TD Power Systems Limited

TD Power Systems reported a strong Q1 FY26 with standalone total income growing 36% YoY to INR 3.63 billion and PAT increasing 51% YoY to INR 471 million. Consolidated figures also showed robust growth, with total income up 36% to INR 3.76 billion and PAT rising 40% to INR 500 million. EBITDA margins for the standalone entity stood at 18.7%, an improvement over 17.17% in the previous year, reflecting healthy operational performance. The company maintains a strong cash position of INR 2.3 billion.

The quarter saw a significant order inflow of INR 3.92 billion, marking a 32% increase year-on-year. Exports and deemed exports contributed 66% (INR 2.57 billion) of this inflow, demonstrating strong international demand. The total manufacturing segment order book stands at INR 14.68 billion, with INR 10.8 billion from generators and motors, INR 3.48 billion from railways, INR 0.11 billion from spares and aftermarket, and INR 0.29 billion from the Turkey business. Management expects to execute INR 14.50 billion of orders in FY26, indicating strong revenue visibility.

The steam turbine market (domestic and export) is projected to grow steadily at 10-12%, driven by captive power plants, biomass, and waste heat recovery. The motor business is targeted to reach INR 1.5 billion in FY26 and over INR 2 billion in FY27, with strong pipelines for synchronous and induction motors. The railways segment is expanding with orders for US, European, and Russian markets, alongside continued Alstom orders for India, anticipating a significant uptick in FY27. The company also noted strong demand from data centers and AI in the US and Europe.

Facing new additional 25% tariffs on direct exports from India to the US, TDPS is implementing 'Plan B' to shift part of its production to Turkey. This strategy leverages its existing plant in Turkey, which will perform assembly and testing, allowing products to attract a 15% duty as 'Made in Turkey' goods. While this involves extra work and negotiations, management is confident it will mitigate the tariff impact^🌐 and maintain a cost advantage of around 20% compared to European competitors, with no expected order delays or cancellations.

TDPS is actively developing new growth avenues, including a UK design center for larger generators (50-150 MW) to target a broader global market, with commercialization expected post-2028. The company is also exploring the CO2 battery storage market, a very exciting and environmentally friendly technology with potential for large-scale business in the future, following a pilot project in Italy. These initiatives aim to diversify the product portfolio and tap into emerging high-growth segments.

The company has a capex plan of INR 40-45 crores for FY26, with approximately INR 20 crores allocated for replacement and the remainder for growth. This investment supports the progressive commissioning of a third plant from Q2 to Q3 FY26. This expansion will initially boost capacity to support INR 2,000 crores in revenue, with potential for INR 2,300-2,400 crores through optimization without further large investments, indicating efficient capital utilization.

Trade receivables for the quarter stood at INR 425 crores, with working capital days currently around 120. Management expects this to continue due to high billings towards quarter-end. The company has provided a consolidated revenue guidance of INR 15 billion for FY26 (with upside potential) and a tentative INR 18 billion for FY27, while aiming to maintain EBITDA margins at current levels plus/minus 0.5%. The management expects to confirm the FY26 guidance in the next quarter.