Event Participants
Executives
2 Maulik Jasani, Vishal Rangwala
Analysts
8 Amit Anwani, Jason Soans, Manish Goyal, Resham Jain, Saket Kapoor, Uttam Purohit, Vaibhav Shah, Varun Jain
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue (incl. Solar) | ~₹457 crore | ~+25% YoY; broad-based growth across India, exports, and subsidiaries |
| Engineering Business Revenue | ₹421 crore | +20.6% YoY, +10.2% QoQ; India engineering +21% YoY, +6% QoQ, strong for typically strong Q1 |
| India Exports | ₹139 crore | +22% YoY, +11% QoQ; recovery in Europe and US industrial demand |
| Bushing Revenue | ₹34 crore | +35% YoY; strong order pipeline, ~30% FY27 growth targeted vs ₹127 crore FY26 |
| Stamping Revenue | ₹19 crore | +31% YoY; new products maturing (AC compressor, railway, auto stamping) |
| Large Size Cages Revenue | ₹10 crore | Q1 impacted by ramp-up constraints at new Bhayla facility; ~50% FY27 growth targeted |
| Japanese Customer Revenue | ₹21 crore | +25% YoY (₹16.5 crore Q1 FY26); ~10% full-year growth guided |
| Consolidated EBITDA (Engineering) | ₹69.8 crore | +6.9% YoY, -9.4% QoQ; margin 16.6%, down 210 bps YoY largely on RM pass-through lag |
| Solar Business Revenue | ₹36.3 crore | Positive EBITDA ₹2.82 crore; project-based, heavily Q4-weighted |
| Working Capital Cycle | 116 days | Improved from 130 days in Q4 FY26 |
| Capex (Q1 FY27) | ₹37 crore | FY27-FY28 combined guidance of ₹180-200 crore |
Geographic & Segment Commentary
India Engineering (Parent + Advantech): +21% YoY, +6% QoQ revenue growth; Q1 delivered strong top line despite margin compression from 8% RM cost increase pending pass-through, ₹4 crore hedge realization FX loss, and ~₹3 crore indirect cost inflation (war impact). Demand traction across bearing cages, bushing, and stamping, aided by MNC customers' new India facilities and rising exports.
Harsha China: ~10% FY27 growth expected vs ₹120 crore FY26, EBITDA margin 12-14%, PAT ~6%. Brownfield expansion (steel cages, expanded portfolio/market reach) secured debt funding at attractive rates; commissioning targeted Q3 FY28 with full impact from FY29.
Harsha Romania: Slight top-line growth but operating losses persist; one-time FX loss of ₹2 crore (RON vs EUR). New CEO brought in; strategy to raise cage share of sales from 20-25% to 30-35%. Breakeven difficult until key casting customer returns to prior volume levels.
Advantech (Harsha Advanced International): Q1 sales ₹30 crore (+7% QoQ); FY27 target ₹140+ crore vs ₹43 crore FY26. Reported ₹4 crore loss in Q1; targeting net positive by FY27 year-end. Phase 2 CapEx announced for machining, stamping, and large-size capabilities.
Solar EPC: Q1 revenue ₹36.3 crore with positive EBITDA ₹2.82 crore; highly project-driven with Q4 typically strongest due to depreciation/financial benefits. FY27 target ~₹200 crore at 7-8% EBITDA margin.
Company-Specific & Strategic Commentary
Product Diversification: Bushing (+35% YoY) driven by wind gearbox conversion effect expected to sustain 2-3 years; stamping (+31%) supported by new products in AC compressor, railway seal inserts, and automotive stamping; large-size cages targeting 50% growth on wallet-share gains with existing customers.
Capacity Expansion Roadmap: Bhayla (Advantech) Phase 2 and Harsha China brownfield underway; ₹180-200 crore combined CapEx over FY27-FY28 (₹50-80 crore in FY27). Bhayla construction paused briefly due to heavy rain but resuming; China building construction progressing on schedule.
End-Market Development: Building capabilities in wind energy gearbox (next-gen bushings and cages), specialized railway applications (stamping components), aerospace/defense (Tier 1/Tier 2 stamping), and EV mobility (high-performance bearing cages). All currently in developmental stage with revenue potential as portfolio matures.
