Record revenue, compressed margins, semicon growth claim overstated

On the headline numbers, it looks like a blowout quarter. Revenue hit a record ₹186 crore, up 48% year-on-year. Profit surged 70%. But the call revealed the real story — and it's more complicated. The quarter proved two pieces of guidance wrong: the EBITDA margin target and the semicon growth claim. That's not a miss in execution; that's a miss in credibility.

PAT of ₹9.7 crore looks strong in isolation, but the profit margin tells the real story. Net profit margin is just 5.1% — compressed by finance costs. Management disclosed interest outgo of approximately ₹9.7 crore in Q2, almost exactly equal to reported PAT. That means underlying operating profit (before interest) is roughly ₹19.4 crore, not ₹9.7 crore. The company's profitability is being masked by debt. The good news: ₹300 crore was raised in a QIP (anchored by SBI MF and Kotak MF); management promised 'substantial' interest cost relief starting in Q3 from debt repayment. The bad news: until that happens, the profit story is understated.

EBITDA margin of 15.6% in Q2 is the core issue. In the prior call (FY26), management guided for 17–22% EBITDA margins 'as the benefits of recent investments are realized.' This call they revised upward to 18–23%, citing scale benefits. But Q2 actual of 15.6% falls 1.4 to 7.4 percentage points short of both targets. Analyst Nisarg Shah pressed directly: 'Previous calls guided 17–20% EBITDA margins; are we on that trajectory with operating leverage?' Management replied: 'Yes, definitely... we're well on track to achieve that' (the 18–23% target). But the numbers don't support that claim yet. At the current margin, delivering 18–23% by year-end would require a 240–450 basis point improvement in H2 — a jump management hasn't quantified or explained.

The prior call (FY26) included bold guidance: '300–400% expansion in the semiconductor and space segments.' This quarter, that guidance quietly evaporated. When analyst Darshil Jhaveri asked directly, 'Were targeting 3–4x growth in space/semicon; how is that segment doing?' management said: 'On track for that kind of growth. ... ₹140 crore non-aero in H1 vs ₹100 crore last year between semicon and space.' That's a 40% year-on-year growth rate — nowhere close to 3–4x. Management cited two very large multinational OEM customers now on board (up from one), which is genuine progress. But the growth rate contradicts the prior guidance by an order of magnitude. Analysts didn't follow up; management didn't acknowledge the gap. That's the credibility issue.

Semicon customer base expanded. Now partnering with two 'very large respected multinationals' in semicon (vs. prior single customer). This is genuine progress for diversification, but growth rate (40% YoY) falls far short of the 3–4x target.

Capital structure strengthened. ₹300 crore QIP completed successfully with strong institutional demand (SBI MF, Kotak MF anchor). Proceeds earmarked for debt repayment (working capital borrowings) and growth capex. Interest cost savings promised to be 'substantial' and visible in Q3.

New facility going live Q3. 140,000–210,000 sq ft Aerospace Park facility being inaugurated early next quarter, with expansion option to 210k sq ft. Designed to support semicon, non-defense, and MRO scaling. This is the capacity lever for the 50/50 split (aerospace / non-aero) targeted by year-end.

FY27 guidance hedged / withdrawn. Prior call: 87% FY27 revenue growth. This call: No numeric FY27 target given. H1 at 60% growth; management deflected quantification to 'Q3/Q4 historically strongest quarters.' Analyst Darshil Jhaveri pressed: 'Alluded to 80%+ growth previously; H1 at 60%; what is FY27 revenue guidance?' Management declined: 'Can't give exact forward-looking numbers.' That's a red flag when you're mid-year at 60% and the prior target was 87%.

The stock is at ₹1,429, down 15.87% from its all-time high of ₹1,699. That drawdown reflects market caution — and it's justified. The stock is near its 20-day moving average (₹1,430), holding above the 50-day (₹1,394) and well above the 200-day (₹1,018). RSI is 51.1 (neutral), suggesting no oversold bounce imminent. Volume is normal; no capitulation selling. Ownership is locked in: promoter stake 74.80% (unchanged for 6+ quarters), FII 1.68% (+8 bps quarter-on-quarter), DII 0.78% (-273 bps QoQ). The DII selling is worth noting — domestic institutions trimmed in Q1 FY27, suggesting they're waiting for margin proof before re-engaging. No insider selling near the highs, and no bulk/block deals in the past six months. The market has priced in margin and guidance concerns; a positive Q3 (facility ramp, margin improvement, interest relief) would likely re-rate the stock.