The Anup Engineering Limited (ANUP.NS) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 ended FY '26 Earnings Conference Call of The Anup Engineering Limited. [Operator Instructions] Please note that this conference is being recorded. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known and unknown risks, uncertainties and other factors. It may be viewed in the conjunction with the business risks that could cause actual results, performance or achievements to differ significantly from what has been expressed or implied in such forward-looking statements. Please note that company has uploaded the results press release, investor presentation and also the outcome of the Board meeting on the website of the stock exchange and website of the company. I now hand the conference over to Mr. Reginaldo Dsouza, Managing Director and CEO of the company. Thank you, and over to you, sir.

Thank you. Hello, everyone, and a very warm welcome to this conference call on our quarter 1 performance for the financial year 2025-'26. Historically, the period April to June quarter 1 has always been a weaker quarter for us, mainly due to high labor absenteeism on account of annual holidays. Moreover, this year had its own challenges from supply chain pressures due to wars and trade uncertainties due to tariffs. Considering these uncertainties, I believe we had a fairly decent first quarter of this financial year. Now, let me quickly take you all through the numbers. The consolidated revenue was INR 175.2 crores, a 20% growth, with an EBITDA of INR 40.4 crores, a growth of about 22%, and a PAT of INR 26.3 crores, a growth of about 21% as compared to quarter 1 of the last financial year. Interestingly, the exports was at 72% of our revenue. Yes, this seems high, but I believe will normalize over the year to about 50% to 55%, considering our order book pipeline. This is fairly in line with our strategic intent of being a 50% export business. The revenue contribution from all our 3 manufacturing locations was in line with our expectations with Ahmedabad plant contributing at 58% to the revenue, our new Kheda facility at 37% and balance coming from Mabel Engineers, Tamil Nadu. So I'm very happy to state that all our 3 locations have started contributing well to our business growth. The sectorial revenue across industries was also as expected with oil and gas at 44%, petrochemicals at 32%, and fertilizer and chemicals at 21%, and the rest from others. In terms of the product mix, heat exchangers, which are predominantly manufactured in our Ahmedabad facility, was at 46%. And the vessels, reactors and columns, which are largely manufactured at Kheda plant, was 44%, which signifies substantial contribution from our Kheda plant. The balance 10% products was siloed from Mabel Engineers. The working capital block was a touch higher for the quarter, mainly on account of a short-term increase in raw material inventory due to specialized material metallurgy buying for on-hand orders and also due to lower customer advances. This is a short term and is expected to normalize in coming quarters with execution of these high-value orders and better order intake to our historical working capital turns of 3.5-plus turns. Our manufacturing capacities have shaped up well with all our 3 manufacturing locations, that is Ahmedabad and Kheda, both in Gujarat, and Mabel Engineers at Tamil Nadu, operating and contributing well. The Phase 2 expansion at Kheda is expected to be completed before time, and we should commission it in quarter 2 of this financial year instead of quarter 3 as informed earlier. With this, we will have a capacity to roll out approximately INR 1,200 crores business per year from these 3 locations. A breakup for you all, if it helps, could be approximately INR 600 crores from Ahmedabad, INR 400 crores from Kheda and INR 200 crores coming from Mabel. And as we expand further, it would improve in line with our growth aspirations. Coming to order booking, the order booking for quarter 1 has been a touch sluggish due to the current uncertainties, mainly on account of wars disturbing the supply chain, trade disruptions due to tariff concerns and other geopolitics. We have some good opportunities in the United States under negotiation, and we had hoped to close them in quarter 1. But with current developments on trade agreements with India, we may have to wait a couple of months for our customers to proceed with ordering. Not that these CapEx projects in United States will not see the light, but the delay is probably on account of reassessing the budget or the ROI and approval of the same to proceed. As you all are aware, almost all our export contracts are FOB India port. And hence, the duty needs to be borne by the customers in United States, which inflates the landed cost for them. Even with a higher tariff of about 25%, India would still be competitive as largely, the supply options for these kind of capital equipment we offer to United States are probably coming from countries like India, Europe, China, Korea and Mexico largely. To give you an example, as late as last week, we got a confirmation for an order of about USD 1 million for supply into United States. Hence, it is likely more about uncertainty that is bothering our customers than the real tariff. Our pending order book as on date after quarter 1 execution is about INR 604 crores. This will surely see a good traction in coming months. We have seen a strong inquiry inflow from Middle East and domestic market. The domestic market has picked up quite well after a slow last 3 quarters with considerable amount of inquiry inflow. For example, projects like the Bina Refinery, Petronet LNG, Reliance PTA [8:30], BPCL Kochi PP plant and a couple of other chemical and fertilizer plants provide good business opportunities. We have an encouraging inquiry bank of about INR 1,020 crores for global projects where we are bidding very strongly. All going well, these should fuel our growth plans for this and the start of the next year. Hence, at the backing of a robust inquiry pipeline and customers moving ahead with projects, especially in domestic and Middle East market, there will be good business opportunities in the near future. With due consideration to these uncertainties, especially on trade due to tariffs and supply chain challenges due to wars and geopolitics, our guidance for this financial year, FY '25-'26, would be 15% to 20% revenue growth with an EBITDA of about 21% to 22%. Of course, we will try and keep this at 20% growth. Export shall be in the range of 50% to 55%. Having said this, we, as a business, are mindful of the risks and challenges that can come our way. We are cautious of the geopolitics and how it could impact trade, and hence, we are using strategic levers to maneuver the short-term uncertainties. On the long-term strategic initiatives towards sustaining our growth, we have been working relentlessly over the last few months on the diversification and inorganic growth opportunities. As mentioned earlier, we are looking at opportunities in the space of energy-related technologies, special chemicals sector, packaged process systems, et cetera. We will surely keep you all informed of the progress as we get closer to a certainty. To conclude, the current uncertainties may have a very short-term impact, but with a strong proven execution, necessary capacity in place for our growth plan and an encouraging pipeline globally, we should see good business prospects in the future. With these pointers, I wish to thank all of you for your presence and patient listening. Now, I would be happy to have your questions. Thank you.

