TDPOWERSYS - TD Power Systems Ltd Share Price

Management's outlook for FY '26 is optimistic, projecting initial revenue guidance of INR 15 billion, with potential for upward adjustments based on sustained order inflows and the commissioning of a third plant in the second half of the financial year. They anticipate EBITDA margins ranging from 18% to 18.25%, with room for improvement.

Key forward-looking points include:

1. Order Book Expansion: As of the latest quarter, the total order book stands at INR 14.79 billion, up from INR 10.51 billion year-on-year. Order inflow has reached a record INR 4.13 billion, representing a 43% quarter-over-quarter increase and a 41% annual increase.
2. Export Growth: Export orders are expected to continue driving growth, constituting 68% of the order inflow. Total order inflow from exports rose from INR 5.9 billion to INR 9.85 billion, a significant 67% year-on-year increase.
3. Commissioning Timeline: The company is on track to start commissioning its new plant by the end of May 2025, with anticipated contributions to revenue beginning in H2 FY '26.
4. Market Segment Focus: Management is targeting growth in the gas turbine segment and larger generator markets, aiming to capture a more significant share from U.S. data centers and stabilization units following recent events that intensified the focus on grid stability in Europe.
5. Long-term Projections: For FY '27, revenue expectations are between INR 19 billion and INR 20 billion, driven by expansion into the large generator and motor markets, as well as traction motors for international markets.

Overall, the management conveys strong confidence in leveraging new orders, expanding export capabilities, and optimizing production efficiency to enhance financial performance.

Q1: Can you help us understand if the gross margin of 36% is sustainable and about the staff cost?
A: The gross contribution margin has been stable, so it's sustainable but might vary slightly quarter-to-quarter. We are hiring mainly blue-collar staff, with white-collar increases coming later. We don't capitalize staff costs, so any increase will reflect in employee costs in the coming year.

Q2: Regarding the net working capital days and its impact on operating cash flow, how should we consider this?
A: We're expecting strong improvements in operating cash flow starting Q1. We purchased materials when copper prices fell, which increased inventory but will be consumed moving forward. March invoicing has led to receivables, but collections are strong in Q1 and Q2.

Q3: What was the sharp jump in other income?
A: The increase in other income is primarily due to foreign exchange gains. We capitalized on favorable euro rates through forward bookings and hedging, which will benefit us throughout this financial year.

Q4: What is your revenue share from the U.S. market and the impact of tariffs?
A: The U.S. market for our products has negligible domestic manufacturing above 10-12 megawatts. While there's tariff uncertainty, demand remains strong and ongoing trade deals may mitigate future impacts. Customers are prepared to manage costs.

Q5: Can you explain the need for the new design center in the U.K. and its benefits?
A: The design center will support development of large generators (up to 100 megawatts) and improve our technology. It will enhance our capabilities, optimize designs, and increase efficiencies, contributing positively to our future products.

Q6: How much of your revenue is from data centers and how are they ensuring continuous investments?
A: Presently, about 20% to 25% of our revenue is from AI and data centers. The demand remains robust; clients are securing capacity for FY '26 and '27 due to ongoing AI applications and a need for reliable power, particularly following recent grid instabilities in Europe.

Q7: What is your revenue and order inflow guidance for FY '26?
A: Our initial revenue guidance for FY '26 is INR 1,500 crores, with order inflows expected between INR 1,600 crores to INR 1,700 crores based on robust ongoing orders and demand trends.

Q8: Can you share the timeline for the 225-megawatt gas turbine generator order from data centers?
A: We expect to deliver this order within the next 12 months, working with our largest OEM customer through whom we receive most business.

Q9: What are the current dynamics of the railway business, and what progress has been made?
A: The domestic railway market is currently inactive, so we are focusing on opportunities in Europe, the U.S., and CIS countries. Prototype development is underway, with volume production expected to start by Q4.

Q10: Is Turkey likely to be a primary market moving forward?
A: No, due to regulatory changes making local production costly and lack of inquiries, we may cease operations there post-current orders, though we'll remain competitive in imports. The impact on our balance sheet will be minimal.

Q11: How is the domestic market performing given the recent orders?
A: We secured several large orders from the domestic market, including 80- to 90-megawatt generators. This contributed significantly to our record performance this quarter, despite broader market challenges.

Q12: What is the expectation regarding geothermal opportunities and recent orders?
A: We are in active discussions for a significant geothermal project. While nothing is finalized yet, we anticipate positive developments within the next three months. The market holds substantial potential for future growth.