Quality Power Electrical Equipments Limited

Quality Power Electrical Equipments Limited delivered robust Q2 FY26 results, with consolidated total revenues reaching INR 218.9 crores, a significant 112% year-on-year growth and 13% sequentially. This strong performance was broad-based across FACTS, HVDC, and high-voltage power quality segments. Consolidated EBITDA stood at INR 49.4 crores, up over 200% YoY, with margins at 22.5%. For the first half of FY26, revenue reached INR 413 crores, marking a 126% YoY increase, and EBITDA was INR 97.7 crores, a 67% rise, with gross margin maintained at 40%.

The company is actively pursuing major capacity enhancement and technology expansion initiatives to become a leading manufacturer in its segment. Mehru, a subsidiary, is on track to achieve 45% more capacity by March, driven by higher utilization and operational discipline, which has already improved its operational margins to 12% this quarter. Quality Power is also investing in manpower and infrastructure to support future growth, including the commissioning of a new coil factory by the end of Q2 FY26 (June 2026).

Quality Power maintains a strong order book of approximately INR 830 crores, providing clear revenue visibility. The order book for Mehru is in excess of INR 375 crores, while Quality Power's standalone order book is around INR 285-290 crores. The company's tender pipeline is robust across various geographies, with significant activity expected in December and January. Management aims to keep the order book duration to not more than 12 months to mitigate margin pressure and supply chain risks, while still pursuing aggressive growth.

In the Gas Insulated Switchgear (GIS) segment, Quality Power has formed a strategic partnership with Hyosung to introduce gas-insulated instrument transformer technology in India. This collaboration positions Mehru at the forefront of the fast-growing GIS market, which is critical as utilities transition from AIS to GIS substations. While commercial supply for GIS products is guided to start within a year, the company is also exploring global opportunities in this segment, leveraging Hyosung's market share.

The company maintains a healthy financial position with excess cash of INR 200 crores, resulting in almost zero net debt. Management indicated that working capital requirements are stable, with internal discipline ensuring trade receivables are managed efficiently, targeting 60 days end-of-month or 99% for customers. This strong liquidity position supports ongoing investments and growth initiatives without relying on external debt.

Quality Power is navigating an environment marked by supply chain constraints, including delays in critical inputs like HVDC magnet wires (due to new BIS license requirements) and tightness in insulators and bushings. Raw material price volatility, particularly for copper and aluminum, is acknowledged as a normal cyclicality that is factored into the business model. The company is implementing strategies like backward integration and hedging to mitigate these challenges and ensure consistent deliveries.

The company is actively pursuing international orders, particularly in Europe, Australia, and the US, with a focus on high-voltage electrical equipment. Management highlighted that the primary competitive threat comes from Chinese manufacturers, who prioritize global domination over margins. Quality Power aims to counter this by becoming the cheapest producer globally through technology and backward integration, ensuring competitiveness in both domestic and international markets.

Quality Power has acquired Sukrut, a transformer accessory product line, which is expected to be consolidated in the next few quarters^⏳. While Sukrut's current revenues are anticipated to be around INR 28 crores for FY26, the acquisition's strategic importance lies in gaining access to over 1,000 new customers in the transformer business. This will facilitate the cross-selling of other product lines, such as magnet wires, into a broader customer base.