Hy-tech Engineers Q1 FY27 earnings call

What moved the numbers, as management explained it

• Q1 EBITDA margin fell to 19.6% from 21.5% YoY as Feb-Apr war-driven steel price hikes were not yet passed through; OEM compensation effective 1 April to reflect from Q2.
• Employee expenses appear elevated as a share of sales because some Q1 sales were cut-off and shifted to Q2 per accounting standards; CFO said employee cost normalises at ~12% of sales on adjusted basis. (accounting)
• Revenue grew 13% YoY versus company's stated 20%+ growth plan; management framed this as timing of new-OEM ramp-up.
• Current capacity utilisation 60-70%; operating leverage from scaling towards 70 lakh fittings/month is the path to margin recovery to 24-25%.
• Export mix stable around 30% (USA 25%, Europe 7-8%) with 5-year plan to lift to 50%; rupee weakness adds ~10% extra export margin.

The numbers management led with

• IPO capex allocation: INR30 crore earmarked for capex to be deployed within one year
• 5-year revenue target: ~INR500 crore (implied 20-25% CAGR)
• Export mix target: 50% of revenue from exports within 5 years vs ~30% currently
• New automated plant capex envelope: INR350-500 crore on 6.5 acres over 2-3 years

The company's filed results for this quarter are not on file with us yet; these are management's own figures from the call.

Guidance on this call

By business

Balance sheet, capex and funding

• IPO raised INR135.7 crore total, including INR60 crore fresh issue; use includes capex, repayment of borrowings and general corporate purposes.
• INR30 crore capex earmarked from IPO proceeds for the current year, expected to add INR100 crore of revenue.
• Board approved acquisition of 6.5-acre additional land for future expansion; total cost being prepared for sharing in November.
• Targeting 50% of profit reinvested in capex annually, consistent with last 25 years.
• Forging capacity utilisation ~68-69% with two new mechanical presses landing at Shirwal and Nashik; forging kept in-house for quality.
• Planning INR350-500 crore capex over 2-3 years for the new 6.5-acre plant; will pursue more automation with higher productivity.

The industry, as management sees it

Management frames the underlying industry as small (1-2% of equipment cost) but critical, with Indian market growing at ~7-8% and OEM-specific addressable opportunity at INR2,000 crore. Globally, the TAM is INR40,000 crore, with India at only ~10% of Hy-Tech's revenue base - signalling substantial long runway. Management expects Hy-Tech to outpace industry at 15-20% domestic growth on SOB gains and import-substitution wins (especially from Chinese-sourced fittings now being indigenised).

Risks management named

• Q1 FY27 EBITDA margin compression to 19.6% (vs 21.5%) due to lag in passing through input cost hikes; recovery expected only from Q2
• No customer above 15% of business to manage concentration risk
• Export-business exposure to US tariff regime under current administration
• Government-customer cycles in Railways/DRDO/marine verticals will take 5-6 months to first revenue and longer to scale
• Employee-cost absorption issue in Q1 explained via sales cutoff shifting between quarters

Not answered directly

• 6.5-acre land acquisition capex detail
• Client names in US and Europe
• Flexible flow / low-pressure fittings scope
• Chinese imports share of India market

Asked for a number, answered without one

• Order book value: No order book as such; OEMs give a contract order with price and keep sending monthly schedules, so the company is effectively booked on annual schedules.
• Chinese imports share of India: MD said he had never assessed that and gave a rough ballpark of INR100-300 crore but emphasised it as a guess.
• 6.5-acre land cost: Plan still being prepared; full cost to be shared in November, though MD indicated capex of INR350-500 crore over 2-3 years for the new plant.
• Mazagon Dock / Cochin Shipyard revenue: Registration just completed; first revenue may come in 5-6 months but timelines uncertain with government entities; not material to growth guidance.
• Data center revenue: No active discussions at the moment; product just established, expects customer engagement in FY28-29 timeframe.
• USA subsidiary capex: Not quantified on the call; board has sanctioned a 100% US subsidiary and a warehouse to serve John Deere and others.

