Tempsens Instruments (India) Limited (TEMPSENS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Tempsons Instruments India Limited Q1-FI27 Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing start and zero on your touch-tone phone. Please note that this conference is being recorded. And now in the conference, over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, Mr. Kumar.

Thank you, Nero. Good afternoon. On behalf of ICICI Securities, I welcome you all to the Q1FI 27 earnings call of Timson's Instrument Limited. Today, we have with us, from the management, Mr. Vinayrati, Managing Director, Mrs. Bianca Minaria, CFO, and Mr. Arnirrati, Head, Global Sales. We'll begin with the opening remarks from the management, which will be followed by Q&A. Thank you, and over to you, sir.

Yeah, thank you. Before we begin, just a brief note. Some of the statements what we are making on the call today, including our outlook for the year, may be forward-looking and are based on our current expectations. They are subject to risk, uncertainty, and actual results may differ materially. The Q1-FY27 financial results are unaudited and subject to limited review by our statutory auditor. Where we refer to peak revenue potentials of new capacity, these are indicative revenues at full utilization. It is neither a forecast nor guidance. All figures are consolidated until we say so. Otherwise, please refer to the disclaimer in the investor presentation, filed with the exchange there. Yeah, thanks. So, since this is our first call, I'll start with a framework on how we think about themselves, and Priyanka would then guide you through the quarterly results, and then Aryan and me would come back on the business and the growth levers. Almost every industrial process runs on heat, be it steel, glass, petrochemical, energy, nuclear. Heat is to be measured precisely. It has to be generated. And the signals and the power have to be carried reliably through some of the harshest environment in the industry. Tensors does all see. We measure, we heat, and we connect, creating a thermal loop for our customers. What we make is engineered and made to order, built to customers, processed with, rather than off-the-shelf products. And it is engineered, made in India, for the world. This water is about a third of our product revenue coming from outside India. That gives us three verticals. The first vertical is temperature sensing solution, which is 45% of our FI26 revenue. So, in this, we have contact sensors such as thermocouple, RTD, and non-contact sensors such as infrared pyrometers and online thermal imagers. According to FNS, we are the largest manufacturer of contact and non-contact temperature sensors in India with about 10.5% and 21% in contact and non-contact sensors. We are the only Indian manufacturer of non-contact temperature sensors. The second product, what we have is specialised cable. So this is about 35% of our revenue. High temperature instrumentation and control cable, LB power cable, mineral insulated metal sheet cable, and nickel alloy conductor. Engineered for elevated temperature, hazardous environment. So these are not commodity cables. The third product in our basket is electrical heating solution, which is 21% of our revenue. Process heating solutions, competent heating solutions, laboratory and process furnaces, and now we are getting into medium-voltage heaters. There is a reason why these three belong together. The first reason is thermal loot. We are one of the very few companies worldwide that can sense temperature, heat up the process, and connect for the same customers. Often, the same plant and the same purchase is the decision maker. The refinery that buys our sensors would also need our cables to connect it and also need our heaters for its purposes. In FI26, the cross-sale is almost 267 crore, which is 60% of our revenue, which is a growth over 30% from the last year. The number two reason is backward integration. We are among the few companies worldwide with backward integrated manufacturing across thermocouples, cables, and heaters. We make our own alloys and the mineral-insulated cables that go into our sensors, heaters, and specialized cables. So, one base is serving all three verticals. So, this gives us control over quality, delivery, and cost. Third is qualification. Our products go into glass furnaces, reactors, pressurizers, fuel cells, space applications, Here, approval takes multiple years. One of our Indian PSUs started buying our temperature sensors in 2004, but today they buy our cables, pyrometers, furnace monitoring cameras, heaters. The one approval makes it easier for the next approval. One of the most important changes, and which is also responsible for the future growth, is we are increasingly supplying our products to OEMs. And this OEM program gives us immense volume, visibility, and scale. In fuel cells, we will be supplying both our temperature sensors and cable harnesses. In automotive sensors, in automotive sector, we have a joint venture with Victoria Technologies that takes us into electrical heating cables to reduce emission in commercial vehicles. We are also private labeling our laboratory furnace for a life science company, which is a long-term contract. And we are building similar relationships with other OEMs across sectors, and with this, we see that this would materially change the scale of the company in future. About two-thirds of our revenue is coming from projects and OEMs, and one-third is coming from the replacement business, which is recurring in nature. No end market is more than 22% of our revenue. Our top 10 customers today are 19% of our revenue in FI26. And our top 20 customers have been with us for over 10 years. We export to over 80 countries. Export has grown 46% CAGR between FI24 and FI26. We operate 15 manufacturing plants, five of them in India, five of them outside India, backed by ATC, R&D engineers, and global certifications like UL, ATEX, and ASMEU stamp. Coming to the financial profile, between FI24 and FI26, we have grown with a revenue factor of 27% to 445 crores last year. EBITDA has grown 36% to 113 crores and adjusted back at 35% to 75 crore rupees. Our gross margins have been in the range of 46% to 47% in the last two years, reflecting in engineering content. And EBITDA margins would move because of one could be timing of large specs, Second could be that particular state, and third could be we are investing for the future of the organization. Finally, we believe that the opportunity is much bigger today than it has ever been. Our products are essential for industries. They fit in every furnace, reactor, hill, turbine, molding machine, processing, and heating matter. Yet, each one is engineered for a specific purpose. Which keeps us our niche, our make-to-order market, rather than a commodity market. Two tailwinds are now working for us at the same time. First is electrification of process heat, as industry is replacing fuel fired with electrical heating. Second is alternative energy, fuel cells, green hydrogen. Third is China plus one factor, a lot of global players are coming to us. And a continued investment in oil and gas heat. Globally, FNS sizes the market for the temperature sensors about $4.3 billion, for the heating solutions about $13.2 billion, and for the specialized cable about $33 billion. Together, it is over $50 billion in FI25, going about 7% to 8% to about $75 billion up to 2030. And we have a small share of that today. While the market is large and the part we are playing is not crowded, critically make-to-order applications, demanding qualifications, engineering caps, certification, and that takes years to earth. So, with that, I would like to hand over to Priyanka for the results of Q1.