[Operator Instructions] The first question is from the line of Jaiveer Shekhawat from AMBIT Capital.

Regi, my first question is just with respect to the order booking. While you highlighted that you would expect a lot of these projects to get finalized over the couple of few months, is it that some of that growth will get pushed forward to the next year, let's say, FY '27 and which is why you have brought down the overall growth guidance for this year?

You're right, Jaiveer. So most -- as you have heard me on the last call, we were expecting some of good order intakes of United States, which we had almost reached closer to finalization. Unfortunately, those have not gone through. Maybe that we should get hands on them maybe in a couple of months. But then, we have less time for execution. So to be more certain, we have brought down the guidance to about 15% to 20%. Of course, internally, we will run for 20% growth, but you could expect the guidance anywhere between 15% to 20%.

Sure. Very, very well understood. Second, if you could also highlight what's been happening on the newer verticals that you had earlier highlighted about, especially your ACHE business and also on the services business? Is there any update there? Any new orders that you're receiving there?

Yes. So, on the services business, surely, we have 3 inquiries right now on board. One, we have already got the order. It's a small one. So, as I explained, initially, for the first year, we are not looking at a very large volume coming from service, but we are trying to build our credentials for service business in this market, which in 3 years' time, all going well, we should reach about INR 200 crores. So we made some good headwinds on inroads into the service. It's a small order intake already. Two, we have executed. So, one we've just received, and 2 inquiries are in the pipeline. And also, on the new product side, we have made some good inroads also in the power sector. we were completely missing on the power sector and happy to state that we bagged order close to about INR 7 crores to INR 8 crores in the power sector already in the last month. So that's also inroad for us into power. ACHE, specific to your question, we have 3 inquiries already quoted for, hoping something will turn around for us in the coming weeks.

Sure. Lastly, on the gross margin side, I think I see a lot of volatility across quarters. This quarter, it has sort of surprised significantly on the positive side. So if you could highlight the reasons there? And also, given that you had a new appointment of Mr. Mathias as the Marketing Officer, Chief Marketing Officer, what would his role be? And then, which are the newer markets or possibly segments that you're looking to sort of target along with his expertise?

