Aartech Solonics Limited (AARTECH) Q1 2027 Earnings Call Transcript

Good morning, everyone. On behalf of Artex Solonix Ltd., I extend a warm welcome to all our shareholders, investors, analysts, and other participants who have joined today's investor interaction through Google Meet. I am Tanuj Reddy, company secretary and compliance officer of Artex Solonix Ltd., and I will be hosting and moderating today's interaction. Today's interaction is being conducted primarily to discuss the financial performance of Artex Solonix Limited for the quarter ended 30th June 2026. The management will take us through the company's performance for the quarter, discuss the key financial and operational developments during the period, and provide its perspective on the business outlook. This will be followed by a question-and-answer session where participants will have an opportunity to interact with the management and seek questions on the quarterly performance and related matters. As there is no separate investor presentation being circulated for today's interaction, the discussion will primarily be based on the company's financial results for the quarter ended 30 June 2026, along with other information and disclosures already available in the public domain. Before we proceed, I would like to introduce the management representatives who are joining with us today. We have with us Mrs. Aarti Nath, CEO and Director of the company, Mr. Pradeep Narkhede, CFO of the company. We are pleased to have the management team with us today and thank them for joining this interaction. Before we begin, let me briefly explain part of today's Interaction. First, the management will discuss the company's financial performance for the quarter ended 30 June, 2026, including the key movements in revenue, profitability, and other relevant financial and operational parameters. Management will also provide relevant commentary on the factors that have contributed to the quarterly performance. Following this, we will move to the question and answer session. Participants will be able to ask questions directly to the management during the question and answer session. Since this interaction is being conducted through Google Meet, I would request all participants to keep their microphones muted while the management is making its opening remarks. During the Q&A session, participants may use the hand option. Once I call your name, please unmute yourself, briefly introduce yourself, and then proceed with your question. After asking the question, I would request you to kindly mute yourself again. If you have multiple questions, I would request you to first phrase the most important question. Depending on the time available, we can take up additional questions subsequently. Before we proceed, I would like to place the The statement that may be made during today's interaction may contain forward-looking statements concerning the company's business, future plans, expectations, outlook on prospects. Such statements are based on the company's current expectations and assumptions and are subject to various risks, uncertainties, and other factors. Actual results may differ materially from those expressed or implied in such forward-looking statements. Participants are requested to consider these statements in conjunction with the company's financial results and other disclosures made by the company with the stock exchanges and other publicly available information. The company does not undertake any obligation to publicly update or revise any forward-looking statements except as may be required under applicable laws and regulations. I would also like to clarify that as a listed company, the company follows the principles of fair and equal disclosure. Accordingly, the management will restrict its comments during today's interaction to information which has already been publicly disclosed or which can appropriately be discussed in this forum. The company will not disclose any unpublished price-sensitive information or material non-public information during this interaction. In case any question seeks information which has not been publicly disclosed, the management may not be able to comment on that particular aspect. Any material information requiring disclosure will be communicated to the stock exchanges in accordance with the applicable regulatory requirements. For today's discussion, participants may refer to the financial results of the company for the quarter ended 30 June 2026, which have been duly disclosed to the stock and are available on the public domain. The discussion today invites additional context around the reported quarterly performance and allow investors to interact directly with the management. With these introductory remarks, we can now proceed with the discussion. I would now like to invite Mrs. Aarti Nath, CEO and Director, to take us through the company's financial performance for the quarter ended 30 June 2026 and the key developments during the quarter. Ma'am, over to you.

