Construction momentum drives beat; ag recovery ahead but uncertain timing

Delivered 347.4 Cr (27% vs 346 Cr prior year), validates claim

Delivered 56.6 Cr PAT (64% vs 34.4 Cr prior), supports claim

Prior guidance was FY26-level growth (21%); Q1 at 27% is ahead, but full-year guidance still cautious at 'couple percentage points better'

Q1 at 25% EBITDA but management notes cycle average is 20%, elevation driven by warehouse sales mix (56%, up from 50-52% prior year)

Confirmed in Q&A, one-time benefit, material cost 33.3% due to product mix change

Construction grew faster than ag due to global AI/smart manufacturing (US) and infrastructure (Europe) tailwinds. New business wins structural; momentum expected to continue into FY28.

Aftermarket declined from 20% (FY25) to 15% (FY26) to 12% (Q1 FY27). Tariff-driven demand deferral expected to recover over 12 months, but timing more uncertain than prior quarter.

First customer deliveries expected Q3 FY27; FY27 revenue mid-single-digit million $. Phase 2 (local manufacturing) under consideration as customer production shifts to Mexico.

Management confirmed new large ag business awards from FY26 now flowing revenue. Single-digit market share acknowledged, but validation/testing cycle (long) justifies growth strategy.

6 targets currently under review; no new updates or timelines. Prior commitment to 'within 18-30 months ROCE/ROE payback' reiterated, but execution still elusive (evaluated 12 since IPO, closed zero).

Yes, structural drivers (new wins, industry recovery, wallet expansion) are multi-quarter. But ag recovery will rebalance mix; expected and healthy. Margins similar across products; channel (warehouse vs export vs local) is differentiator.

Evaluated ~12 targets since IPO; 6 under close review. Deal criteria: value-accretive within 18-30 months (ROCE/ROE), meaningful platform, manageable size, not distressed. No hurry; effort and intensity remain high; will update when concrete.

Small ₹1 Cr inventory gain. Material cost 33.3% due to product mix shift (3PL/PMP/fabrication have different material %). Channel: warehouse 56% (vs 50-52% prior), local-local 22% (vs ~25% prior), direct export ~22%. Warehouse margin highest; normal material range 34-37%.

Construction momentum continues FY27-FY28. Small ag growth starts CY27 (later this year). Large ag trough CY26 (mid-teens decline expected this year), recovery FY28. Cycle EBITDA margin 20% (peak-to-trough); current 23-25% but dependent on recovery pace, warehouse %, FX.

Large ag Western market; India is small ag country (50% global tractors). Validation/testing cycle slow; new wins flowing now (FY26 awards). CFM works with top 3 construction OEMs globally; order win book similar Europe/US; revenue will follow cycle. Efforts on new retailers in Europe/US underway.

Invested in fabrication facility 2.5 years ago while waiting for M&A; in discussions with OEM customers for fabrication supply. Capex 2.5-3.5% of revenue (organic + inorganic), fairly constant. Fabrication expected meaningful vertical in 18-24 months; still below capex headroom.

FY26 was +21%; FY27 will be couple percentage points better (~23-24%). Margins: cycle is 20%, current 24-25% in recovery mode. Expected above 20% going forward depending on recovery pace, warehouse %, FX. Capital is 2.5-3.5% organic; ₹190 Cr cash for M&A if needed.

Mexico: export from India + warehouse model; Phase 2 local mfg under consideration. FY27 revenue mid-single-digit million $. Warehouse sales will remain 52-56% range (Mexico adds warehouse, but industry recovery adds direct/local sales). H2 better than H1 due to ag industry recovery in H2.

Q2 looks very robust; should be in line with Q1.

Product mix (3PL/PMP/fabrication material % different) and channel mix (warehouse higher) drive elevation. Material cost should stay 34-37% (normal range); confident of 20% EBITDA over cycle. Variables stack differently at different cycle points.

Demand deferral (tariffs, inflation, West Asia); not degrowth. Aftermarket flat YoY absolute but lower % (OEM grew faster). Tariffs reduced; expect normalization over 12 months. Note: aftermarket 20% FY25, 15% FY26, 12% Q1 FY27 (it gave anchor when OEM down). Adding new retail channels in US/Europe ongoing.

Off-highway supplier focused. TAM: below 70 HP 3PL (dominant), above 70 HP 3PL (single-digit, biggest runway), PMP (wallet expansion with top 3 construction OEMs), fabrication/hydraulics/PTOs (M&A targets). Construction customers in AI/smart manufacturing and mining (indirect exposure). Growth via wallet expansion, not sector pivot.

Construction recovering (started H2 CY25, continuing FY27-28). Small ag recovery just starting (CY27 main). Large ag at trough CY26 (down 30% CY25, down 15-16% CY26). New business wins split ag/construction, focused on large ag + construction (higher runways). Noncyclical growth via wallet expansion with top customers.

Q1 FY27: warehouse 56%, local-local 22%, direct export 22%. Q1 FY26: warehouse 50-52%, local-local ~25%, direct export remainder.

Mexico warehouse increases warehouse %, but industry recovery also increases direct exports and local sales. Expect warehouse sales to stay in 52-56% range over 12-18 months (not structurally higher).

Couple = 2-3 percentage points, implies 23-24% FY27 growth. Conservative framing given Q1's 27%, but reflects caution on H2 ag recovery timing and full-year mix.

Large ag recovery expected FY28; small ag growth CY27 onwards. New business order book ₹225 Cr provides visibility; but timing of ag recovery still uncertain.

Cycle average 20% (peak-to-trough); current elevation due to recovery mode, warehouse sales mix (56%), and operating leverage. Material cost range 34-37% normal; management confident maintaining 20%+ over cycle.

Mexico warehouse will add warehouse sales, but industry recovery adds direct exports and local sales; mix expected to settle 52-56% over 12-18 months (not structurally higher than now).

Q1 capex ₹12 Cr (~3.5% of revenue). Capex ratio remains fairly constant; covers capacity, productivity, customer-led growth. Inorganic capex (M&A) to come from cash balance (₹190 Cr), debt-free.

Large ag in Western markets at trough CY26 (down 15-16% expected); can downturn extend if US recession or farm debt stress persists? Small ag Western recovery fragile after 3 years decline.

Top 5 ag global OEMs and top 3 construction OEMs are primary customers; concentration risk if any customer loses market share or reduces capex in downturn; new business diversification limited to same OEM base.

Aftermarket (3PL replacement parts) 12% of revenue, flat YoY absolute but down from 15% FY26 and 20% FY25 due to tariff-driven price volatility and demand deferral. If recovery delays, revenue drag extends.

Evaluated 12 M&A targets since IPO; 6 currently under review; zero deals closed. PTO/hydraulics/fabrication acquisitions promised for years but not materialized. If M&A doesn't close, ₹190 Cr cash underdeployed; organic capex 2.5-3.5% won't fully utilize balance sheet.

Mexico warehouse commencing Q3 FY27; FY27 revenue expected mid-single-digit million $ (~$3-8M). Phase 2 local manufacturing not yet committed. If customer production shift delays or warehouse demand lower than expected, revenue ramp slower.