HARSHA - Harsha Engineers International Limited Share Price

In the earnings call for Harsha Engineers International Limited, management provided a cautiously optimistic outlook for the upcoming quarters. They indicated signs of industrial demand improvement in Europe, particularly notable in sales by Harsha Romania, which reported one of its highest sales in recent quarters during Q1 FY '26. The CEO, Vishal Rangwala, expressed an expectation for low-teens top-line growth in the India Engineering business and a higher single-digit consolidated growth for the current financial year. They anticipate a better profitability scenario compared to FY 2025.

Key forward-looking points include:

1. Sales Growth: Aiming for at least a low-teens growth in India Engineering and a higher single-digit growth on a consolidated basis for FY '26. The bushing segment is anticipated to grow at least 30% compared to the previous year, predicting revenues of around INR 130 crores for FY '26.

2. New Contracts: They announced a long-term contract for a bushing manufacturing deal expected to realize peak annual sales of approx. INR 117 crores over the next 2-3 years, with some revenue anticipated by Q4 FY '26.

3. Investment Plans: Management confirmed that they plan to invest about INR 100 crores over the next 1.5 years into the new greenfield site after already investing a cumulative INR 200 crores.

4. International Performance: The performance in Romania and China is expected to improve significantly, aiming to cut combined losses from INR 17 crores in FY '25 to roughly half by the end of FY '26.

5. Capacity Utilization: Current capacity utilization stands at 65-70% overall, with plans for further enhancements and potential expanse in product lines at existing sites.

Overall, the outlook is underscored by a positive demand trajectory in both domestic and international markets, coupled with strategic contracts and investment plans that could bolster revenue significantly in the near term.

Here are the major questions from the Q&A section of the earnings transcript along with their detailed answers:

Question: My first question is on our new greenfield plant. Could you share some color on how much revenues we have booked in the first quarter from this facility and the kind of products we have produced?

Answer: We began commercialization in the last week of June, booking minimal sales of INR 2 lakh. Overall, Harsha Advantek reported total sales of INR 1.65 crores in Q1. The new facility will focus on Bushing, large-sized cages, and stamping. Although I cannot give a specific breakeven point, we expect a positive turnaround by the end of the year.

Question: What is the remaining capex that we will do both in FY '26 as well as FY '27?

Answer: In FY '26, we have around INR 100 crores of capex planned over the next 1.5 years, mainly for incremental setups at Bhayla focused on stamping and large-sized cages. The capex will also involve existing facilities to address bottlenecks as we expand production.

Question: Regarding the new order of INR 117 crores, is this part of existing revenue or a completely new order?

Answer: This order is considered largely new, but there may be some overlap in products with existing orders. Our estimate suggests about 20% overlap, as some products within the new contract could replace older ones.

Question: Could you provide some insight into the sales from Romania? We're sensing some impact from geopolitical trade issues. What's the current situation?

Answer: We are working to diversify our revenue from semi-finished products to cages in Romania. Industrial demand in Europe shows improvement, positively impacting our sales. While U.S. demand is softening, it constitutes only about 10% of our overall demand, so the immediate impact on us is limited.

Question: What is the contribution of the Bushing segment now, and what do you foresee for the future?

Answer: Currently, the Bushing segment contributes roughly INR 100 crores annually. We anticipate strong growth, aiming for at least INR 200 crores over the next 2-3 years, thanks to favorable trends and our new long-term contracts.

Question: How much are you expecting to reduce the combined losses from Romania and China from last year's INR 13.4 crores?

Answer: We are aiming to cut these losses by at least 50% in FY '26 due to improved market conditions and the new initiatives we have implemented. Progress will depend on various factors, including order fulfillment and market performance.

Question: What is the current capacity utilization in your facilities in India?

Answer: Overall, our capacity utilization stands at approximately 65-70% in India, although this varies by segment. Some areas are underutilized, while others may be closer to optimal levels, as we manage product mix and demand fluctuations.

These answers reflect key insights and expectations concerning the company's financial performance and strategic initiatives, providing an overview of its business outlook.