Thank you, Kanush, and good afternoon, everyone. I warmly welcome all of you for our first quarter investor meet. Many of you would be attending for the first time, so just a brief background about our company. Artexolnix Limited was incorporated in the year 1982 and is dealing in specialized energy applications with multiple segments which are catering to thermal power sector on the generation side, on the distribution and transmission side. A bouquet of products in other diversified segments are also there, which includes the defense sector, plastic enclosure sector, and other services that we are offering in the electrical engineering services side. Coming on the first quarter results, our total revenue from operations for 30 June 2026 is 728 lakhs, with we, on a year-on-year basis, it was 433 lakhs. As we can clearly see that the revenues have grown approximately by one and a half times and representing a strong order book in line, good execution of the products in place, and also the fact that we had a strong pipeline at the beginning of the year to execute these orders. In the first quarter, we were already having an order book of around 7 CR from our last financial year, which were executed in this year. If we have to look into the other expenses, on the expenses side, the cost of material consumed were around 3.36 CR. We have a marginally increased year-on-year basis, which shows a lot of efforts and bandwidth that have been put on the material expenses, on the procurement expenses, and a lot of rate contracts and savings have been done there. Employee benefit expenses have marginally increased to around 119 lakhs, clearly representing some increments that have been given on a yearly basis to all our employees, along with performance bonuses that were outlaid in the first quarter. Total expenses, if we compare on a year-on-year basis, they have increased from a 4.69 lakhs to around 7.2 CR. If we have to marginally compare it on percentage basis, the percentage seems to be at an equal level as on year-on-year basis. No exceptional items for this quarter, and the total profit before tax that we can see has increased by a significant amount from a 73 lakhs to 119 lakhs. The reasons are very evident that the top lines have grown significantly on a year-on-year basis when we compare it. And this is mitigated also by a lot of disciplined expense layouts that have been done on the procurement side and all the other expenses that have been done. First quarter is normally pretty, I would say, subdued for our businesses because the third and the fourth quarter are normally the heavier ones. When a lot of order execution has been done. But this year, we have had record numbers representing that the company has good traction and good control over its orders in hand. And also expect that the next three quarters are going to be very healthy in terms of revenues, and also in terms of margins. If I have to go segment-wise, our bus transfer system, which is our flagship product, has given a revenue of around $123 lakhs, followed by control and relay panels, which has given around $224 lakhs. Our plastic enclosure business has given around $40 lakhs. And our project businesses, which is mainly catering to the defense segment, has given around $156 lakhs. One of the interesting segments that we are also pursuing now is on the trading front, Where we are looking at specialized items being traded domestically and in the overseas market, giving us confidence that we would be able to also understand the new technologies that are coming in the world and understand the engineering concepts and also have a marketable presence under the name of our company. The trading segment has given us around 181 lakhs, totaling to

around 7 CR. In the end, I would like to say that

on the asset and liability side also, balance sheet is very healthy with negligible. debt on our books. In fact, we have only non-fund based liabilities which have been continuing on our books and we have been a cash rich company for many years, continuing to do so till the last quarter as well. And the expectation and the strategy that we continue to follow is that we would be keeping our balance sheet very light and leverage this in the long term to come.

So thank you. Any questions are more than welcome.

Thank you, ma'am, for taking us to the company's financial performance for the quarter ended 30 June 2026 and for providing the relevant context around the quarterly numbers. I believe that gives our investors a useful overview of the company's performance during the quarter.

We will now move to the question and answer session. For the benefit of all participants, I will introduce you briefly and proceed with your question.

I request everyone to keep the questions concise and primarily focused on the company's quarterly financial performance, The factors affecting the results and other matters relevant to the company's business and publicly disclose information.

With that, let's begin the question and answer session.

I can see that Mr. Amitabh has raised his hand. Sir, you may please unmute yourself and go ahead with your question.

Hi. Thanks for organizing the call. I wanted to understand slightly, I wanted to understand some of the products which your company has been developing In a very discreet manner that not much talk about many things which are being developed, I think, which I think, which I have gone through the literature but uploaded on your website. So can you through the through the magazine which you are publishing so anything on your product development philosophy and how this paradigm and ultra capacitor tool which you have developed for for defense. And is this going to be industrialized in some time soon? Or what is the timeline visibility with respect to some of the products which you think are going to poise for growth?