Every question, with its answer

1. 1. Q1 margin compression, FY27 margin guidance, marine revenue start

   Srinivasareddy, Yellow Investments20:55

   Question. Raw-material cost fell as a share of sales while employee cost rose 28.5% YoY - what really cut the EBITDA margin, and what FY27 margin should investors model? And are Mazagon Dock and Cochin Shipyard current customers - what revenue have they earned so far and when can first revenue be expected? Will marine margins be higher than regular products?

   Answer, Hemant Mondkar, Chairman and Managing Director. Hemant confirmed EBITDA margin guidance is maintained at 24-25% in FY27, and PAT can be expected to grow 25-30% YoY in absolute terms. On Q1 margin dip, he explained that input costs spiked in February-April on war-related raw-material moves; OEMs agreed to price revisions effective 1 April, but the recovery will flow in only from Q2. Without the lag, quarterly growth would have been ~20%. On Mazagon Dock and Cochin Shipyard, registration has been freshly completed (took ~a year); tender participation and revenue start expected in ~5-6 months. Margins from marine will be at regular levels, though export business carries ~10% extra margin (further aided by rupee depreciation against USD). He added that in normal engineering, EBITDA of 15-16% is typical, but Hy-Tech runs at 22-23% on Kaizen-led efficiency.

2. 2. Product criticality, wallet share with OEMs, competitive landscape

   Rahil Dasani, MAPL32:29

   Question. Could you explain what the products are and their criticality, including accuracy requirements? And who are the customers and what wallet share do you have - if they procure INR100 of fittings, are we the sole vendor? Who are the key competitors - global players like Parker/Gates/Chinese or domestic?

   Answer, Hemant Mondkar, Chairman and Managing Director. Hemant explained the product's mechanical role using backhoe-loader example: lines connect hydraulic pipelines operating at 300 bar vs 1 bar for household plumbing; leak-proof precision is non-negotiable, so few players qualify. OEMs cited: Tata Hitachi, JCB, Mahindra & Mahindra, Ammann, Wirtgen and injection-moulding machine makers. Wallet share: varies - Windsor Machines at 100% for 48 years; John Deere at 100%; some customers at 50-70%, newer ones at 10% rising. No single customer >15% of business. On competition: no Chinese manufacturer present in India; Parker is twice Hy-Tech's price in local market and used only by EPC contractors on foreign-company projects; domestic second competitor <50% of Hy-Tech's turnover. New MNCs entering India are pointed to Hy-Tech as preferred partner.

3. 3. Revenue guidance, capacity utilisation, order book model, capex, RM pass-through

   Gaurav Shukla, Finvestors

   Question. What is the FY27 and FY28 revenue-growth guidance? What is the current order book? What is current utilisation of forging and hydraulic fitting plants? Any capex plan for FY27 or FY28? Given CFO's margin commentary, how do you compensate for raw-material price hikes driven by geopolitical issues?

   Answer, Hemant Mondkar, Chairman and Managing Director. Reaffirmed guidance: revenue growth minimum 20% pa; PAT growth 25-30% pa. On order book - explained they do not run an order-book model; OEMs give annual schedules with negotiated price and continuously roll releases, so business is effectively booked. Capacity utilisation currently 60-70%; 20-25% headroom is intentionally maintained to absorb new OEM wins (e.g. INR10-15 crore orders). Capex: INR30 crore from IPO proceeds being implemented within a year - this will add INR100 crore of business. On raw-material pass-through - confirmed customers have agreed compensation effective 1 April; the catch-up reflects in Q2.

4. 4. End-industry mix, diversification ambition, global TAM, capex-to-revenue multiplier

   Rajiv Mehta, YES Securities37:47

   Question. Could you give a revenue break-up by end-industry/application? Are there more opportunities in existing industries, and are you exploring diversification into defence, aerospace or other manufacturing areas that can sustain 25-30% growth for multiple years? And how many years of revenue growth opportunity is the current capex plus announcements building?

