Premier Explosives Limited (526247) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Conference Call hosted by Premier Explosives Limited. [Operator Instructions] I now hand the conference over to Mr. Akhilesh Gandhi from Stellar IR. Thank you, and over to you, sir.

Thank you, Steve. Good afternoon, everyone. I Akhilesh Gandhi, on behalf of Stellar Investor Relations, welcome you all to the Premier Explosives Q1 FY '27 Earnings Conference Call. We shall be sharing the key operating and financial highlights for the first quarter ended on June 30, 2026. Today, we have with us the senior management team of Premier Explosives. Mainly we have Mr. T.V. Chowdary sir. He is our Managing Director; along with we have Mr. Vijay Kumar. He is our Chief Financial Officer. Before we begin, I would like to state that this call may contain some of the forward-looking statements, which are completely based upon the company's beliefs, opinions and expectations as of today. The statements made in today's call are not a guarantee of future performance and also involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Document relating to the company's financial performance, including the investor presentation has already been uploaded on the stock exchange. With that, I now invite Mr. T.V. Chowdary sir to share his opening remarks on the company's performance for the first quarter. Thank you, and over to you, sir.

Thank you, Mr. Akhilesh, and good afternoon, everyone. I welcome you all to the earnings conference call of Premier Explosives for the first quarter ended June 30, 2026. Thank you for joining us. I trust you have reviewed our Q1 financial year '27 results along with the investor presentation available on the stock exchanges and on our website. During Q1 FY '27, we reported revenue of INR 102.6 crores, reflecting a decline of 28% year-on-year. The quarter was impacted by delays in dispatches and project execution, primarily due to ongoing global headwinds and supply chain disruptions across certain programs. While these factors affected near-term revenue recognition, the underlying demand environment for our products and solutions remains robust. On the profitability front, operating performance was impacted by elevated raw material costs amid prevailing global market conditions. The increase in input prices created temporary pressure on margins during the quarter. However, we continue to focus on operational efficiency, cost optimization and disciplined execution of -- execution to mitigate these challenges. Encouragingly, we believe that many of these external headwinds are gradually easing as supply chain stabilize and execution improves, we expect a stronger operational performance and better revenue conversion in the coming quarters. Most importantly, our business fundamentals remain strong. As of today, our order book stands at INR 1,393 crores with approximately 94% of the order book coming from Defense segment. The healthy order backlog provides strong revenue visibility and reinforces our confidence in the company's growth trajectory. Also regarding the recent acquisition of Apollo Micro Systems acquisition by Apollo Micro Systems, we believe this marks a significant milestone in Premier Explosive's growth journey and opens up exciting opportunities for the company. The partnership brings together Apollo's strengths in defense electronics and mission-critical systems with Premier's capability in energetic materials, rocket motors, ammunition and propulsion systems, creating a broader and more integrated defense platform. For Premier, the strategic benefits are clear, enhanced access to larger and more complex defense programs, stronger technology and R&D capabilities, a wider customer reach and improved operational efficiencies through scale and collaboration. The combined strengths will also strengthen our position in India's growth defense -- growing defense indigenization and export opportunities. We believe this partnership will accelerate Premier's next phase of growth, strengthen our competitive positioning and create long-term value for all stakeholders. We remain excited about the opportunities ahead and look forward to unlocking the full potential of this partnership. Now I request Mr. Vijay Kumar, our CFO, to share the financial performance.

Thank you, sir. Good afternoon, everyone. The result presentation for the quarter ended June 30, 2026, has been uploaded on the stock exchanges and on the company's website. I believe you may have gone through the same. The revenue from operations for Q1 FY '27 degrew by 28% year-on-year to INR 102.6 crores. Our EBIT for Q1 FY '27 degrew by 80% year-on-year to INR 4.8 crores. The EBIT margin for the quarter stands at 4.7%. Our net profit decreased by 80% year-on-year to INR 3 crores. The PAT margin for the quarter stands at 3%. Now coming to the order book. The company's current order book stands at INR 1,393 crores, out of which Defense segment order is majority of INR 1,309 crores, which is equal to 94% of the total order book. Explosives segment stands at INR 42 crores, which is equal to 3% of the total order book and Service segment, which is Operational and Maintenance Services segment stands at INR 42 crores, which is equal to 3% of the total order book. This order book reflects the strong growth visibility we see over the coming years. We remain confident that supported by sustained execution momentum, continued development of new products and our ongoing expansion initiatives, the company will continue to maintain a strong growth trajectory in the forthcoming quarters. With this, we'll now open the floor for questions and answers. Thank you.