Thank you, Veena, sir. And good afternoon, everyone. I will cover revenue growth, margins, ISO profit utilization, and other output. Revenue from operation for Q1FI27 grew 118 crores, up by 33% from 89 crores a year old. Q1FI27 includes Tamsys Germany, Tamsys Polska, and Tamsys measurement and control revenue as well. Temperature sensing grew by 42% to 60 crores, about 51% of our total product revenue. Electrical heating grew 148.8% to 25 crores on a low weight as the heater facility commissioned towards the end of Q1 last year. Specialized tables declined by 8.8% to 32.5 crore, reflecting the timing of export order application. Domestic revenue by 18.5% to 78 crore. Export revenue grew by 78.3% to 39.8 crore, rising to about 34% of total revenue from about 25% a year ago. This increase is on account of addition of Tamsyn's Germany, Tamsyn's Poleska, along with sustained growth in key geographies like Southeast Asia and North America. EBITDA grew 26.6 crore up by 15.7% at a margin of 22% against 25.3% last year. The roughly 330 basis point decline has to clear a path. First, gross material margin was 47.4%, broadly in line with our full year level of 46.9% in FI25 and 46% in FI26. Even last year, at 49.3% was a high base. Second, employee cost rose by 45% to 20.4 crore, taking about 140 basis points. This increase reflects the company's continued investment in strengthening organizational capability and expanding headcount to support future growth. and also includes an ESOP charge of 57 lakhs in Q1FI26 with no comparable charge in last year. Other expense grew slower than the revenue. In addition, recently acquired business contributed a relatively lower revenue base while adding employee costs, further influencing the cost structure during the integration phase. Profit before tax rose 16.2% to 21.4 crore and profit after tax grew 16.3 crore up by 15.6%. Adjusted fat, which excludes amortization of acquisition and achiever success, was 17.3 crore up about 15%. Our IPO included a fresh issue of 95 crore, of which 55 crore has already been used to repay borrowings against total borrowings of 78 crore at March 2026. The lower finance cost should be visible from the coming quarter. During the Q1, we also acquired land for about 25 crore for the expansion of our specialized stable business from internal approval. Two points on the year ahead. First, we expect revenue growth to be in line with our blended growth over the last three years. And secondly, we expect margin to remain broadly similar to last year's margin profile as the project we have started to take off and the investment in this quarter brings to payback. After this, I will hand back to Mr. Ayan Ratham.