Thank you, Amitabji. I would like to answer your question that the philosophy on the product developments have been very clear for our organization. And that has been to be stated in a one-line mantra that it needs to carry some value addition in the existing applications that are there in the world and the pain points that we are solving for our ultimate customer. Yeah. Coming on ultracapacitors or energy storage devices, this technology has been there with the organization for the last 15, more than 15 years now. And we have been trying to apply ourselves on the various applications for ultracapacitors, whether it is in In locos for railways, whether it is for engine starting devices in army for tanks, or whether it is as sophisticated as giving nanotechnology-based ultracapacitors in missiles. So, based on the applications, of course, the product development varies, and also the R&D behind it also varies. At this point of time, with all the disclosures that I can give on the ultra capacitors and its applications, because these are mainly very proprietary based and a lot of legal commitments are there not to disclose it, because these commitments are placed with the sensitive customers like Indian Army. I would just like to express that the products are made in India for India and for nation building and for very critical applications that are used in very difficult terrains for the larger machines or equipments or heavy vehicles that are placed, let's say, in extreme terrains. Thank you.

I have one other follow-up, not a related question, but with respect to the CRP product which you have, and if you can throw us some light on the margin profile of CRP which you produce with the peers, because some of your listed peers are making more margins there, so I wanted to understand whether we are cross-subsidizing our CRP margins to other developmental products. Or how competitive we are with respect to this relay panel, and in terms of other electrical products, you can talk about, or you can club together.

All right. Thank you again for your question on CRP. CRP has been our bread and butter product for many years now, and the pricing strategy that we offer on this product is around 10% plus. And we have been focusing, starting from very, very preliminary product line of, let's say, 11 kV to 220 kV. Now our competitors, which are there in the market, are, let's say, according to your research, is offering more than the margins that we are gaining. One of the reasons can be that if you go in the higher ratings of, let's say, 415 KB till 750 KB, then the margins, of course, increase because there is a lot of competition that gets filtered out. Uh, our long term vision is to get to that level. And for that, we have been trying to brace ourselves with a lot of original equipment manufacturing of the relays, which we are right now collaborating with many companies. But that is very much on our cards to start this as our own manufacturing and get to higher rating panels.

Okay. And how is the roadmap in terms of you to go from 220 to 4765? Because the companies that I'm referring to are also not into higher TV ratings. So, I wanted to understand your position in the supply chain. Like, you would like to work with, like, let's say, Snyder Electric, or you would like to be your own brand, because you are fairly kind of recognized into an industrial system like NPVC and all those ecosystems. I think you are recognized as a MECO itself, if I'm not wrong.

Yeah, yeah, yeah. So, one of the essential criterias to understand possibly this problem is the product segmentization in the control and relay panel. So, control and relay panel, what we are offering is right now to the distribution and the transmission utilities. But yes, there are a lot of new business segments which are coming through EPCs, which offer good margins. And the supply chain is slightly stagnant because the deliveries are not very clear. But yes, they offer some good margins. We are also trying to procure that. And the roadmap to go beyond 220 to 415, as I already reiterated, that we are looking for some good collaboration partners of relay manufacturers who would partner with us to go into the higher orbit. Possibly in future, we are suitably also looking for manufacturing our own relays and getting into that pool.

And this will be required, it will require some kind of certification from PTCIL or any industry certification you sought to make a presence as a brand, as a make.

Yes, there are a lot of type test certificates, type testing that needs to be done on the product. Along with that, yes, big establishments like PGCIL or, you know, global type testing organizations like Kima, etc., are required to validate your product before it is floated in the market.

Okay. Thank you for the clarity. And I would, if somebody would like to visit your plant, then how feasible it is for an investor like P2B?

More than welcome, Amitabh ji, and to the rest of the investors, you are more than welcome to visit our factory premises. And the coordinates can be given by our compliance officer to peruse the same.

Okay.

Thank you. Any other investor wishes to raise their concerns with the management? Yeah, Ms. Shivani, please go ahead.

Hello to everyone present in the meeting. The company's financial performance has improved, but the stock price has not reflected this to the same extent. How does the management view this?