[Operator Instructions] First question comes from the line of [ Paras Kulkarni ] with Ignite Capital.

Firstly, on the cost side, we have seen a sharp decline in other expenses from INR 20 crores to INR 11 crores in 1Q. So if I were to build it for the entire year, what is the run rate cost do we expect for the full year? And also what attributed to this decrease?

In earlier quarters, there were provisions expected credit loss provision and there was a decline in ForEx -- decrease in ForEx losses. So those are -- it is not comparable for exact apple-to-apple. There is a reduction in cost as far as other expenses are concerned. Yes.

So is this INR 11 crores sort of sustainable run rate?

Yes, it is -- you can say around INR 9 crores kind of thing. You can see in 30th June '25 also, it is around INR 9 crores. So INR 9 crores to INR 10 crores kind of thing.

Okay. Understood. And now coming to the gross margin. You did explain in your opening remarks that the geopolitical situation affected the margin. So looking at FY '27, where do we see the gross margin? Do we see that improving sequentially? Or should we maintain this 35% as a decent assumption?

Yes. Margins will definitely improve because we have different products, there's bouquet of products. So depending on the dispatches of the product, it keeps on increasing.

The healthy order book and execution pattern, we have already this quarter's movement of materials and all those goods gives us the confidence that it will improve in the coming quarters.

Okay. So could you please quantify as to whether this is the baseline and we should assume 40% kind of gross margins going ahead looking at Q4, which way?

Even in earlier conference calls also, we said that we are targeting an EBITDA of 15% to 20%. So I think same line we are trying to achieve.

Now you mentioned about enhancing your product offering and you said that you would be also looking at drones and UAV. So what is the current stage of development here? I mean, are we trying to develop our own UAV technologies or we would be partnering with other companies? So could you throw some light on that?

We are not developing our own drone technologies that is for the birds and all those. We are partnering with several drone manufacturing industries for the payloads. We are making the payloads and then participating along with them in as a partner, not an independent stand-alone supplier.

Okay. Understood. And now with Apollo taking up -- I mean, taking over, so do you expect any orders from the naval side of the business because they have got good relations with the Navy and they have got orders with respect to the sea mines and submarine. So do you see any traction going ahead in the order book from naval side?

Yes. We are hoping that this association will help us to strategically strengthen ourselves. And -- but the total potential of this will come to know by December only.

I think it might be 7 months. And last question around export licenses. In fourth quarter, we have talked about around INR 400 crores of export license we have not received. So when do we sort of -- have we received them currently? Because last time we had said that we would be expecting to get those licenses within 3 to 4 months. So what is the status there? And what is the export portion which we would be expecting in FY '27 from the current order book, the execution?

Yes. Past 1 week, we have received several export licenses, and we have also moved out the material from the factories. And some of them are in pipeline. We are expecting them to arrive in 1 or 2 days. So it's quite satisfactory, receipt of export licenses and what material is moving out. On the backlogs of previous quarters, I think we'll be completing in this quarter.

Okay. So is it fair enough to expect around INR 200 crores, INR 300 crores of export in '27 as stated earlier?

Yes, we are targeting some INR 200 crores in this quarter based on -- INR 150 crores to INR 200 crores.

The next question comes from the line of Varun Jain with Dolat Capital.

So I have a couple of questions. Starting with this July 2023 flares order, this was guided for completion in Q1 FY '27 and the INR 30 crores of LD reversal was expected. So any update on that?

Yes. LD still is in process. Maybe by this quarter end or by October, November, I think we'll come to know because a lot of processes are there. It's going on. And as far as flares are concerned?

Yes. Further orders in pipeline, and we are -- we have started production in our own plant and all those. So we are hoping that this will contribute well in the coming quarters.

Earlier order also, we are going to complete it in another 3 to 4 months. There is a backlog of about INR 75 crores. So that will be completed in the next 4, 5 months.

So just for clarity, sir, this July 2023 order will get completed in the next 4, 5 months. Is that right?

Yes, yes. Already [indiscernible] completed.

Okay. And sir, earlier, management had guided for this INR 430 crores order of October 2025 that approximately 2/3 will be done in FY '27. So that would be close to INR 285 crores. So is that guidance on track? And how much did we do in Q1?

Q1, it was only INR 21 crores kind of thing. And in the second quarter, we are expecting a better number.

