Hitachi Energy India Limited (POWERINDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hitachi Energy India Limited Q1 FY '27 Analyst Conference Call. [Operator Instructions]. Please note, this conference is being recorded. I now hand the conference over to Ms. Priyanka Bhagat, Head, Investor Relations, Hitachi Energy India Limited. Thank you, and over to you, ma'am.

Good evening, everyone. Thank you for joining us today for the Quarter 1 Financial Year '27 Earnings Conference Call of Hitachi Energy India Limited. We appreciate your continued interest in our company and value the opportunity to engage with you as we discuss are performing for the quarter. Before we begin, I would like to remind everyone that certain statements made during this call may constitute forward-looking statements. These statements are based on current expectations and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. With that, it is my pleasure to invite Mr. N. Venu, Managing Director and CEO of Hitachi Energy India Limited to share his insights. Over to you, sir.

Thank you, Priyanka. Good evening, everyone, and thank you very much for joining Hitachi Energy India's Quarter 1 FY '27 Earnings Conference Call. So we have just announced our quarter 1 FY '27 results, and I hope all of you got the opportunity to go through the same. So in the next 20, 25 minutes, I want you to our performance for the period ending June 30, 2026. As always, we follow the presentation to the webcast or downloaded from the stock exchange for use of reference, I will refer to slide numbers. Today, in this room, I'm joined by our CFO, Ajay Singh; and Poovanna Ammatanda, the General Counsel and Company Secretary of Hitachi Energy India. I'm Pleased to share that we have started the financial year, 37%, a very strong note, generating a very robust growth in outer orders and revenues. Our Q1 FY '27 performance reflects our continued focus on operational excellence and execution of the project our order backlog in a disciplined way, enabling us to effectively convert our strong order backlog into revenue growth. As part of our commitment to strengthen execution capabilities and building a more resilient supply chain. We began constructing our Hitachi Energies manufacturing facility in Karjat, Vadodara in June 2026. This investment reinforces our commitment to India's energy transition, energy security and the government's vision of Make in India. So despite geopolitical challenges that the country continues to deal with the underlying fundamentals of our business remain exceptionally strong. India continues to witness unpresented in as plant in transmission infratructure, renewable energy integration, renewable energy renewable energy, deployment, modernization and resilience and organization and different infrastructure. The long-term structural driver continue to create a significant and sustainable growth opportunities for our industry. Our strong order backlog, combined with a healthy bidding pipeline provides good visibility for future revenue growth. More importantly, we remain focused on execution, disciplined profitable growth and delivering value to all of our stakeholders, supporting the continued energy security aspiration. With that note, let me now take you over the presentation, and I'm now moving to Slide #3. Our license to operate safety, which is our license to operate. As you all know, safety remains fundamental to our license to operate. We continue to embed best-in-class safety practices across our factories, project side, offices. During the quarter, we conducted more than 450 life-saving rules inspections, more than 850 observation tools, enabling us to close all high-risk of that identified during the period. In parallel, we continue to implement health and safety programs and training initiatives across our facilities to further strengthen our safety culture. So these efforts, we remain focused on achieving a recordable injury frequency rate of 0.09. So moving to the Slide #4, which is very, very important to us, the ESG targets and action plan sustainability remains central to our strategy with a strong focus on decarbonizing our operations as reflected in the table. We expect to achieve most of our 2030 September targets by end of this financial year with the exception of our water and diversary goals, which will go up to year or more so, but much before our 2030 stated targets. During the year, we achieved a 16% reduction in freshwater usage compared to the 2019 baseline through recycling initiatives and the deployment of water-efficient fixtures. We are confident that achieving our 2030 water target remains well within reach. Notably, our Halol facility and the water positive index certificated last quarter, underscoring our commitment to responsible water teaching. We also made meaningful progress in governance and social impact. Our gender diversity is more to 10%, reinforcing our commitment to building a more inclusive workplace. We are targeting further improvement of 3 to 4 percentage points by 2030. At the same time, we continue to uphold an uncompromising commitment to integrity with a 0 incident recorded during the year. Our sustainability progress is closely aligned with the broader energy transition and India's commitment at COV '26. I move to [indiscernible] 5. India's electricity demand is expected to grow strongly over the coming years and also coming decades. In parallel, the power grid is becoming increasingly complex with a high low densities rising reliability requirements and emerging demand drivers such as enabled world enable data centers. This is resulting in significant investments across transmission, distribution and consumption and also broader grid infrastructure. Our addressable market continues to present significant opportunities, and we see a strong momentum in renewable energy, transmission investments to integrate non-fossil fuel capacity, increasing investments in data centers and accelerating adoption of electrical vehicles to just name a few. Overall, these trends reinforce our confidence in multiyear growth opportunity for our portfolio, whether it's the product systems, services and software at Hitachi Energy. We are thoughtfully at the forefront of India's energy transition -- we recognize the responsibility that comes with this role and remain committed to enabling a more reliable, resilient and system energy future for execution excellence, technology leadership and strategic investments in capacity and capabilities. I'll move to Slide #6. As you can see our performance against this backdrop, we secured orders of INR 5,096.5 crores during the quarter 1. And Q1 last year, Q1 included a lot HVDC just to provide a more meaningful comparison of our underlying performance. We have also presented our growth, excluding HBDC for the current quarter. On a comparable basis, order intake in Q1 increased by 26.1% on a year-on basis, and 