Gala Precision Engineering Q1 FY27 earnings call

Gala Precision Engineering Limited delivered a robust Q1 FY27, with consolidated revenue growing 20% year-on-year to INR 75 crores. This growth was accompanied by a 28% increase in EBITDA to INR 12 crores, achieving a margin of 16.51%, and a 29% rise in net profit to INR 8 crores, with a PAT margin of 11.44%. The company reported a strong 40% year-on-year growth in order bookings, providing significant visibility for the quarters ahead. Management expressed confidence in achieving its 20-25% growth guidance for FY27.

The company successfully commissioned its new fastener manufacturing facility in Chennai, which boasts an installed capacity of 4,600 metric tons, enhancing its ability to cater to growing customer requirements. A significant milestone was achieved with the first bulk commercial order from a leading Indian electrolyzer manufacturer, validating Gala Precision's efforts to diversify into high-growth clean energy sectors. Furthermore, an MoU was signed for the acquisition of 10.15 acres of land in Wada, adjacent to its existing facility, to support long-term capacity expansion, with an estimated capex of INR 40-45 crores planned for the next year.

The Disc Springs (DSS) business continued its strong performance, contributing 54% to revenue with 31% year-on-year sales growth. Specialized Fasteners (SFS) accounted for 29% of revenue (INR 22.3 crores), benefiting from increased customer adoption. Customized Solutions (CSS) contributed 17% (INR 12.5 crores), driven by sturdy demand across industrial and mobility applications. The company's diversified portfolio is providing resilience and positioning it to capture growth across multiple end-user segments.

Gala Precision has appointed KPMG to conduct a comprehensive working capital optimization study, reflecting its ongoing commitment to improving operational efficiency and capital productivity. The report is expected by August end or Q3 FY27, after which specific actions and targets will be planned. The company's effective tax rate is projected to be around 22.5%, lower than the standard 25%, due to deductions for new product development, ESOP perquisite value, and higher depreciation, with an upcoming solar project commissioning in Q3 FY27 also contributing to tax benefits.

The company emphasized its strong customer relationships, noting that it has not lost a customer due to quality or delivery issues in the last 25 years. While new customer acquisition in the European market can take 12-24 months due to long legacy and approval processes, business consistently grows once established. The company's products are 100% manufactured and sold under the Gala or Gallock brand, with 85% being customized to customer drawings and 15% sold to fastener distributors. Cross-selling opportunities are being leveraged, particularly for fasteners and wedge lock washers, to existing disc spring customers in industrial, renewable, and mobility sectors.