EPACKPEB

EPACKPEB reported a 22% YoY increase in overall revenue for Q3 FY26, with its prefab division growing 31% YoY. The nine-month performance was even stronger, with revenue up 41% and EBITDA up 57% YoY, aligning with the company's IPO guidance. However, Q3 experienced a QoQ revenue dip, which management attributed to seasonality, specifically prolonged monsoons in the South affecting customer civil work and material drawal, and Rs. 35-40 crores of finished goods that could not be billed in December due to holidays.

As of January 1, 2026, the company's pending order book stood at a strong Rs. 1,215 crores, providing a clear revenue runway for the next 7-8 months. Management expressed high confidence in achieving its annual revenue guidance of Rs. 1,500-1,550 crores for FY26. The order book composition shows a growing contribution from the renewable sector (25-28%) and electronics/semiconductor/electrical sectors (~18%), alongside traditional FMCG, auto, pharma, logistics, and warehousing segments. The order book is primarily composed of Rs. 1,000 crores in PEB and Rs. 215 crores in sandwich panels/prefab structures.

EPACKPEB reported an average capacity utilization of over 74% across its three plants for the last three months. The company is actively pursuing capacity expansion, with Rs. 56-57 crores invested in a new structural steel fabrication unit (Unit-4) in Mumbattu, expected to be commercialized in Q4 FY26. Additionally, a Rs. 101 crore CAPEX for a new sandwich panel line in Ghiloth is underway, though its commercialization is delayed to Q3 FY27 due to NGT-related civil work restrictions. A new Gujarat plant with 50,000 tons capacity, requiring Rs. 55-60 crores CAPEX, is planned for FY27, with Rs. 40 crores already invested in land acquisition.

The EBITDA margin for Q3 FY26 was 10.1%, and the nine-month margin stood at 10.8%, falling within the guided range of 10.5-11.5% for the current and next fiscal years. Management highlighted three mechanisms to protect OPM from commodity price volatility: maintaining 30-45 days of raw material inventory, securing purchase orders with vendors covering 2.5-3 months, and weekly order booking based on current commodity prices, which acts as a natural hedge. They noted that only extreme events, like the 40% steel price hike during the Ukraine war in 2022, have significantly impacted margins.

Working capital days increased from 23 days in Q2 to 38 days in Q3. Management clarified that the 23-day figure was an anomaly due to exceptionally fast execution and payments, and the realistic guidance is 35 days. The current stretch is attributed to increased receivables and Rs. 30-40 crores of finished goods that could not be billed. The CFO indicated that Rs. 70 crores of term loan was repaid using IPO proceeds, and finance costs are expected to reduce from 2.2% (9-month basis) to 1.9% of revenue by year-end, which should help improve the working capital cycle.

EPACKPEB is increasingly focusing on the renewable sector, which now constitutes 25-28% of its order book. Management noted that this sector offers repeat business opportunities and slightly better margins, with a focus on demonstrating execution capabilities to earn premiums. The company is actively engaging with various government agencies (PWD, CPWD, Defense) to embed prefab technology as a standard part of overall construction, aiming for it to constitute 25-30% of the total construction demand. EPACKPEB has successfully executed projects in challenging environments, including Siachen, for defense personnel.

The company expects its steady-state Return on Equity (ROE) to be around 18% and Return on Capital Employed (ROC) to be in the range of 22-25% over the next few years. While a temporary 'blip' in ROE is anticipated in FY27 due to ongoing CAPEX, management is optimistic about achieving these return ratios as new capacities become operational and contribute to growth.