Detailed Narrative
Q1 FY27 Performance Overview
Harsha Engineers International Limited delivered a strong Q1 FY27, with consolidated revenue growing 25% year-over-year to ₹421 crores. This growth was largely propelled by a consistent 21% top-line increase in the India Engineering business. Consolidated EBITDA for the Engineering segment stood at ₹69.8 crores, showing a 6.9% YoY growth, though it experienced a 9.4% sequential decline from the previous quarter's ₹77 crores.
India Engineering Business Growth Drivers
The India Engineering business demonstrated robust performance across key product segments. Bushing sales reached ₹34 crores, marking a 35% year-over-year growth, with strong order visibility. Stamping sales were equally encouraging, growing 31% YoY to ₹90 crores, driven by new product developments for white goods, railways, and automotive sectors. The company anticipates maintaining approximately 30% growth for both Bushing and Stamping sales for the full FY27.
Margin Pressures and FX Impact
Despite strong revenue, margins faced headwinds in Q1 FY27. Average raw material costs increased by approximately 8%, which is expected to be passed through in the subsequent 1-2 quarters. The India Engineering business also recorded a foreign exchange loss of ₹4 crores due to technical accounting related to cash flow hedges. Additionally, indirect material costs, including oil and chemicals, rose by about ₹3 crores due to inflationary pressures, contributing to a quarter-over-quarter degrowth in margins.
Foreign Subsidiaries Performance and Outlook
Harsha China is performing stably, with an expected 10% overall growth for FY27, an EBITDA margin in the range of 12-14%, and a PAT range of 6%. A Brownfield expansion project is underway in China to enhance steel Cages capabilities, with commissioning expected by Q3 of the next financial year. In contrast, Harsha Romania remains in negative territory, incurring a ₹2 crore foreign exchange loss in Q1 FY27. Management aims to reduce the combined losses from both foreign subsidiaries to a lower single-digit figure, in the range of ₹2-4 crores, for FY27.
Capital Expenditure Plans and Progress
The company incurred a CapEx of ₹37 crores in Q1 FY27. The total CapEx for FY27 and the subsequent year is projected to be between ₹180-200 crores, with ₹50-80 crores planned for FY27. These investments are strategically directed towards the 2nd phase expansion of Harsha Advantek for Bushing, Stampings, and large-size cages, the Brownfield expansion in Harsha China, and the Bhayla plant expansion. Building construction for the Bhayla plant is expected to commence this month, with the third building completed by year-end.
Product Segment Specifics and Solar EPC
Large-size Cages sales in Q1 FY27 were ₹10 crores, an aberration attributed to challenges in ramping up the new facility, though management remains confident in achieving a 50% growth for the full year. The company is actively developing new products in white goods components, railways, seals, and other automotive stamping products. The solar EPC business generated ₹36.3 crores in revenue with a positive EBITDA of ₹2.82 crores in Q1, and is targeted to achieve ₹200 crores in revenue with a 7-8% EBITDA margin for FY27.