Thank you, Triyanka. Good afternoon, all. So, I'll briefly cover the three verticals, what we've been up to during Q1 this year, and also the growth levers for each segment. So, for temperature sensing, the organic growth was led by thermal power and by OEMs, including CBD equipment manufacturers. And the pipeline remains healthy across thermal and nuclear power in India, also steel and glass worldwide. We are also launching a new series of next-generation pyrometers, the S-CVs, which is co-developed by our partner, MicroEpsilon, which should start dispatches Q3 this year. So, these products will mostly be aimed at the OEM industries, and it will give us a new lever to pull, especially for the non-contact temperature sensors. We are also building a brownfield plant of about 50,000 square feet within Unit 1 for OEM contact sensors, which is expected to be commissioned by Q3-FI28, which will have a peak revenue potential of about 120 crores with the availability to add further revenue potential in the same facility as well. On to the electrical heating, the growth largely came from significant oil and gas dispatches in India, Southeast Asia, and Middle East. We have also signed a five-year supply contract with the licenses OEM for standard furnaces. In addition to that, we plan to add about 25,000 square feet of space for custom-built furnaces this year as well. So in heating, one of the major products that we are working towards are the mid-voltage heaters up to 15 megawatts for process heating. This will mostly be used in industries like carbon capture, battery storage, and green hydrogen. This is not a crowded space, and we believe we have a very good ride to it in this particular segment. So these heaters have already been tested up to 7.2 kilowatts, and we are targeting explosion-through certification by Q4-FI27. This product will play a pivotal role as the industry replaces fuel-fired heaters with electrical ones. The new products will be supported by a new 50,000-square-foot plant within Unit 6 that is expected to be completed by Q1 F528, which will carry a peak revenue potential of about 200 crores. On to specialized tables, we do not see Q1 as a major problem. It was mostly based on the timing of export orders. In all, we executed orders for thermal power, oil and gas in Africa for a new customer, and chemicals in India. We also are foraying into cable harnesses that we've already gotten the UL certification for OEM customers. These are not standard cable harnesses. These are made for extreme temperatures for very hazardous environments. So, we believe this new product line will help us get into newer use cases as well. So, for cables, we have also started construction for unit 8. It is a greenfield project and should be complete by Q2 F528 with a peak revenue potential of 60 crores. And again, we can ramp the capacity here as well very quickly as we already have the base ready. For the joint venture with Pictura Technologies, we have signed an agreement to acquire an 80,000 square foot facility that already has a shed built on top of it. So production should commence by Q4 F527 with a peak revenue potential of about 120 crores. So, in total, the four projects commissioning between Q4, FI27, to Q3, FI28 has an aggregate peak revenue potential of about 500 crores at full utilization against a FI26 revenue base of 445 crores. As mentioned, this is potential, but this just goes to show how we are ramping up facilities faster and investing for the future as we execute on major projects that we have in hand right now. On the growth levers, we believe there will be four significant levers for temp and sales growth across the three verticals in the near future. First is OEMs. As you might see in the 26 numbers, OEMs contribute in significant part of the revenue, but we believe going forward, these will be pivotal for our growth, where we are working in new energy, automotive, plastics, CBD equipment, and with distribution platforms as well, where we supply products at scale, giving us operational leverage as well. Second is international geography. We have entered into new markets like Mexico, Poland, and South Korea, and ramping up our existing presence across Middle East, Southeast Asia, and Europe, which will play out in the near future. Third is customer approvals and certifications. We are targeting global vendor approvals for oil and gas and domestic approvals in defense and aerospace. As mentioned earlier, every approval that we get makes it easy for us to get further approvals as well for that particular segment. And lastly, fourth is new products and partnerships. So, examples are the Victoria Joint Venture, the STDs with MicroEpsilon, medium voltage heaters, as well as our foray into cable harnesses. So to sum it up, Q1 was a strong quarter for us. Revenue is up by our score, exports close to about 80%, and heating more than doubled. Profits grew about 16%, but we believe we are investing ahead, and we expect the profit growth to be in line with the revenue growth by the end of this year. So in summary, we are engineered, we are made-to-order, made in India for the world, And we believe the opportunity in front of us is larger than ever. We are working hard to execute on the opportunities we have in hand right now. Thank you, and we are happy to take any questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Participants, you may press star and one to ask a question. First question is from the line of Pratik

Gamshi from Union Mutual Fund. Please go ahead.