And for the entire year, will we do close to INR 285 crores or something?

No, no, we have to complete the order before this financial year.

So the entire INR 430 crores will be done in FY '27?

Yes.

So we have the capability, like the capacity to do the entire order?

Yes, yes.

Yes, we have. The shaft material payload, we are dependent on imports, which we have completed, we have executed. The flares we do in our own plant. So we have the capability to complete.

Got it, sir. And sir, on the guidance front, I think in FY '27, management had guided for INR 600 crores, INR 700 crores. So we have done close to INR 103 crores in FY -- in this Q1. So in the balance 9 months, can we do INR 500 crores, INR 600 crores more? I mean, is that -- do we have that kind of capacity and...

Yes. Capacity-wise, like I explained, we have the capacity for flares and other products to make, whereas items like shafts we are dependent on imports where it depends on the conditions prevailing there. But otherwise, flares and other things are made in our own facility, and then we'll be able to execute that.

You retain the INR 600 crore guidance for FY '27. Is that right?

Yes.

Okay, sir. Got it. And sir, last quarter, you mentioned that there was a new alternate raw material, which DRDO -- you had sent to DRDO for approval, and this was going to be used for these land mines and loitering munitions for drones. Any update on that?

Yes, there is a considerable progress on it. They have -- they are conducting the tests of our material, what we have proposed and that is being done by DRDO, ARDE and HEMRL. Once it is complete, I think they will give us a clearance to use that material. That will open a door for completely getting into mines that is Adrushy mines and Ulka mines, which are very much in demand from our Indian Army.

So by when do we expect like any completion of survey by DRDO?

Hardware part, we have assembled all together and then other components and then chemicals, it's going on. It may take another 6 months.

Another 6 months?

Yes.

Got it, sir. And sir, on the Katepally, this CapEx, so we had earlier said that by Q1 and some assets will start commissioning, then by Q2, some will start. So did we see anything commissioned by end of Q1 or even till now because we are halfway through Q2 also?

Integration of the pipelines and the plant and machinery erection and installation for the RDX and HMX production is almost complete, and then we are expecting to take up the water trials in September month. That water trials will take a month. And after that, it will come into production of the products intended for. That is about RDX and HMX. And about mixing plant where 2.5 tonnes planetary mixer is installed, some of the components which are imported by the supplier of the mixer, they got delayed because of the movement -- maritime movement of ships and all those. So now we have put pressure on them and then make them ship it by air. So that also, we are hoping that end of September, we'll be ready with the plant and then we'll take up the dummy trials.

Got it, sir. And sir, on the Andhra Pradesh, this expansion plan, like after the acquisition of promoter stake by Apollo, are we continuing with it? And have we finalized a land parcel for it?

Land parcel, the pricing was an issue. We were requesting the government for a reasonable price, which we can afford to install because as an explosive industry, we require large landed areas. Such large area, the price makes a big difference. So we are -- we have requested the government for reworking the price and then to give us a better price through which we can get gainfully benefited. So at present, it is at that status.

And this expansion will be going on even post -- like the Apollo will continue with it, right?

Yes, the requirements are there, which definitely, I think once they come into the picture and then we'll be taking a call after making the presentation of our...

Okay, sir. Got it. And just the last one from my side, sir. What changes do you expect like post Apollo, like what -- with the new capabilities they bring in, what more can you do really? Any synergy benefit or any guidance there?

We are expecting their capabilities are in defense electronics. So where -- in which area where we have no expertise. So we are expecting that we'll be able to get a good gainful benefits from them with their expertise and then the systems which -- where you work integrated with electronics and high energy materials, that's where I think we can definitely -- we are looking forward to do it better strategically to be better on that. These all will come, more details will come probably by the next quarter.

The next question comes from the line of Chandresh with Niveshaay.

Sir, 2 questions on the order book side. Can you provide the program-wise breakup of the order book?

You can only give a breakup of industrial explosives and defense.

We have 95% defense orders and 6% regular explosives, industrial explosives.

Okay. And sir, secondly, with respect to this project, Kusha, I mean, BEL is also expecting about INR 30,000 crores to INR 40,000 crores. So on that side, how much is Premier Explosives expecting in the QRSAM.

Couldn't get the question. Could you please repeat?

So basically, I mean the QRSAM, how much is you are expecting.

QRSAM. No, if you have participated in a tender and something, then we can say that but tenders itself are not called.