   Answer, Hemant Mondkar, Chairman and Managing Director. Hemant reiterated 20% growth from the existing business is already independent of Railways/Defence; those will be additional. Aviation was ruled out for now (heavy certification burden), Railways and Defence will start in 1-2 years but not fast. He cited total global hydraulic-fittings TAM of ~INR40,000 crore - INR20,000 crore in USA, INR10,000 crore in Europe, INR2,000 crore in India, INR8,000 crore spread across other countries. Hy-Tech is at ~10% of Indian market. INR30 crore of current capex will add INR100 crore of business; 50% of profit has been reinvested in capex for 25 years, supporting 25-30% growth for the next 10 years.

5. 5. Data centre opportunity, R&D intensity, FY28 operating leverage

   Arvind Arora, A Square Capital44:07

   Question. Any colour on the data-centre opportunity for hydraulic fittings - including any ongoing customer discussions or specification work? What is the R&D spend today and any plans to increase it? And given your 20% revenue / 30% PAT growth comment, can operating leverage continue into FY28 as well?

   Answer, Hemant Mondkar, Chairman and Managing Director. Hemant confirmed data centres need stainless-steel fittings; range developed in the last 2 years. Commercial entry expected within ~1 year; first revenue could be in FY28/FY29; no active customer conversation yet. R&D currently ~1% of revenue - adequate since most products are standard; higher spend only on higher value-added items like valves (under consideration). On operating leverage for FY28: he told the analyst to wait for Q2 numbers to see the trend - margin trajectory was reaffirmed.

   Partly answered.

6. 6. US customer base, export mix over time, client name disclosure

   Shubham Gupta, Prospera Wealth Private Limited45:40

   Question. Tell us more about US customers, lined-up customers, and total US revenue potential. And looking 1-2 years forward, how will export revenue grow as a share of total? Could you name current US and European clients?

   Answer, Hemant Mondkar, Chairman and Managing Director. US currently 25% of revenue and will continue at that share deliberately - philosophy is diversification by country to insulate from geopolitical risks. Yesterday an Australian customer also committed. 5-year plan: 50:50 export:domestic split (today ~30% export). Within export, 25% USA, balance 25% spread across Europe, Australia, New Zealand, Dubai. On naming clients, he declined: "I cannot tell you that" - reflected three times.

   Not answered directly.

7. 7. Capacity post expansion, EBITDA margin path, PPE WDV movement

   Subhanu Bangal, 3 Head Capital47:58

   Question. What is future capacity post the expansion (current 483 lakh pieces p.a. fittings, 3,120 MT forging)? And on EBITDA margin, you said target is 24-25% this year - is that right? And fixed assets dropped INR6 crore YoY between FY25 and FY26 - what happened?

   Answer, Hemant Mondkar, Chairman and Managing Director. On capacity: today INR200 crore revenue base, with INR30 crore of capex will move to INR300-320 crore. Fittings to move from 35 lakh/month to 50 lakh/month; tonnage up 1.5x. EBITDA margin: confirmed 24-25% year-on-year expansion path; he expects +0.5-1% margin annually driven by export mix (better price) and Kaizen-driven operational efficiency, reaching 25% within 2-3 years. On the PPE drop, the CFO clarified the FY25 INR641 million and FY26 INR594.95 million comparison is essentially flat once CWIP and depreciation effects are normalised; capacity is increasing year-on-year. Hemant added that the plant is in a "D zone" - subsidies on machinery have also impacted written-down values.

8. 8. OEM contract structure, forging capacity, RM pass-through cycle

   Uttam Purohit, VVD Asset Management54:35

   Question. How are contracts structured with OEMs - fixed-price or variable? Given the commentary, it seems you have to renegotiate. Is forging capacity also being expanded? And is it correct that raw-material price hikes are generally recovered within 3-6 months?