39% on a quarter-on-quarter. This growth was driven by several notable wins across key sectors. Among which, I would like to significantly highlight Hitachi Energy India first, the battery energy toresystem project, a 2-gigawatt wind power evacuation project in Europe, part of the 2 gigawatt wind power question project. and supplier GIS IV solutions for 100 gigawatt solar park investor in India. In addition, we secured multiple data center orders from the hyperscalers during the quarter, a notable project amount, this is 42.5 mva data center project in Hyderabad awarded by a leading Indian multinational covenant. As a result, we closed the quarter with an order backlog of INR 32,242.1 crores, representing strong highest order backlog -- higher order backlog ever and also strong double-digit growth compared to the Q1 FY '26, providing revenue visibility for the coming quarters. We won several projects in the renewable sector, in industries data center I've already talked about and also exports. If I move to Slide #7. The first order, the key order wins during this year. The first order supports the acceleration of Europe grid expansion and Lamar initiatives comprising several projects that will enable the transmission of clean power. As part of this program, Hitachi Energy India will collaborate on 3 key transmission links. And these 3 links will deliver 6 gigawatt of fleet electricity to the grid, and we will be supplying and also both products as well as a services partly to our customers. The second project marks a major milestone for Hitachi LSG in India. It's a 165-megawatt, 317 megawatt bakery store system project AP reflecting a strong validation of our capabilities in big integration for quality and advanced energy solution. If you recall our Investors Day in Mumbai and we talked about entering into the new segments, Battery Energy storage is one subsegment where we are very successful in securing the first order in the quarter ended this now. The third project is a significant data set or related order for a new cooling station and main pool in station comprising of 56 days of at 12.5% above that. And the project will support 100 gigawatt of solar park in Western India, highlighting our expertise in delivering large-scale transmission infrastructure enable industry integration emerging digital infrastructure in that. And if I go to the next slide, we will discuss the projects what we executed during the quarter. As a technology leader, we remain committed to enhancing grid reliability through timely execution and high-quality project delivery. During the quarter, we achieved significant progress in several strategic projects. I'd like to highlight a few notable milestones. The gas and [indiscernible] substation project for an iron ore processing plant in Chattisgarh and the second 1 is 220k,re-based aligned with at systems at Damanjodi, Odissa and the 220 project in Mumbai, Maharashtra and the last 1 you know very well. This is a 1,000-megawatt crudes RDCsisont project in Mumbai, in Maharastra. These projects underscore our strong execution capabilities across diverse industry segments and geographies. Our comprehensive scope of work as the entire project life cycle including design, engineering, manufacturing, supply, erection, testing and end-to-end commissioning. This integrated approach enables us to deliver high-quality, reliable solutions while addressing the evolving needs of our customers and supporting the modernization of the power grid. Beyond project delivery, we continue to invest in Katamati building innovation and industry leadership to support long-term growth, which we're going to discuss in the next slide. Slide # -- I move to Slide #9. The energy sector, you all know is at the forefront of the ongoing transformation of the global economy and especially also in Indian economy, making it imperative for Hitachi Energy to continuously adapt to this evolving landscape. Engagement that industry programs, conferences, in knowledge sharing platforms provide valuable insights and fresh perspectives. Keeping us ahead of emerging trends and accelerate the execution of our strategic priorities. During this quarter, we actively contributed to talent development innovation and industry thought leadership to several key initiatives. Some of them are Hitachi Energy, the tech center and our Baroda train, several executives from Bhutan Green Power Corporation. And the next one is in a partnership with NIT Warangal, Hitachi Energy hosted Innom3.0, bringing together more than 140 participants across 28 teams to develop AI ML powered digital in solutions for the energy sector. And the third 1 is at Elk Tomas Plaga Vitaeris giant industry leaders to discuss India's growing global influence and opportunities emerging from its accelerating energy transition smart grid expansions and manufacturing growth. These initiatives reflect our commitment to building industry capabilities fostering innovation and strengthening our leadership position in shaping a more sustainable, resilient and digitally enabled energy future. I move to Slide # 10, give you a little bit more color on our order growth. Our order growth in the domestic market during the quarter was driven by strong momentum across industry, industries, data centers and the renewable segment. The chart on the right highlights the order mix. From a business segment perspective, product orders images the largest contribution FY '27. From an end market perspective, the order book remains well diversified with contribution broadly distributed at our sectors. Looking at our customer channels, the quarter witnessed strong contributions from EPC contractors and OEM customers, reflecting the breadth of our market presence and strength of our customer relationship. Overall, the order intake demonstrates continued demand for our technology portfolio. Moving to the Slide 11 to further strengthen our execution capabilities -- we began constructing Hitachi Energy India's 20th manufacturing facility in Karjan, Vadodara in June 2026. This investment underscores our commitment to supporting India energy transition enhancing energy security and advancing government Make in India initiative. The new facility is being designed as a fully digital and smart manufacturing unit, leveraging advanced technologies to enhance quality, productivity and operational performance. With a targeted commissioning date of the -- the last quarter of the fiscal year -- calendar year 2028. Capacity will play a key role in expanding our manufacturing footprint entering local capacities and supporting the growing demand for systems engine structure in India and global markets. Overall, our strong order intake helps the backlog successful execution and continued investment in future capacity position us well for a sustained growth. So with that, I will hand over to Ajay to take you through the next 2 slides. Over to you, Ajay.