Thank you, Shivani, for your question.

What I would just like to comment here is that And of course, the synergies that are getting reflected in the books with better revenues and with better performance should be considered by the investors appropriately. And because it's a free market, I would believe that in the future, they would definitely consider and incorporate this in the pricing of the stock.

Any further questions? Yes, Mr. Dev Agarwal, please go ahead.

Yeah, good afternoon, man. I'm Dev Agarwal from Shagumi Capital. So, ma'am, in the previous call, you mentioned we have out by 10 of 100 crores. So, do we see any conversion from that?

It's my first question.

Thank you, Mr. Dev. In our previous earnings call, what the management had mentioned is is that we have total inquiries of around 100 CR, which we have quoted, but the orders in hand were around 10 to 15 CR, if I'm not mistaken. I'm sorry, I mean, you had something more to ask more than that?

Yeah, actually, I think it was in pipeline, that is query So I think, do you see any more conversions in that? Are we seeing any other inquiries to that 100 growers?

Yes, we are very much there in the middle of a lot of things and mostly because these are some long gestation projects that come our way. The inquiries are still alive and we should be able to get some good numbers in this financial year. Um, when if I become very conservative about the projects getting stretched because of a lot of, uh, ecosystem changes, including, um, you know, policy changes, et cetera, I will expect that we should be able to, uh, come to a near about number, uh, by this financial year or around the same time in the next financial year.

Okay, it was quite good. So ma'am, I have seen in the company's disclosure and also annual reports that we are developing various kinds of products in a very niche, that is VTS and ultra capacitors too, and various other products. So ma'am, which segment do you see would be seeing so much of growth in the future, like ultra capacitors, as you said, is also developed with the, I would say, not ultra capacitors, but particularly AAPM and EMLAS BC. So, they are produced with the collaboration of IIT Bombay and Indian Army 2. So, what do you see? Which segment would be the biggest, I would say, the growth driver for the future projections if we do?

Possibly, I would take it a little more philosophically, Mr. Dev, that every product has its own life cycle. And a lot of parameters actually depend on when the product is getting applied and where it's getting applied and at what time. But to make it more objective, I would like to say that at this point of time, a lot of new industries are opening up. For example, for bus transfer system, we were looking at Genco's particularly. But now the segment has increased to not just the Gencos, but the refineries, to process industries, to cement industries, and to a lot of newer areas where this product can be applicable. Similarly, the products that are getting developed currently, let's say you are talking about AAPM. Yes, the application seems to be very, very interesting right now in the current stage at where the Indian Army is working. And yes, of course, that would also have many more applications in newer industries that would follow. Sure. Not just in India, but around the globe also.

Sure, sure. So, ma'am, I have a follow-up question, basically. So, if we see about data centers and power sector, we have so much of basically data centers. So, do you see any demands coming from data centers or any other industries, particularly when DTS is used?

Yes, to be very categoric, data centers are actually right now getting developed in India. And there are some different product lines that we have to offer. Particularly on the energy storage side, we are looking at applications that would be helpful for data center. This can also include, you know, applications like flywheel or ultracapacitors or rectifiers or many such other products that should that should work out in the long term basis for such newer industries. Please.

So, I think we are, you mentioned in the earlier call that we have a product named EMLS, which is used in Vikrant or any other ship where fighter jets lie on a very short distance. So, this, like this, what's the, I would say, approval timeline from Navy or any Any other agency which is giving the approval for that? And for Ultracapacitor also, Indian Army is giving the approvals or any other agency. So what time does it take for them to give you the approval? And why would they be choosing you as the supplier for their critical products?

The timelines actually vary from product to product and also on the budgets that they have to offer for such products. But typically, you know, for the technical evaluation, it takes somewhere around 18 to 24 months where they actually place the prototype on the real field And see what variations they can observe or how efficient or how robust that product is. So around 24 months, typically it takes, but that is only for the technical evaluation. But to break the entry barrier and, you know, to show your product and to get them convinced about the product definitely takes much, much longer. So, if I have to answer this, that the technology on which we are working currently will possibly be more applicable in the next, after five years, and for that, we are working today. What we are seeing today, we have started working five years back, and the results now can be seen.