Yes. So, on the margins side, yes, we had some profitable orders executed in quarter 1. That's where the gross margins have reflected better. But based on our pending order book position, we think it will normalize anywhere between 21% to 22%, and that's the reason for our guidance of 21% to 22%. In terms of Rudolph Mathias, he comes in as Chief Marketing Officer for us to take care of our sales and business development side, the front end of the business. And he comes with a lot of international experience, being in Canada for a pretty long time, worked in Middle East, so an overall experience globally, which would augur well for us for pushing our growth plan into the international markets. So his role in charge would be to head the complete front end with sales and business development. And just to add to what I said about ACHE earlier, we have also built up our team in terms of design for designing and estimation of these products. So our technical offers are well accepted by customers, which says that we built pretty good capabilities in-house in terms of understanding this product and also offering a good proposal to our customer. I believe it's just a matter of time that we'll end up on an order.

So in terms of just the initial signs of pickup, I mean, when do you expect that it will start meaningfully contributing to revenues? Will it be by end of the year?

So contribution directly to the revenue part, I believe, it will be in quarter 1 of next year because generally, the cycle times would be anywhere between 7 to 8 months. So I believe even if we bag an order by the end of this quarter, so we should be good to go with quarter 1 revenue coming in from ACHEs.

The next question is from the line of Mohit Surana from Monarch Networth Capital Limited.

My question is with respect to the order book. Is there any chance of order book cancellations going forward from the orders that we have already received? And keeping in mind the global supply chain issues and the tariff-related uncertainties, can there be some more erosion in margins in order to get the orders?

So let me just clarify. So your first question was basically any chances of order cancellation? And second, based on the current supply chain concerns, whether there could be any erosion on the margins, right?

Yes, that is correct.

Okay. So, on the order cancellations, the answer would be, no. Largely, by and large, these are -- the orders that we booked are large petrochemical and hydrogen projects and also refineries. So these are large-scale projects and where the investments have gone ahead to a large extent. So the possibilities of cancellations are very rare, if I have to say. In terms of profitability, also, we have things protected because these are all, as you know, estimation models. And we have -- generally go back-to-back with our suppliers for all the critical items. And based on the pending order book position, almost 70% to 80% of our raw material is from sourcing domestically in India. So in that sense, we don't see much of an impact to us coming from the supply chain. Of course, the -- a little bit of delays -- in case if the wars and others elevate to different levels, we could see a little bit of delays into the supply chain. But in terms of the profitability, no, I think we are fairly well covered for this year.

Understood, sir. So this...

And if you see the reflection of that, in fact, we have kept our guidance 21% to 22%, almost similar to what we projected at the beginning of the year.

Absolutely, sir. Yes, that is fair, sir. Sir, just one more question. So you have given a guidance of 15% to 20% revenue growth for this year. Just thinking of a slightly longer term, a 3-year to 4-year kind of perspective, what kind of revenue CAGR we can expect from a longer-term perspective?

So, on a 3-year perspective, we -- as a business, we are still at 15% to 20% kind of a growth plan for the next 3 years. As a business with all the diversification plans in place, which should be driving in towards 20%, but I would keep the guidance of 15% to 20% over the next 3 years.

The next question is from the line of [ Gopalkrishnan from Utkarsh Investments ].

First of all, thanks for the opportunity given to me. First question is regarding the profit growth and sales growth of the company 3 years and 1-year period. I find that the profit growth is lagging the sales growth. For example, 3 years, the sales growth is 35% and profit growth is only 22%. And for the trailing 12-month period, the sales growth is 29%, whereas the profit growth is only 9%. I would like to know why this profit growth is lagging behind the sales growth. This is question number one. Question number two is, in the last quarter, there was a consignment, which was held up, close to around INR 200 crores, impacting the financials for the company. Has that consignment been dispatched this quarter? And another question is about orders. The order book size is INR 600 crores, whereas the turnover that we are going to do this year is around INR 840 crores. That is INR 700 crores plus 20% growth, if I take, around INR 840 crores, INR 850 crores. So how will the company -- even if they get the order of INR 250 crores, can they execute it within this financial year? This is my third question.