Customer Concentration: Top 10 customers ~80% of India revenue, spread across 80+ plants worldwide; major customers include Timken, Schaeffler, SKF, NBC, ZF, and Hailey; India wallet share estimated at 80-90% with major bearing customers.
Inorganic Growth: Evaluating strategic opportunities in precision engineering space when they arise; opportunistic approach, not a mandate.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| India Engineering Growth | High teens, FY27 | Volume-led; ~3-4% price pass-through adds some value impact |
| Consolidated Sales Growth | Low-to-mid teens, FY27 | India >15%, subsidiaries low teens on average |
| Bottom Line Growth | Stronger than revenue, FY27 | Advantech losses dramatically reducing, Romania losses tapering |
| Bushing | vs ₹127 crore FY26; conversion effect expected for 2-3 years | |
| Stamping | vs ₹60 crore FY26; strong new product pipeline | |
| Large Size Cages | vs ₹49 crore FY26; Q1 aberration, order pipeline strong | |
| Japanese Customers | vs ₹72 crore FY26; slow development cycle, still positive | |
| Advantech | ₹140+ crore revenue, net positive by FY27 year-end | vs ₹43 crore FY26; ramp-up phase, EBITDA margin ~9% currently |
| Harsha China | ~10% growth, EBITDA 12-14%, PAT ~6% | vs ₹120 crore FY26 |
| Combined Foreign Subsidiary Losses | ₹2-4 crore (lower single digit) | vs ₹10 crore FY26; both subsidiaries expected to improve |
| India Engineering EBITDA Margin | 20-22% sustainable | RM pass-through lag creates quarterly volatility |
| Consolidated EBITDA Margin | ~18.7% if metal prices stabilize | Matches last year's level; dependent on metal stability |
| Solar | ~₹200 crore revenue, 7-8% EBITDA margin | Project-based, order-driven |
| Capex | ₹50-80 crore in FY27; ₹180-200 crore over FY27-FY28 | Bhayla Phase 2 + China brownfield expansions |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Price Volatility | RM costs up ~8% in Q1 across brass, copper, zinc, steel, and polymers; pass-through lag of 1-2 quarters compresses near-term margins. Management expects stabilization but offers no certainty on timing. |
| Forex Volatility | Q1 hit by ₹4 crore hedge realization loss (OCI accounting) and ₹2 crore Romania FX loss (RON vs EUR borrowings); may cause periodic accounting volatility in future quarters. |
| Romania Turnaround Risk | Operating losses persist; breakeven held back by high overheads and key casting customer not at prior volumes. New CEO and product-mix shift expected to taper losses to ₹2-3 crore FY27. |
| Geopolitical / Macro Conditions | War impact inflated indirect costs (oil, chemicals, packing) by ~₹3 crore in Q1; potential further supply-chain and demand disruption remains. |
| Capacity Ramp-up Execution | Large-size cage capacity at Bhayla facility struggling to ramp; Q1 revenue of ₹10 crore below plan. Management confident of ~50% FY27 growth on strong pipeline, but ramp-up pace is a key watch point. |
Q&A Highlights
Growth Drivers & Full-Year Outlook
- Question: Which segments drove the strong growth — India or Europe — and can 20% growth be sustained for FY27? (Varun Jain)
- Answer: Growth was broad-based — India, Europe, and US all recovering. 20% is a "very tough stretch"; expect mid-to-high teens in India and low-teens consolidated for FY27. (Vishal Rangwala)
Raw Material & Margin Pressure
- Question: Where is the RM increase coming from, and how will margins normalize? (Varun Jain; Jason Soans)
- Answer: RM increase is across brass, copper, zinc, steel, and polymers — broader than last year's brass-focused spike. Pass-through with ~4-month delay means 8% RM hike translates to ~3-4% price recovery in coming quarters. India engineering sustainable EBITDA margin guided at 20-22%. (Vishal Rangwala; Maulik Jasani)
Romania Turnaround
- Question: Where does Romania stand, and when will it break even? (Amit Anwani; Saket Kapoor)