Thank you for that. Ma'am, if you see the R&D expenditure for the company, for FY25, as given in the annual report, so it's around 45,000 something, and in the newer annual report, which will be uploaded, so I think the R&D expenditure, if we see, is not that really much compared to what development we are doing, what critical products we are developing for defense, data center, and power center. So, what's unique about the R&D team and what's like the Amitra also? Like, we are developing this much of good products at a very less R&D community there.

So, typically, you know, what I would say that many technology companies actually, when they are getting evaluated, they check the books as to how much R&D expenditure has actually been incurred. And for us, actually, you know, we don't believe in a lot of overheads that are actually construed as R&D expenses, whether it is in terms of human resources or whether it is in terms of, you know, R&D procurements. We work on very frugal basis and we understand the technology and its application. And our strategy is very simple that we first try and understand the technology, its applications, Make a prototype, get it validated, for which it takes a long time, do the iterations, and try and make a more robust product, and then float it in the market for technical evaluation. So, while, you know, one can always say that, you know, why the R&D expenses are very less, we also need to understand one thing that we normally try and capitalize all our R&D expenses and turn it into assets, because that is something that would help us in the long run and not just expense it out.

Sure, it must help you. Thank you very much. Yes, Mr. Amitabh, please go ahead.

Yeah, thanks for the opportunity again. I wanted to understand a bit on the Indian Railway as a customer, the potential customer for us, because a lot many upgradation in terms of electrical systems are happening. Modernization is happening in Indian Railway. So do we see Indian Railway as a target? And also if you can throw some light on oil and gas, particularly I've noticed you have supplied to Tangote refinery in past, and they're doing huge capex again in a much bigger fashion. So, do we see oil and gas, and which product line of ours will get some traction because of these two levers?

In oil and refineries, we are basically, again, considering it as a process industry, and our flagship product bus transfer system is more apt over there. In our previous executions also, Dangote had given a turnkey contract to Reliance, and then Reliance had actually given us the bus transfer system applications to be applied over there. So, yes, oil and refineries is one industry which definitely shows some very good sunrise horizons for our bus transfer system and where we have actually proved our credentials also. So, on the UCAP side, as I mentioned, that it is not just the defense sector, but also various other sectors where, you know, we can also look at energy starting devices for not just vehicles, but also automobiles.

Also, I would say aerospace and such industries.

So in ultracapacitor, if you are looking at so many use cases, so for it to be popular, it has to be, for it to be democratized, it has to be low cost. So, what is the major cost for it to fall so that it can get an industry traction in, let's say, automobile or locomotive for this ultra-capacitor to become mainstream? Because technology has to be affordable for it to gain mileage.

Technology, when commoditized, will become more customer-friendly. But presently, that's not our lookout. We are looking at the pain points of our customers, where this application is really apt, and will create a big difference in the way they are working right now. So that's our focus right now.

Oh, understood. With that, I believe we have addressed

the key questions raised by our investors and analysts today. I would like to take this opportunity to thank all our shareholders, investors, and analysts for joining today's interaction and for the constructive questions and observations. I would also like to thank our management team for taking the time to discuss the company's financial performance for the quarter ended 30 June, 2026, and for addressing the questions raised during the session. We appreciate the continued interest and confidence of our investors in Artex Solonix Limited. The company remains committed to maintaining transparent, timely, and consistent communication with all its shareholders and to complying with all applicable disclosure and regulatory requirements. Any material information requiring disclosure will continue to be communicated through the appropriate regulatory channels. With this, we come to the end of today's interested interaction. On behalf of Artex Solenex Limited, thank you once again to all the participants for joining us today and for giving us your valuable time. We appreciate your continued support and interest in the company. Have a very good day. Thank you.