Yes. So, on the first part, in terms of the sales growth and profitability, of course, it all -- the profitability, I'm sure you understand, it will all depend on the product mix that we go with. So, as we grow and get our growth at the rate of around 30% that we had over the last 3 years, we had to get more aggressive in the market, number one, to win contracts because as you know, these are all estimated contracts. We estimate the pricing, we negotiate, and we win contracts on negotiable bids. So, as we grow, we have to take orders at an aggressive pricing for our growth plan. That's one. Second, I'm sure you would have heard me in the calls of the previous that as we are growing, we have decided to take up more large-volume products, which may be lower in profitability, maybe about 15% profitability, but the churn cycles are more. And that's the precise reason which we've been able to grow over the last 3 years with 30% plus CAGR. So the difference between the growth and the profitability, I think, it all depends on the product mixes that we choose, depending on the projects that hit the ground in that particular year or period. Yes. So the large order that we spoke about last year -- sorry, the last quarter that was on hold or delayed for dispatches from the customers has still not been dispatched. We are talking to our customers. So they want -- have requested us for some more time to be able to pick up those equipment. But at the same time, as I said, we've been covered in terms of payment for a large extent and also the storage clause is in the contract. So we are safeguarded in terms of our cost and margins due to this delayed pickup from our customers. And the third one, the order booking slowdown, yes, of course, as I explained, there have been some uncertainties. In fact, over the last 3 quarters -- as you know, we are largely 50% domestic and 50% export. That's our strategic road map. Domestic, over the last 3 quarters, has been really stagnant, but that would now -- as anticipated, it has started moving well. And in the international business, mainly because of the current trade uncertainties, the first quarter has not -- as I explained, has not been that great. But the kind of inquiry pipeline that we have today, close to about INR 1,020 crores, which is one of the historical highs, we believe, at the strike rate and the conversion rate that normally we have, it should fuel our growth journey. And how we will achieve the numbers of 20% growth? So if you look at INR 175 crores that we have done, and if you add the INR 604 crores pending order book, which is completely executable in this year, we are already at about...

[ INR 775 crores ].

We are already at about INR 780 crores. What we need to get is only about INR 70 crores, and we have large portion incidentally -- we generally don't get that, but incidentally, a lot of inquiries are very, very short-term delivery items. And I'm sure you would be surprised when I say that, we have large inquiry banks, which are as low as 5 months delivery for customers. Maybe the customers have delayed the ordering because of the uncertainties. But now, the [ end date ] remains the same, and we have to deliver it quickly. So obviously, it is sort of blessing in disguise that we've got this opportunity of short-term delivery items. So with that, we are confident that we should be able to hit the guidance of 15% to 20% growth rate for this year.

Sir, one thing -- sorry, one more just follow-up. Our dependence on U.S. is close to 27%, if I remember it right. Has it increased? Or is it going to -- are you going to diversify geographically, say, to Europe, or I think, Saudi Aramco is one of our major customers. That's what you mentioned in one of the calls. So with the OPEC deciding to increase their output and all of that, I think we should have more opportunity from such geographies. Is my assumption correct?

Yes. So the first point you made about U.S. contribution to our revenue about 27% to 30%, yes, right. Last year, if you see, of the total exports, U.S. was about 30% last year, but this year -- because we had that large orders coming in. This year, what we had factored in into our workings was anywhere between 5% to 10% order booking from United States. So having said that, as I mentioned, we don't see those projects going away, but may be a touch delayed by 2 to 3 months. That's what we are expecting. But at the same time, we understand that we need to course correct and diversify. So we have already taken initiatives to focus more on Middle East, where there are many inquiries on the table at the moment. So we have -- as I mentioned earlier, we have taken course corrections to diversify and focus on the other regions to fuel our growth and order intake. And I think I missed mentioning about Saudi Aramco that you mentioned. Yes, it's the first order that we are executing for Saudi Aramco, close to about, I believe, 26 heat exchangers. It's a very critical piece of equipment for us, important project. We should be delivering it all by Q3 of this year.

The next question is from the line of Ravi Naredi from Naredi Investments.

