Pennar Industries Limited

Pennar Industries reported consolidated revenue of ₹943 crores, a 12.3% YoY increase. However, PAT growth was limited to 10.14%, reaching ₹33.55 crores. Management attributed this subdued profit growth to one-time^📎 employee-related costs amounting to approximately ₹4 crores, stemming from labor code implementation, a court order, and wage agreements. Excluding these non-recurring^📎 items, management stated that PAT growth would have been around 20%, in line with their guidance.

The Custom Designed Building Solutions (PEB) segment, a key vertical, reported flat revenue of ₹440 crores. This was due to lingering labor challenges in India which are now reportedly resolved, and a delayed revenue contribution from the new US acquisition, Telco. Management is highly optimistic for a strong rebound, citing a robust PEB India order book of ₹820 crores and a combined US order book (Ascent Buildings and Telco) of $62 million. The Telco acquisition is now fully integrated and expected to contribute meaningfully from Q4 FY26.

The Diversified Engineering segment was the standout performer, with revenue growing 25.2% YoY to ₹520.31 crores. This growth was primarily driven by strong performance in the steel BU, boilers, and BIW (Body in White) divisions. The boilers division, in particular, has a strong outlook with its order backlog increasing to ₹123 crores, bolstered by export orders from Australia and Sri Lanka. Management expects this segment to be a major growth lever in the coming year.

The US operations are poised for significant growth. The combined order backlog for metal buildings (Ascent) and structural (Telco) stands at $62 million, up 30% over the last six months. The company is expanding its sales and business development teams in the US to capitalize on this momentum. Furthermore, the reduction in US tariffs for hydraulics is expected to provide a significant boost to that business vertical, with management already seeing renewed interest from US customers.

Despite the Q3 PAT miss, management firmly recommitted to their guidance of achieving double-digit PAT growth north of 20% YoY. They also reiterated their long-term target of reaching a sustainable 7% PAT margin within the next 2-3 years, up from the current adjusted level of ~4%. This confidence is underpinned by the resolution of operational issues, a strong and growing order book, and multiple growth levers firing across their key business verticals.

The company maintained healthy capital efficiency metrics, with ROCE at 21.3% and Return on Equity at 12.1%. Working capital days stood at 76, which management acknowledged as high and is an area of focus for improvement. Finance costs were well-managed at 3.56% of net revenue, below their guidance of 4%. The cost of debt is a blend of 9.5%.