Shilchar Technologies Q1 FY27 earnings call

Shilchar Technologies reported a softer start to FY27, with revenue from operations at ₹134.60 crores. EBITDA for the quarter stood at ₹29.23 crores, translating to an EBITDA margin of 21.72%. Profit after tax was ₹20.86 crores. Management attributed the subdued performance primarily to external factors impacting exports and raw material costs.

The ongoing crisis in West Asia significantly affected the company's Middle East exports and led to a sudden increase in shipping costs, rising 3-5 times for certain geographies. This materially increased landed costs for customers, resulting in slower export dispatches and an estimated revenue loss of ₹30-35 crores for Q1. The issue is characterized as a 'cost and logistic issue' rather than a 'demand issue', with underlying customer demand remaining firm.

To mitigate export challenges, Shilchar proactively shifted its focus to the domestic market. However, passing on the sudden escalation in commodity prices for existing domestic orders took longer than anticipated, extending negotiations through much of Q1. This, combined with a lower export mix, contributed to pressure on profitability margins, which reflected only a partial pass-through of higher raw material prices in Q1.

The company's CAPEX project, Phase-3 expansion, which will add approximately 6,500 MVA capacity, remains on track for commissioning in April 2027. Civil foundation work is complete, PEB erection and utility infrastructure are progressing well, and all necessary equipment has been ordered. This new facility is expected to drive the next phase of growth from FY28 onwards.

Shilchar maintains a strong order book of almost ₹500 crores as of the call date, with a current composition of approximately 70% domestic and 30% export. These orders are primarily scheduled for execution in Q2, Q3, and Q4 FY27. Management expressed confidence in achieving the annual revenue target of ₹800 crores for FY27 and expects to operate existing capacity at almost full utilization. Business momentum is anticipated to be notably better in Q2 compared to Q1.

Q1 profitability was impacted by the lower export mix and partial pass-through of raw material costs. Management expects margins to improve in Q2 and Q3, noting that current orders are priced at current raw material costs. While the company aims to maintain historical profitability, a sustained reliance on the domestic market due to geopolitical issues could lead to a 'slight dip' in overall margins, as the margin difference between domestic and international clientele is approximately 10%.