Simplex Castings Q1 FY27 earnings call

Simplex Castings Ltd. delivered a strong Q1 FY27, with revenue from operations growing by approximately 35% year-on-year to ₹60.95 crores. EBITDA increased over 25% year-on-year to ₹11.52 crores, resulting in an EBITDA margin of 18.89%. PAT saw a significant rise of 45% year-on-year to ₹6.86 crores, with PAT margins improving to 11.25% from 10.48%. The company expressed increased confidence in its strategic direction and scale, aiming to leverage its deep engineering and manufacturing capabilities to address a substantially larger market opportunity than historically pursued.

The company's near-term order book has expanded significantly to roughly ₹150 crores, compared to a historical range of ₹80-100 crores, providing strong revenue visibility. Management confirmed that the FY27 revenue target of ₹300 crores is on track, with ₹60 crores already achieved in Q1 and the remaining ₹150 crores from the order book to be executed this financial year, supplemented by pipeline orders. The company is also targeting over ₹100 crores each from the railway business and power sector in the next year.

Working capital remains a key financial priority, with the current cycle at 100-120 days. Simplex Castings is implementing a strategic shift in its product mix at Unit 1, focusing on faster-moving products with shorter execution and realization cycles, such as railway bogies (30-45 day cycle). This strategy, combined with the use of platforms like RXIL and Invoice Mart for faster payments, aims to reduce the working capital cycle to 60-70 days by the end of the next financial year. A similar product mix strategy is planned for Unit 3.

The company is currently operating at 50-60% capacity utilization and targets reaching at least 80% by the end of the next financial year. Capital work in progress amounts to approximately ₹30 crores, deployed for both working capital needs and capital expansion, primarily at the Tedesra Unit, expected to be completed this financial year. Simplex is actively expanding into new growth verticals beyond its traditional steel and railway sectors, including defence, oil & gas, and shipbuilding, aiming for 10-15% of business from defence and shipbuilding in the next financial year. The company is also exploring EPC projects, targeting order sizes of ₹100-150 crores with margins of 15-20%.

The previously awarded Green Hydrogen project, a consortium effort with IIT Bhilai and a grant of ₹160-161 crores, had to be closed. This was primarily due to unforeseen GST implications on the grant and subsequent changes in the tender conditions, which made it commercially unviable for Simplex. The company clarified that its technical collaborations are not royalty-based but rather technical transfers that have been completed. Simplex continues to focus on leveraging its existing infrastructure and skilled workforce to participate in larger, more complex, and higher-value projects.