Thank you, Venu, and good evening, everyone. So let me take you through the financial performance a little bit in detail for quarter 1. So if you see orders, we had clicked INR 5,096 crores. And if I compare from quarter-on-quarter. We have grown by 110%. But just to compare without HVDC if you remove them, you see we have grown Y-on-Y 26% and quarter-on-quarter, 39%. So this gives a more robust growth in this particular quarter. revenue from operations weekly INR 2,493 crores, and we have grown by 68% from a Y-o-y basis. And that also supported in growth of the profit before tax. So profit before tax, if you see, we have grown by 120%, 39.5 crores, that is 15.6% if you compare year-basis, [indiscernible] 10%. Frofit after tax, we reached 11.8%, which was earlier, it was 8.9%. And if you see operational EBITDA, we were INR 399 crores, which is compared to what we did in the antis 11.5%. So it is important to note that this EBITDA performance includes an unrealized foreign exchange loss of INR 36.37 crores which is recorded in this quarter. If I come to the next slide, a little bit -- give you more details. You see if we have a revenue for operation 293 and we had other income of roughly INR 57 crores, which includes the interest income that we have settled our deposits that we have set. Margins -- gross margin is fairly consistent. I say 40% particular quarter personnel expenses around 6.5% and other expenses, 17%, which would compare from a Y-o-Y basis, which was a 2.5% Exchange loss is INR 60 crores, which is basically notional in nature. And depreciation has increased compared to the previous quarter, and basically, we are doing CapEx around our -- for the capacity expansion. -- finance cost remains consistent, and that is how we can see overall profit before tax is 15.6% and profit after tax is 11.8%. Over to you, Venu.