Sir, just a previous question, I [ may forward ], this INR 200 crore order delay, how much we received against this order and whether this INR 200 crore order included INR 600 crore order?

Yes. So this INR 200 crores that we are talking about, we have not closed everything. It's on the pipeline. Because customer pickup has got delayed for the ready items, we have slowed down the production. The revised completion date for all these equipment is December-end, which is almost in the quarter 3 of this year. So we would be closing up all the equipment by quarter 3 and customer would pick up. So this is a request that they have made, against which we have, in the contract, the storage clause. So they are paying us all the cost and the storage clause as per the contract. So we are safeguarded in terms of the contractual terms. So in short answer, we should be able to execute this complete order by December-end, and customer has agreed to pick up all the equipment.

No, how much we have received there against this order, INR 200 crore order?

So the equipment which are ready and where we have issued the [ IRNs ] and waiting is 75% of the payment we have received. Generally, we receive only 35% to 40% advance. But in this case, we've been paid close to about 75% to 80%.

75% we already received?

Yes.

And one more, after INR 50 crores Kheda CapEx done, how much top line we may expect in financial year '26 and '27?

From Kheda plant?

Yes.

So Kheda plant next year will be anywhere between INR 300 crores to INR 400 crores, depending on the product mix. So the plant capacity would be INR 400 crores. Depending on how the order intake goes, it can be anywhere between INR 300 crores to INR 400 crores. But largely, it would be towards the INR 350 crores, INR 400 crores mark.

Okay. And sir, in longer time, any plan to shift the Ahmedabad unit to other place and monetize land value?

No plans at all. Ahmedabad plant is a very strategic location for heat exchangers because it is very close to the tube manufacturers. So it's a very, very strategic location, and we have no plans to capitalize on the land. So in short, the Ahmedabad facility will be dedicated for all heat exchangers because it's in the city limits, and heat exchanges are smaller in sizes, so transportation would be easy. All reactors, vessels and columns, which are generally larger in sizes and heavier in weight, they will be made in our Kheda location, which is on the national highway. And all the silos and chemical items would be made in our Chennai Mabel facility because that's also on the national highway.

Sir, I am asking, this INR 200 crore order, which [ we delivered ] in quarter 3, is it included in INR 600 crores order book?

About INR 50 crores to INR 60 crores is included in that.

The next question is from the line of Naysar Parikh from Native Investment Managers.

Am I audible?

Yes, sir.

Yes. Please go ahead.

So I heard, obviously, your comments around order flow and things like that. But if you look at it, if I just compute based on your opening, closing order book and what you've booked, it seems like it's less than INR 50 crores or INR 40 crores of order -- new order booking in this quarter. And for exports, it seems like it's nil really. So can you just throw some light overall, how do you see things moving forward? And specifically, on exports, did we not book any orders? Were there cancellations? Or what happened?

So to be precise, we had an order booking of INR 74 crores in quarter 1 or after this period for this year. And you're right, it was more domestic because there was -- as I mentioned in my call, there were many domestic projects which picked up in line with our expectations. I do understand the concern of the order book. But as I mentioned, this is a short-term -- as per our view, this is a short-term uncertainty because of the current trade. Domestic has picked up. And if you look at the inquiry bank position that we have of INR 1,020 crores, generally, we have a strike rate of anywhere between around 20%. So considering the inquiry pipeline and considering the projects that is getting a go-ahead, especially in domestic and the Middle East market -- when I say Middle East, it is largely the Saudi Aramco and ADNOC, that is Abu Dhabi National Oil Company -- and in India, the projects that I did mention on my earlier remarks, that gives us a lot of confidence that we will be able to garner good order book. And at the same time, because of our capacity is already in place with Phase 2 expansion, we have a flexibility to execute much ahead of time. So even if we are running short of time, we will have a little bit of better flexibility now with added capacity to be able to turn around the revenue to the guidance that I provided of about 15% to 20% growth for this year. So you can expect us to close anywhere around INR 840 crores, around that number for this year.