Yeah, thanks for being the opportunity. Many congratulations, Vinay Jee and the team for a solid set of numbers. My question revolves around the new product launches or the newer segments you are trying to get into. So the recent partnership with MicroEpsilon, getting into a newer range of pyrometers, and in terms of end-user industries like fuel cells, semiconductors also you mentioned in the presentation. Can you just elaborate a bit on the opportunity in this whole new segments in terms of market, addressable market, how much share we can grab? How should one see this new segments and new products evolving over next, say, three, five years' time?

Right. So, hi, Arjun here. On the new products, what we're trying to do is address markets where we see an immense potential to grow, be it the data centers or, let's say, companies coming to India for their OEM needs. So especially with MicroEpsilon, we believe for the newer product, that is in itself about a 3,000 grow market. And till now, we are only, let's say, addressing around 1% of that market. So we are actively working towards the product launch. And as we launch the products in Q3 this year, through both the MicroEpsilon channels as well as the Tempsons channels, We believe we should have a better idea of the hard trajectory in that particular market. On the medium-voltage heaters as well, this is not a crowded market. There are only a handful among the players here, and we believe we have a solid right to win given our backward integration as well as our process expertise. So, as we certify our products, we see a very long runway starting FI28 for these products as well. For fuel cells and automotive, we are generally working on our existing product lines, but newer avenues or newer industries where we slightly modify the product to fit the kind of reliability needs there. We believe we are very well positioned here as well, because with OEMs, what you look for is scale. And us plus being in India, we are uniquely positioned for that. And that is why we are getting the preference there. So all in all, we expect, I mean, especially the OEM part plus the new product part, to start contributing significantly. I mean, more than 25% of our revenue.

Got it. Aryan, that was very helpful. In terms of margin profile, so this is all on your industries, like you mentioned, data center, fuel cell, semi-con, etc. Is the margin comparable to the core business, or is it better? And the model which you'll adopt is tying up with partnering. This will be the model you'll adopt, right?

Broadly, on the margin, they'll broadly remain similar across these newer products and newer segments. I mean, it really depends on the kind of product as well. So what we would say is broadly similar margin profile. And on partnerships, I mean, we take it case to case in, let's say, industries or products that we have a right to win or we have the right competencies. We would do it standalone, but in markets or in products where we see it beneficial both for us and our partners to tie up and attend the market together, We would tie up with incumbent players or with players that want to enter those markets.

Got it. This was very helpful. Thanks and all the best. Thank you. Thanks a lot.

Thank you. Next question is from the line of SR, from SR Investments.

Please go ahead.

Sir, what is your name? Please go ahead with your name first.

I'm Sahil from somebody I got. Hello.

Go ahead, sir.

Yeah. Sir, you have called out that fusions is a growth vertical within that temperature sensing part. So, could you share how this audit trajectory from those OEM customers has evolved in quarter one of this year?

Yeah. So, transportation is a very basic parameter to be measured in any kind of process. So, in fuel cell also, it is very important to get the right efficiency and output of these fuels, since it has to operate in a particular temperature. So we have tied up with OEMs to supply our temperature sensors for this particular market, and so that is what it works like.

To add on to that, so we are in pretty advanced stages here with the free trials and the run-up. So now what we're focusing on is executing at scale. So, that is broadly where we are at in this segment, and we are also attempting other products as well, but they might have a little ways to go in terms of the full scale.

So, can you quantify the run rate and the volumes that you expect to ramp up for the exit of F52300 if you expect to ramp it up? Thank you.

So, this is like a work in progress, and we will come back with the exact results that we agreed to, please.