   Answer, Hemant Mondkar, Chairman and Managing Director. Hemant clarified contracts are not formally written, but there is an understanding that OEMs compensate for raw-material cost increases and other input-cost escalations because of the long-standing relationship and Hy-Tech's reasonableness. OEMs do seek 1% year-on-year cost reduction in return, which Hy-Tech accepts. On forging - one mechanical press has already landed at Shirwal, another is en route to Nashik; ~15-20% extra forging capacity currently in place. In-house forging is non-negotiable because external forgings do not meet international standards. On RM pass-through - confirmed typical recovery within 3-6 months.

9. 9. Flexible flow solutions, own-brand distribution strategy, brass fittings stance

   Anshul Mandowara, Indus Opportunities Fund

   Question. Do we have manufacturing capability for flexible flow solutions also, or are we purely focused on hydraulics? And given the existing OEM tie-ups with major earth-mover brands, do we sell under our own brand through distributors, or is there a plan to do so?

   Answer, Hemant Mondkar, Chairman and Managing Director. Hy-Tech is not entering low-pressure fittings/brass fittings business at all (citing copper-price volatility and pilferage risk). Valves are under consideration as an add-on to the hydraulic range. Stainless-steel fittings for oil-and-gas and data-centre are the next adjacent verticals. On own-brand retail via distributors - direct business is with large OEMs and small OEMs via distributors (4 in India: Ahmedabad, Bangalore, Delhi, Pune). OEM mix 70-75%, distributor ~10%.

10. 10. Domestic market capture paths, Chinese imports, 6.5-acre capex envelope, current land bank

    Rahil Dasani, MAPL

    Question. Indian hydraulic-fittings market is INR2,000 crore - is the scale-up dependent on distributor base expansion, or are there other paths? How much of that INR2,000 crore is Chinese imports? Excluding the INR30 crore existing capex, how much will the planned 6.5-acre land acquisition cost, and what is the current land bank across 5-6 facilities?

    Answer, Hemant Mondkar, Chairman and Managing Director. Domestic scale-up pathways: (1) Chinese-sourced fittings now being indigenised - Sany already visited last month with a "tremendous" requirement; (2) registering with foreign EPC contractors to supply on their projects; (3) consolidation wins at customers who currently use 7 suppliers and want to reduce to 2. Domestic business is INR120-130 crore excluding exports, expected to double in 3-4 years. He declined to estimate Chinese import share ("no idea, maybe INR100-300 crore"). On the 6.5-acre land cost - he deferred to November for the detailed plan; capex envelope likely INR350-500 crore over 2-3 years. Current land bank is ~8 acres = 3,20,000 sq ft across 6 facilities.

    Not answered directly.

11. 11. Q1 employee cost spike

    Rajneesh Bhandari, VMware1:04:02

    Question. CFO mentioned employee expenses are up in this quarter - what conspired the increase?

    Answer, Sunil Satwani, Chief Financial Officer. CFO clarified: employee expenses are higher in absolute value YoY because absolute top line is higher; the apparent ratio jump is due to a sales cutoff between the two quarters per accounting standards. Add back that shifted sale and employee-cost ratio remains stable at ~12% of total sales.

12. 12. SKU additions trajectory

    Srinivasareddy, Yellow Investments1:06:12

    Question. SKU addition slowed from 2,206 in FY24 to 880 in FY26 - is this a move towards higher-value parts or a deliberate slowdown?

    Answer, Hemant Mondkar, Chairman and Managing Director. Hemant clarified SKU additions are driven by OEM-driven RFQs when they launch new equipment - not a deliberate slowdown. CFO added that new SKUs depend on customer inquiries, on that basis development happens.

13. 13. 5-year revenue target, market sizing

    Paras Chheda, Purpleone Vertex Ventures LLP1:07:54

    Question. In the 5-year plan, what is the targeted revenue size? And PAT growth at 25-30% YoY? What is the global and Indian market size?

    Answer, Hemant Mondkar, Chairman and Managing Director. 5-year revenue target INR500 crore (validated via 20-25% growth). PAT growth 25-30% YoY confirmed. Global market size: USA INR20,000 crore, Europe INR10,000 crore, India INR2,000 crore, others INR8,000 crore (total INR40,000 crore).

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