Synergy Green Industries Limited

Synergy Green Industries reported a strong Q1 FY26, with total income rising 8% YoY to ₹85.38 crores. PBDIT saw a significant 25% increase to ₹13.16 crores, leading to a 210 basis points expansion in PBDIT margin to 15.41%. Profit Before Tax grew 26% to ₹5.13 crores, and Profit After Tax increased 14.44% to ₹3.38 crores, reflecting robust operational performance for the quarter ended June 30, 2025.

The company is undertaking a major capex cycle of ₹187-200 crores, primarily for expanding foundry capacity from 30,000 to 45,000 metric tons (₹60 crores allocated), installing 8 MW of solar power, and establishing in-house machining capabilities (20,000 tonnes capacity). The foundry expansion is expected to be operational by Q3 FY26, with the 8 MW solar capacity operational this month. A further capex of ₹400-500 crores is planned for FY26-27 to expand capacity to 100,000-120,000 tons progressively, with an initial phase of ₹300-400 crores.

The company has received schedules of ₹167 crores from Vestas for execution in 2026, and management indicated that the overall order book is 'already fully there,' supporting further expansion beyond 45,000 tons. While exports were flat last year and are expected to be around 15% of revenue this year (primarily to the US), management believes the impact of potential tariffs is minimal due to the single-source nature of their parts and low cost impact on the overall product.

Synergy Green aims to achieve a 50-50 revenue mix between wind and non-wind segments, up from the current 20-25% non-wind composition. This diversification strategy is intended to mitigate volatility associated with the wind industry and leverage opportunities in other segments like pumps, mining, and machine tools, where the total addressable market is significantly larger. Management sees no problem in achieving this 50-50 split.

The company targets a 20% revenue growth and over 100 basis points expansion in PBDIT margins for FY26, aiming for 'better than 18%' EBITDA margins. Initiatives like in-house machining, expected to contribute 5-6% to margins, and captive solar power (10 MW total, adding 8 MW this year) are key drivers for this improvement. Despite a 2-month delay in foundry expansion and potential short-term margin impact from new plant expenses, management expects overall positive impact.

The company's current gross debt stands at ₹150 crores with a cost of debt at 8.75%. Management is committed to maintaining a debt-to-equity ratio below 1.5, ensuring a manageable capital structure for ongoing and future capex plans. They also confirmed that almost all bill discounting is done without recourse, indicating prudent working capital management and minimizing financial risk.

India is seen as a strong competitor to China in the global supply chain, especially with government policies promoting local content (70-80%). The company is actively engaging with new OEMs like Envision and Nordex, and existing ones like Vestas and Siemens Gamesa. Management noted that while China is cheaper due to commodity prices and government incentives, India's growing domestic demand and focus on renewables (especially wind) present significant opportunities, with India expected to catch up^📎 quickly next to China.