All right. And the specific OYAM clients that we are targeting in the geographies of Mexico and South Korea and Korea, as you mentioned in the opening remarks, so what are these OYAM clients like? In which particular are these OYAM clients connected to?

So, specifically in these geographies, you mentioned Mexico and South Korea, we are not just targeting OEM plants, we are also targeting process industries. When you see the industry makeup of these two geographies, it is broadly similar to the kind of industries we are already serving. So, there is a lot of steel, there is oil and gas, there is cement. So, these are the key verticals that we are targeting in these two geographies. Most of the OEM play is domestic.

Understood. Thank you. I'll get back in. Thank you. Thank you. Next question is from the line of Amar from Blue Sky Fintech. Please go ahead.

Yeah, yes. First of all, congratulations on good set of numbers. I have two basic general questions for your industry. First of all, how is the competition intensity in your business? And secondly, how difficult it is for a new entrance to enter into your market? And also, at the same time, if any of the, how difficult for an existing client to shift to other? So, overall, how is the competition intensity and what's the basic mode in the industry?

Yeah, so, temperature sensors, electrical heaters are specialized cables. So, they form a small cost, but they are very critical for any industry, be it power industry, be it petrochemical industry. The cost of these equipment could be less than 1% of the whole plant, but they are very critical in case a temperature sensor malfunctions or so it could cause a safety hazard. Otherwise, it is very important for productivity and efficiency of the product it makes. So, the customers are very choosy in terms of choosing the right vendors for such kind of products. These are pretty critical products. So, in terms of their limited number of players in critical industry, and the criticality would change on the application of the product. So for a nuclear power plant or a petrochemical plant, they would be very choosing the customers, but for a plastic industry, it could be a lot of players. So that is how the competition could vary from industry to industry. More critical applications, more certified products. For example, in petrochemical, you are using explosion-proof products. In some other case, some other certifications are there. Pressurized vessels are there. Then you used to have a pressurized vessel certification. So, it changes from industry to industry, and that is why it's difficult to, you should have a proven track record with the same kind of industry. You should have the right set of certification, and then you should have the right processes, right people, right machine, and then only the customer might visit you, and then would certify you. So, this is a long cycle. It may take for the first time three to five years for the first approval. But once you approve with one set of products, the next set of products is a comparatively easier approval. So, roadblock for anyone to get into such kind of customers.

Okay. Okay. Okay, sir. Just a large question. So, how much, what percentage of our current revenue is coming from those critical industries in which getting into it is like you already said, like industry to industry, it varies, right? So, what percentage of our current revenue comes from the critical segment?

So, most of our revenue is coming from the critical segment. I would not say exact percent. It could be maybe 75 to 90 percent would be coming from these critical kind of areas. And there would be maybe 10 to 20 percent would be from regular industry players, the competition. But that's just when we brought that to my side.

Next question is from the man of Naman Parmar from Innovation Investment Advisory. Please, go ahead.

Yeah, so, thank you so much for the opportunity. So, my question is regarding the new age industries of me. And like, how big will be the industry?

Naman, sorry to interrupt you, but your voice is breaking. Can you please come in a better reception area?

Now, it's order.

Yes, go ahead.

Yeah. So, yeah, I was asked about, like, the newer industry, like, how the new semiconductor, like you mentioned about, you have the products, right, the cartridge, heating solution, and they have applications. If you can help me understand overall, like, how big will be the market in the overall temp, like, you have already mentioned about the global market size for the temperature sensing, it would be around 40,000-43,000 crores. And similarly, for the heating solution, it will be 132,000 Kauru. So, if you can help me understand how much will be the contribution for this new-edge industry and how you are going to take up this new-edge industry on your portfolio side.

Right. So, broadly, I mean, new-edge industry is a very broad definition, if I'm being honest. We are working across several new-edge kind of industries, be it energy, be it, let's say, energy storage, or, let's say, decarbonization. So, it's an ever-evolving kind of industry, so it's hard to put a number on it, because essentially, as you mentioned, temperature is ubiquitous across these industries. So what we believe the industry in general, I mean, the process industries are growing at about 8% to 10% given the, I mean, geography. And these industries would be growing at a much higher peak, but it would be hard to put a number on it as we are diversified across a lot of these newer kind of industries. But definitely, there is a huge potential, and we are a very small percent of the pie. So, we believe TAM is not going to be a limiting factor. It is just for us to address the market with the right kind of products.