- Answer: Excluding FX, performance improved only slightly; copper price increases negated some gains. New CEO appointed; target to raise cage share from 20-25% to 30-35% of sales. Breakeven remains difficult until the key casting customer returns to prior volumes. Combined China+Romania loss guided at ₹2-4 crore this year vs ₹10 crore last year. (Vishal Rangwala; Maulik Jasani)
Bushing & Stamping Growth Drivers
- Question: Is the 30%+ growth in bushing and stamping sustainable? (Amit Anwani)
- Answer: Bushing growth is driven by the conversion effect (bearings to bushings in wind gearboxes), expected to last at least 2-3 years, plus wallet-share gains. Stamping growth driven by new product launches with a strong pipeline maturing over the next 12 months. (Vishal Rangwala)
Large Size Cages
- Question: Why was large-cage revenue flattish at ₹10 crore despite 50% growth guidance? (Amit Anwani)
- Answer: Q1 was an aberration — large-size capacity at the new Bhayla facility is still struggling to ramp up. Demand and order pipeline are strong; growth will come from increasing wallet share (currently low) with existing customers. (Vishal Rangwala)
CapEx & Expansion Progress
- Question: How are China brownfield and Bhayla Phase 2 progressing, and what is the CapEx guidance? (Vaibhav Shah; Manish Goyal)
- Answer: China Phase 2 is on track for Q3 FY28 commissioning; building construction ongoing. Bhayla construction was paused due to heavy rain but will resume shortly; machinery procurement underway. CapEx guidance: ₹50-80 crore in FY27, ₹180-200 crore combined over FY27-FY28. (Maulik Jasani; Vishal Rangwala)
Japan Customer Growth
- Question: Q1 Japan revenue grew 25% to ₹21 crore; why guide only 10% full-year growth? (Varun Jain)
- Answer: No expected downtick; Japan projects have slow development and conversion cycles. Japan is a laggard but remains positive; other three growth fronts are more aggressive. (Vishal Rangwala)
Customer Concentration & Wallet Share
- Question: What is the customer concentration in India, and who are the largest customers? (Varun Jain)
- Answer: Top 10 customers account for ~80% of revenue, spread across 80+ plants worldwide; major customers include Timken, Schaeffler, SKF, NBC, ZF, and Hailey. India wallet share estimated at 80-90% with almost all major bearing customers. (Vishal Rangwala)
Solar Business Volatility
- Question: Why is solar EPC so volatile (up 120% YoY, down 65% QoQ)? (Varun Jain)
- Answer: Solar is project-based with Q4 receiving depreciation and financial benefits; Q1 was decent relative to last year. FY27 target is ~₹200 crore revenue at 7-8% EBITDA margin. (Vishal Rangwala)
EBITDA/PAT Growth Trajectory
- Question: Is it fair to assume PAT growth > EBITDA growth > revenue growth for the next 2-3 years? (Resham Jain)
- Answer: Yes, especially this year — Advantech losses are dramatically reducing quarter-over-quarter, and Romania is improving. Bhayla targeted at ₹300-400 crore revenue by year 3. (Vishal Rangwala)
Key Takeaway
Harsha Engineers delivered a satisfactory Q1 FY27 with consolidated engineering revenue of ₹421 crore (+20.6% YoY, +10.2% QoQ), driven by broad-based demand across India, Europe, and US; India exports rose 22% to ₹139 crore. EBITDA came in at ₹69.8 crore (+6.9% YoY), with margin compression to 16.6% driven by an 8% raw-material cost increase pending pass-through (1-2 quarter lag), a ₹4 crore hedge-related FX loss, and ~₹3 crore indirect cost inflation from the war. Bushing (+35% YoY), stamping (+31%), and Japanese customer (+25%) segments led growth, while large-size cages (₹10 crore) disappointed on capacity ramp-up but carry a strong pipeline. Management guided to high-teens India growth, low-teens consolidated growth, and sharper bottom-line improvement as Advantech targets ₹140+ crore revenue with net-positive profitability by FY27 year-end and combined foreign subsidiary losses narrow to ₹2-4 crore. Strategic focus remains on Bhayla Phase 2 and China brownfield expansions (₹180-200 crore CapEx over FY27-28), product diversification into wind, rail, aerospace, and EV, and inorganic opportunities in precision engineering. Key watch points: metal price stability, Romania turnaround, and large-cage capacity ramp-up.