as stand-alone profit of the company is concerned.

    — H.K Kansal

Order Book

  • New Order Inflow Order Book · by Dec 2025 · Medium confidence Rs. 600 crores
    Usually 15% type of thing, plus minus something. So, we can still get Rs. 600 crores rupees up to December this year.

    — H.K Kansal

  • Unexecuted Order Book Order Book · by Dec 2025 · Medium confidence around Rs. 3000 crores
    So, Rs. 600 crores we can still get. So, it will be around Rs. 3000 crores by the end of December, the unexecuted order book.

    — H.K Kansal

Risks & concerns

  • Seasonality and Weather Impact

    high

    Early and heavy monsoons materially impacted Q1 execution and are expected to affect Q2, creating significant H1/H2 skew.

    Management acknowledged

  • Increase in Promoter Pledge

    medium

    Promoter pledge rose from ~7% to 11% for a personal property purchase. Management stated it will be removed within 1.5 years.

    Analyst acknowledged

  • Margin Pressure

    low

    Analyst noted a decline in EBITDA margins over the past two years. Management acknowledged competition but guided for a stable ~20% PAT margin.

    Analyst acknowledged

Q&A highlights

3 direct
Subdued Q1 performance and its impact on full-year guidance Direct
But in next two quarters that is last two quarters of the financial year, we will definitely make it up because receivables will be more and we will execute the works of sewer laying in that period.

This addresses the primary concern of the quarter's underperformance and reaffirms the full-year target, explaining the seasonality and catch-up plan for H2.

Asked by Dinesh Kulkarni

Company's policy on debt and growth ambition Direct
To do 50%, we will have to dilute. We have no intention of doing that... It is not in our policy... the company management does not think that we should go for any debt.

It clarifies the company's core financial philosophy of organic, debt-free growth, which caps its growth ambition at 25-30% and is crucial for investor modeling.

Asked by Paras Chheda

Strategic rationale for acquiring the paper company (Brij Bihari) Direct
Our primary objective was to use this land for mortgaging to the bank and it will remain so. Any business or income that is related in that company, through its own assets or goods, is additional benefit to the company.

This reveals the acquisition was a financial strategy to secure collateral for bank guarantees, not an operational diversification, clarifying capital allocation decisions.

Asked by Pankaj Motwani

3 min read 6 chapters

Detailed narrative

Subdued Q1 Performance Attributed to Early Monsoon

EMS reported a modest Q1 FY26 with revenue at ₹211.32 crores (up 3.73% YoY) and PAT at ₹37.38 crores (up 1.46% YoY). Management stated these results were 'subdued' and below their 20-25% growth expectation. The underperformance was directly attributed to an early and heavy rainy season, which began 15 days sooner than usual, significantly impacting underground work like laying sewerage and water supply lines. Management expects these weather-related challenges to persist through Q2, leading to a revenue split of approximately 35% in H1 and 65% in H2 for the fiscal year.

Full-Year Guidance Reaffirmed on H2 Catch-up Hopes

Despite the slow start, the management team expressed strong confidence in meeting their full-year targets. They reiterated guidance for approximately 25% revenue growth, translating to a full-year revenue of around ₹1250 crores. The company also aims to maintain its PAT margin at around 20% (+/- 1-1.5%). The catch-up is expected in the second half of the year (H2), from October onwards, when execution of underground works can resume at full pace.

Strong Order Book and Healthy Pipeline Provide Visibility

The company's current unexecuted order book stands at a healthy ₹2500 crores. Additionally, they have successfully secured two new orders worth ₹200 crores in the current fiscal year. The bidding pipeline is robust at ₹4000 crores. Management anticipates a win ratio of around 15%, which could add another ₹600 crores to the order book by December 2025, potentially taking the total unexecuted order book to ₹3000 crores. This provides strong revenue visibility for the next two years, as the company typically executes 40% of its order book annually.

Staunch Commitment to Debt-Free, Organic Growth

Management firmly stated that the company's policy is to remain debt-free and fund its 25-30% growth target through internal accruals. This was highlighted as a core philosophy, with management explicitly stating they have 'no intention' of taking on debt or diluting equity to chase higher growth rates like 50%. The only exception is project-specific debt within separate SPVs for HAM (Hybrid Annuity Model) projects, which does not impact the parent company's balance sheet.

Strategic Rationale for Recent Acquisitions

The company has recently acquired EMS Realtech, a subsidiary with a land bank valued at ₹200-250 crores, for a real estate project. Regarding the acquisition of a 60% stake in a paper company, management clarified the primary objective was not operational diversification but to use the company's land as collateral for bank guarantees. The paper unit is expected to generate an additional ₹100 crores in annual revenue at a 6-8% PAT margin, which will be consolidated, but this is considered a secondary benefit.

Market Outlook and Competitive Landscape

Management sees a tremendous, long-term opportunity in the urban water and wastewater sector, estimating a potential market size of ₹15 lakh crores. They are not involved in the Jal Jeevan Mission, which has faced funding issues, but focus on centrally funded schemes like AMRUT and Namami Gange. While acknowledging competition from large players like L&T in specific areas (STP/WTP plants), they stated that L&T is not a direct competitor in their core business of laying city-wide sewerage and water supply networks.

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