It might be a small one. Just to clarify, your March-end order book was some INR 741 crores, right? You booked some INR 175 crores, and it's INR 604 crores. So if you booked INR 74 crores new order, your order book should be closer to INR 650 crores, right, closer to INR 600 crores. So just if you can explain, was there some order cancellations, which is bringing the order book down?

No, there was no order cancellation.

Okay. And if I can, on the domestic side, where is it that -- can you just talk about any sectors or something that you're seeing traction? And do you expect that it will be domestic largely that will help you get to the INR 840 crores? Or you think that export market may recover? How are you looking at it?

Yes. So domestic, the larger traction that we are seeing is on the petrochemicals side. Of course, there are offshoots of refinery expansions, but largely what we are seeing is petrochemical plant. So if you see the projects that are named, Reliance PTA, if you see the PP plant of BPCL Kochi, if you see Petronet PP plant, so all these are projects mostly on the petrochemicals side. So the larger traction, of course, is coming from petrochemicals. And domestic will surely be driving this quarter in terms of order intake, plus some extent from the Middle East. And that is the reason if you see, an export, which is at about 72% in quarter 1, we are saying, by the end of the year, it will be roughly about 50% to 55%. So obviously, there would be more contributions coming from domestic, both from the pending order book as well as the new orders that we are expecting, which are short delivery items. So from that context, your assumption is right.

And just to clarify on that order part, if you refer our last presentation, investor presentation of Q4, the closing order book as on 31st March was at INR 700 crores, and INR 741 crores was the closing order book as on 30th April 2025. So probably that's the INR 40 crores, which probably you are finding as a difference. INR 700 crores was an opening, and then the order inward, the minus revenue will match exactly the amount which we have recorded.

Got it. No, that helps. Just last question on the EBITDA margin, what you mentioned, maybe closer to 21%, 22%, is it just -- I mean, is it just because of new plant and economies of scale? Or even at a gross profit level, are you seeing that there is pricing pressure or customers are demanding some relaxation on pricing?

So to a large extent, as I said, we already have INR 604 crores pending order. And being an estimated model, we very clearly have an understanding in terms of the margin. But at the same time, since we have to get orders in the next couple of months, we believe that we will have to be a little more aggressive in the market. And that is what we have factored on a conservative basis when we talk about 21% to 22%.

Right. Because 21% in that [ INR 840 crores ] is basically single-digit EBITDA growth, right, which is a bit far off from the earlier numbers that obviously historically you've done and what you've been expecting. So that's the reason I'm asking that -- so there is a possibility that we can have a single-digit EBITDA growth here, right?

Yes. So 21%, 22% that we are saying is a conservative number. If the order intake spirals out into profitable orders for us, we may see numbers better than that. But at the moment, we would keep the guidance at 21%, 22%, and we will try to get it on the higher side.

[Operator Instructions] The next question is from the line of [ Gopalkrishnan from Utkarsh Investments ].

Yes. Sir, actually, my question is just a follow-up. See, you are saying the export will be 50% by the end of this fiscal. Now in this 50%, what will be our dependence on U.S.? Will it be the same 27%, or it will be less? What it is?

So there will be no -- Mr. Gopalkrishnan, there will be no dependence on U.S. So in this number for exports that we are talking about, we have discounted, assuming that the uncertainty would continue for a little longer period. And even if we get those orders, we may not be able to execute in this financial year. So -- and that is the precise reason we are saying a guidance of about 15% to 20% as compared to our earlier guidance.

Sir, that is a headline. You are not going to have any dependence on U.S. You are not going to be impacted by the tariff, my God. This is a headline actually. Great.

For this particular year.

Yes, this is great, sir. That gives me a lot of relief as an investor.

As there are no further questions from the participants, I would hand the conference over to Mr. Reginaldo Dsouza for closing comments. Over to you, sir.

Thank you. Thank you all for your insightful questions, and I hope we were able to clarify to your satisfaction. In case if you have any further queries, please feel free to connect with us, and we would be happy to respond. I take this opportunity to thank my wonderful team at Anup and to each and every stakeholder helping us deliver performance. A big thank you to all our shareholders for your trust and support, as always. Thank you. Take care and stay healthy.

Thank you. On behalf of The Anup Engineering Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.