Pennar Industrie

Pennar Industries reported a strong close to FY26, with Q4 revenue reaching INR933.7 crores and PAT growing by 14.89% to INR41.04 crores. For the full fiscal year, the company achieved its highest ever revenue of INR3,666 crores, an increase of 12.33% YoY, and record profitability with PAT at INR138.83 crores, up 16.22%. The PAT margin for Q4 improved to 4.44% from 3.9%, and for the full year, it stood at 3.83% compared to 3.7% in FY25, reflecting a positive trajectory towards higher-margin businesses.

The Custom Design Building Solutions segment (PEB) saw Q4 revenue grow by 12.35% from INR460 crores to INR516 crores, primarily driven by the U.S. business, including the Telco acquisition. PEB India's capacity utilization is at 70%, with an order backlog of INR810 crores. PEB U.S. continues strong double-digit growth with an order backlog of $63 million. The Boilers and Process Equipment segment's order book increased to INR145 crores, and Hydraulics' backlog grew to INR34 crores. The overall order backlog stands at approximately INR900 crores, indicating strong revenue visibility.

The company's PAT margins have shown consistent improvement over the past four years, with Q4 FY26 at 4.44% and FY26 at 3.83%. This expansion is attributed to a strategic shift towards higher-margin businesses like PEB U.S. and Engineering Services, and value addition in BIW, ICD, and boiler businesses. Management is committed to achieving 20% PAT growth for FY27 and aims for a 5% PAT margin in the future, though not committing to it for the immediate year. The Engineering Services segment's higher margins also contribute positively to the bottom line.

Working capital days increased to 82 days in Q4 FY26, up from 65 days, due to conscious inventory procurement and some stuck debtors. Management plans to reduce this to 75 days in the coming quarters by collecting receivables and optimizing inventory turns. The debt-to-equity ratio is currently 0.98x, which the company aims to bring down to 0.8x by the end of FY27 through a combination of profitability, capex management, and potential equity infusion. Cash and cash equivalents, including other bank balances, reached a record high of INR269.93 crores.

Planned capital expenditure for FY27 is projected to be sub-INR100 crores, primarily for the completion of the BIW Hyundai plant and automation initiatives. The company is investing in automation, such as the AGT Robotics line, to reduce reliance on manual labor and improve efficiency and output quality, particularly in painting, surface treatment, and assembly. This is expected to enhance operating margins in the long term, compensating for initial capex costs. A minor INR5 crore equity investment was made in the solar joint venture due to USD-INR exchange rate fluctuations and technology changes.

The US PEB market is estimated to be over $10 billion, with Pennar currently holding a sub-3% market share. The company sees significant growth potential by expanding its geographic presence beyond the current South and Midwest regions. Engineering Services, a major growth driver, is leveraging AI-assisted design and detailing to enhance efficiency and value. Management views AI as automation that improves productivity and does not pose a risk to the business model, with the segment expected to scale well in FY27.