Thank you, Ajay. And ladies and gentlemen, our Q1 FY 2017 demonstrates the strength of our strong go-to-market strategy, our business model and the effectiveness of our execution strategy. We delivered strong growth in orders, revenue and profitability will continue to invest for the future through capacity expansion technology, leadership and talent development. Our record order backlog and healthy bidding pipeline provides strong visibility for growth, and we remain focused on calculating these opportunities into discipline and sustainable value strengthening our core business, renewables, HVDC, industries and infrastructure, while ensuring the continuity and resilience of our installed base to the service business -- at the same time, we remain committed to effectively executing our strong backlog enhancing productivity and maintaining the highest standards of quality and customer satisfaction. We are also well positioned to capitalize on emerging growth opportunities, particularly in the Mat energy storage system, renewable integration, data centers, did modernization where demand fundamentals remain highly encouraging. Looking ahead, we'll continue to invest in our people, technology, manufacturing capacity and operational capabilities to support long-term sustainable growth. Backed by strong market fundamentals, a robust order pipeline and our differentiated technology portfolio, we remain confident in our ability to create long-term value for all of our stakeholders while contributing to more resilient, secure and sustainable energy future. So thank you very much for listening to me. And now we open the floor for question and answers. Thank you very much.

[Operator Instructions]. Our first question comes from the line of Amit Anwani with PL Capital.

Congrats for the very strong set of numbers. First question pertains to the 2 gigawatt tenant order in Europe. So what's the quantum of that order, which is there in the INR 5,000 crore book order inflow? And second, are we expecting more orders as we understand, there's a joint venture for at least 4 or 5 others with L&T globally by Hitachi Energy. So are we expecting more such orders in the coming time?

Yes. So right at this point in time, it is a combination of 3 orders, okay? And we do look more of services and also supporting from here, and it's approximately around INR 1,700 crores.

Understood. And yes. And second, sir, I wanted to understand, you highlighted about battery energy storage on the strong pipeline side, battery energy storage and data centers. So on battery energy storage, I wanted to understand, will you be primarily focusing on the domestic market for BSS as of now or there's an export opportunity. And second, where do we stand in terms of BSS probably are we expecting orders this year, if you can highlight more on the BSS side.

As you know very well, the domestic -- the battery energy storage, we have quite a strong robust requirements. And there is also mandated that every renewable energy needs to have a mandatory energy today. So all those things are driving the huge amount of growth opportunities, domestic. Right now, our focus is to supply for the domestic market. In the domestic market itself is a huge requirement. We have just started. So we will be doing -- as you know, there's a new technology. We've got to be very -- we are the first ensure that this technology is deployed, and then we will do the scale it up so that pipeline is quite robust.

Right. Sir, lastly, how -- if you could share the export contribution in order inflows and revenues.

So export contribution on the revenues is ballpark around 25%. So that is the run rate we are seeing at the moment.

[Operator Instructions]. Our next question comes from the line of Shirom Kapur with Jefferies.

My first question is on your margins. So while, of course, your operating EBITDA margins have improved very well Y-o-Y. But on the gross margin side, there seems to have been a contraction of over 350 basis points. So if you could comment on that, what has driven this cross margin contraction? Is it a function of mix or maybe the commodity costs where we have not been able to pass through the entire commodity inflation. Could you give a bit more color on that?

So we are talking about the gross margin. I see the gross margin compared to the previous quarter it is improved in my view.

Actually, year-on-year, sir, that's what my question was on a year-on-year basis.

So on year-on-year basis, I think we are talking only 0.2, 0.3 basis points, right? -- on even talk about year one, I think basically there also I see an improvement, not contraction in the gross margin.

Okay. I mean I can check on that and come back. But okay, y second question is on the best side. So you, of course, highlighted you won your first order on BES. Could you elaborate on what exactly our offering is here and best, who is the competition? What are the kind of products that we're offering? And is the margin profile here similar or better versus the rest of the business?

