Harsha Engg Intl

Harsha Engineers reported a flattish Q3 FY25 performance. The engineering business achieved a topline of ₹302 crores, an 8.63% YoY increase but a 2.58% QoQ dip. EBITDA for the engineering segment was ₹48.2 crores, showing a slight 0.61% YoY decline. The solar business contributed ₹37 crores in revenue and ₹1.28 crores in EBITDA. Overall, the company noted persistent headwinds in Europe and the US, while India showed mixed trends with strong growth in Bronze Bushings.

The India business saw higher single-digit growth in Q3 FY25, primarily driven by the Bronze Bushing segment, which recorded over ₹60 crores in 9-month YTD sales and is on track to surpass the ₹80 crores annual target for FY25. Management projects this segment to reach ₹300 crores annually in the long term, with a minimum 50% growth expected in FY26. However, the domestic cages business was soft in Q3 due to year-end inventory reduction by major MNC bearing companies, but is anticipated to resume 8-10% growth in Q4 FY25.

International markets, particularly Europe and the US, continue to face significant headwinds with no clear signs of revival. The Romania subsidiary remains a major concern, not expected to achieve operating breakeven in the current financial year due to demand compression and fixed overheads. While China's year-to-date performance has improved, the overall international outlook remains uncertain, especially with potential tariff wars between the US and China.

Harsha Engineers has secured a major long-term sourcing contract for cages with a global customer, projected to generate €6-10 million in annual revenue at full potential, with supplies commencing in H2 FY26. The company is also expanding into complex stamping components beyond bearing cages, focusing on green and battery-operated vehicle segments. Additionally, customer CAPEX in India for localization is expected to create an incremental opportunity of around ₹200 crores for cage supply at peak.

The company incurred ₹70.8 crores in CAPEX during Q3 FY25 and targets an overall CAPEX of approximately ₹170 crores for FY25. This investment is primarily for a new Greenfield plant, with commissioning planned in phases. Most new capacities are expected to come online by the end of Q1 FY26, supporting future growth and new contract requirements.

Harsha Engineers successfully reduced its overall working capital cycle to 144 days from 151 days in the previous quarter. While the current financial year's topline is expected to be more or less flat, bottom-line growth is projected to be much higher, in line with the current run rate. The consolidated EBITDA margin for the nine months stood at 16.09%, and the long-term target is to improve this to 17-18% from the current 14-15% range, though management noted the difficulty in predicting this given the current environment.