Revenue beats but PAT collapses; margin recovery hinges on price pass-through

₹250.4 Cr Q2 FY27; Atul confirmed in opening

Atul stated '32 percent year-on-year basis'; revenue growth 20.4% consolidated due to mix

EBITDA ₹27.7 Cr Q2 (+8% YoY); margin lag explained by exhausted low-cost inventory Q1, commodity inflation

Atul: tungsten carbide, tool steel, power, diesel, carbide up 300%, 30%, 40%, 50% respectively

Atul: SEM targeting ₹150 Cr+ to breakeven; STML just started Q2; no explicit FY28 breakeven revenue restated

Revised to ₹110-120 Cr for fasteners alone; ₹40 Cr subs investment; ₹150 Cr total FY27 capex

Prior ₹80 Cr fasteners capex → now ₹120 Cr fasteners + ₹30 Cr EV subs = ₹150 Cr total FY27 (vs. earlier ₹80 Cr implied). Funding via debt.

Prior: no explicit timeline given. Now: management hoping for Q4 recovery; price pass-through in negotiation with retrospective effect. Timing uncertain.

Prior (Q1 FY27): SEM/STML combined ₹225–250 Cr by FY28. This call: SEM targeting ₹150 Cr+ alone; no explicit FY27–28 combined target stated, detailed discussion deferred to FY27 full-year call.

Prior: 20%+ annual growth. Delivered Q2: 32% YoY standalone; H1: 28% YoY. Guidance reaffirmed via run-rate language ('existing customers ramping', capex planned).

SEM grew 26% Q2 vs Q1; STML just started Q2, turnover mainly Q2 only

Mix of operational and fixed cost; need to reach ₹150 Cr revenue to achieve breakeven

We are hoping; there is exceptional pressure; negotiating with customers for price increases; difficult to commit on Q4 specifically; hoping for substantial compensation

Existing customers ramping. Tata, Leyland, Volvo, Mahindra, Daimler Benz, Swaraj Mazda — not startups; existing operators up dramatically

Exhausted low-cost inventory in Q1; commodity inflation (steel, carbide, tool steel up 300%, 300%, 50%). Exceptional year with inflationary impact on all inputs. Price recovery ongoing via negotiation.

Consolidated ₹150 Cr FY27; SEM ₹20 Cr, STML ₹10 Cr, fasteners ₹120 Cr. Building with 12–24 month lag before revenue conversion.

Tungsten carbide prices up 300%, electrodes up. Volume growth 28% also contributed. Percentage-wise expenses stable despite absolute inflation.

₹40 Cr investment in subsidiaries (SEM/STML); ₹110 Cr capex for fasteners being funded via debt component. Two main reasons.

Not really. All major customers already onboarded. Focus is product development and business share increase with existing base. Volume growth 28% HY from existing base.

One PoC delayed, expected completion by end of November. Second PoC on hold due to customer's inflation constraints; hoping for completion by end of next month (November).

28% is pure volume growth; value growth similar. Inflation impact minimal right now; majority of inflation costs under negotiation for price recovery in Q3–Q4.

First target for fasteners is ₹1,000 Cr ASAP. For SEM/STML refocusing, a lot of groundwork happening; will discuss in detail in FY27 full-year investor call.

Production lines commissioned Q2 as planned. Substantial ramp starting Q3, Q4. Validation with customers ongoing in Q3; production supplying from Q4 onwards.

5 new contracts coming to production by end of year; 23 total programs; 42 active programs in E-mobility; validation and testing phase ongoing.

Current run-rate ~₹190–200 Cr annualized fasteners; ₹1k Cr is multi-year target. Requires sustained capex and market share gains. No explicit timeline (ASAP) given.

SEM ₹23 Cr Q2; STML minimal Q2. Combined target of ₹225–250 Cr by FY28 (prior) not explicitly restated; new SEM-only ₹150 Cr breakeven threshold introduced. Timing uncertain.

Currently under pressure from commodity inflation and inventory drawdown. Price recovery in negotiation with retrospective effect. Management hoping (not committing) to Q4 recovery; no explicit margin target for FY27 stated.

Deferred detailed gross margin guidance to Q4; still in ramp-up phase. Early production lines just validated; no explicit STML margin target given.

Breakdown: fasteners ₹120 Cr, SEM ₹20 Cr, STML ₹10 Cr. 12–24 month lag expected before capex yields revenue. Funding via debt component.

Initial ₹25 Cr already incurred; revised plan upward due to expanded customer demand and new capacity lines. Capex building progressively.

PAT collapsed 83% YoY despite 20% revenue growth. Input cost inflation (steel, carbide +300%) exhausted low-cost inventory in Q1. Price recovery in negotiation; timing and extent uncertain. Margin pressure may extend into FY28.

Capex escalated from ₹80 Cr (prior) to ₹150 Cr (this call). 12–24 month lag before capex converts to revenue. Risk of capex overspend, delays in capacity deployment, or demand slowdown reducing ROI.

SEM and STML are early-stage, loss-making. Both expected to ramp Q3–Q4 and turn around in FY28. Customer validation, production scaling, supply chain challenges, or demand delays could derail timeline.

Steel, carbide, tungsten carbide, tool steel prices remain elevated and volatile. While price pass-through is ongoing, future commodity spikes could compress margins again if not immediately negotiated.

Italian competitor acquisition noted; Madhur Rathi asked about competitive intensity. Atul claimed no pricing pressure and good wicket, but market consolidation may limit margin expansion.