No, I think this is the -- what we are talking about is the battery energy storage is everything. -- it's more of a modular and scalable questions, what we have we have unveiled during our investors' time in versus the thing. And it doesn't include the batteries. So normally, we don't pull batteries into that because that is we design what kind of batches required the customers will place the batteries on that in that. So right now, the margin profile is, as you know, this technology, you need to get mature. We need to also do a lot of localization. So over a period of time, this market also will become similar to the margins, what we have with that. But the key is that we had -- this is a scalable version where easy to fit, easy to do that, and there's a lot of revenue potential going forward on that because we do a lot of digital layer on to that, so that be able to monitor and provide the digital services going forward in that. So it will be -- as I said, we got the first order. So we got to execute, we've got to also look at what are the things, and it's the end-to-end we offer to our customers, excluding the batteries, but integrating the battery into the software of battery management is also part of our solutions.

Just for the earlier question, when we see at the year end, there is more or less some gross margin is same. But when you compare with the same period, yes, there is some contraction, but that is mainly because of the product mix that we have executed. So this more dependent upon the product mix.

Got it, sir. Just lastly, on just a bookkeeping question on your order flow. So you mentioned that year-on-year, excluding HVDC orders, we saw a 26% growth -- just to clarify, in your second quarter presentation last year, you had mentioned that versus the first quarter last year, you had seen 28% growth in your order flow. So that number implies you did about INR 2,200 crores in the second quarter last year orders. So that would imply about INR 1,700 crores ex-HVDC orders in the first quarter. But here, if we look at your first quarter this year, out of 5,000, if we exclude the 1,700, you've done about INR 3,300 crores of orders. So that seems to be more than a 26% increase, sorry, also the

We remove the HVDC -- when we compare the remote from both sides. We remove HVDC from that quarter and remove HVDC from that quarter.

That's -- so just to understand if we take the 26% year-on-year growth. So that means whatever number we get for the first quarter last year, that would be the ex-HPDC number, which means that the balancing would be the HVDC order in the first quarter of last year? Would that be the correct understanding?

More or less, yes.

Our next question is from the line of Parikshit Kandpal with HDFC Securities.

Congratulations on a great quarter and a strong order inflow. So my first question is if I remove this HBDC order of INR 1,700 for balance is about 3. So out of that, how much is the base order, I mean more regular base orders, I mean excluding the data center in the best order?

Most of them are in base orders. We don't have any major launch orders in this quarter -- all our -- it's a good strong thing from the data center this quarter.

So the data center would be a large order, right? I mean almost INR 400 crores to INR 500 crores, and I think BES will be even....

The multiple orders, not 1 order. It's a data center, multiple orders we have.

Okay. Okay. And this best you are doing, is it for the utility-grade customer? Or is it a C&I customer? I mean, from which you are doing the best?

It's a C&I customer.

So your focus largely will be on the C&I segment, right, not at the utility scale.

No, we will also do orbit of utility customers. As I said, we have been first thing, where we need to see how our product will fit into that. So those are the things we'll do. We are not limiting only to C&I.

Sir, my second question is on this quarter's revenue. So just wanted to understand, I mean, there is a dip in the gross margin. So what I understand is that if there is a contribution coming in from the 2 HP DCs on the revenue front. So the GPR may be slightly lower, but it's been utilized with at the EBITDA level. So just wanted to understand how much is the contribution of the HVDC projects in the revenue in this quarter.

See, we actually do not give the breakup separately on the margins for the respective segments. So overall, as I explained, the gross margin, if you compare from the last quarter, it has improved. If you compare from Y-on-Y basis, it has a slight contraction, and that is mainly coming off the different product mix that we are executing. But again, if you compare from that March year-end closing, we are consistent. And also to remember that in the first quarter, the first quarter is generally a very soft quarter from various other things standpoint.

I just wonder the revenue of the HVDC share of revenue, I don't want the margins. I just want to understand, in this quarter, how much is this contribution from the DC projects, the 2 HVDC projects. Approximately, I mean if you can give some color on that.

So if you have been following us, we have been telling that the first year, the revenue execution will be slightly on the lower side, and then it will pick up on the second and third year. That is what we have been telling. So this is also all the HPT revenues are -- has not been flown or it is not there in this particular quarter. That's much we can say.

But it is in in in the first project. Carta project is picking up. Mataro will start, but Coveris picking up.

So this quarter largely the base revenue quarter, so no major contribution from HVDC revenues.

So there is some contribution from the BDCs not that nothing is there.