Okay, got it. But if you can help me understand how much percentage would be contribution from this cell type like you are telling about semiconductor going forward, like you are able to crack the existing industry, right? Petrochemical, metals, steels, and all you have already cracked. Now you are trying to enter this very high growth industry. So how much contribution that is going forward?

The thing is, the consensus has typically been a heavy industry player, but these new-age industries, the same products, can find the application in this new-age industry. For example, our Korean joint venture is supplying for the battery manufacturing, which is like a new-age industry. So we don't have an exact number, so we have not really discovered the exact number. But the growth, I would say, for the new age industry or the new kind of products would be much faster. And we expect this to be in a double-digit number or maybe in the high 20s or 30s in the next few years, maybe 2-3 years.

Okay, got it. Secondly, on the replacement side, if you can help me understand how frequently the replacement used to come for these temperature sensing products and electrical heating pollution products, Like you are 30% of the revenue used to come to the PMR. So, if you can help me understand how is the replacement market for you and going forward how you are able to get at this market?

So, the replacement depends on where the application of these kind of temperature sensors or electrical heaters take place. The harsher the environment, the harshness could be because of the high temperatures, aggressive nature of the material, because these are going into furnaces, reactor. So I would say, for example, in molten aluminum, it could be just 30 dips, which can happen maybe in a few hours. The temperature sensor may last just a few hours, or maybe for a nuclear power plant, it can last 20 years. So, there is no real thumb rule on what exactly. It depends on the application to application, the life cycle. But as of today, 30% of our business is coming from this replacement business. And this replacement business is because of the project business, what we are doing. Like, for example, we do projects for a power plant. So, mostly the customer could come to us for a replacement. And secondly, for a new customer, we might come to them for a replacement product. And then once they are happy, they could also approve us for the project business. Because these are all make to order kind of products. And the players like the suppliers from US or Europe, they are not interested in smaller supplies. And where we come into the play, and with our 6th location outside India, we kind of try to be close to the customer to supply initially for the replacement demand and then get into the project demand.

Okay, that's very helpful. Lastly, on the revenue potential, like you mentioned, 500 crore of revenue. So, it's an add-on to existing revenue that you are currently doing for 45 crores. So, almost 1,000 crores of revenue you can do or it's on the total end of revenue only.

So, we are adding in capacities, I mean, which will be online by Q3FY28 of about 500 crores of additional revenue. Of course, the property will take up some time to ramp up, but eventually that would be on top of our existing base.

Okay, okay, got it. And can give the margin profile of the three segments, which is for the temperature.

Naman, sorry to interrupt, we are again losing your audio.

Yeah, sorry, now it's audible. Yeah, so just asking about the margin profile in three different segments.

So, we have not really differentiated on the margin profile on the different segments, but the blended margin is already available with you. Overall, I would say that the margin profile in temperature sensors and electrical heaters is slightly more than the switch light cables.

Okay. Okay. Got it. Okay. And lastly, how much inventory you used to have to maintain because you have lots of SKU, right? In all the three segments. So, I think your raw material would be different for three segments. So, how you try to manage that particular because current scenario with changing where raw material prices significantly. So, how you are coping with this?

Yeah, Priyanka is fine. So, approximately, we have 110 or 120 crores of inventory, and out of this inventory, 65 to 70 percent is lying in our raw material, and the balance is either in working progress and finished goods. And regarding the inventory price fluctuation, actually we book the orders at the time of the raw materials at the time of receiving the orders. So, we pass through the fluctuations to the customer.

Thank you. Naman, I request to come back for a follow-up question. Thank you. Next question is from Nanav Jinesh Kariya from Union AMC. Please, go ahead.

Yes, thank you for the opportunity. Sir, while we are very diversified in terms of industry and regions, we have sizable exposure to petrochemical industry, and we are awaiting approvals for cables in Middle East, and for Africa and MENA region also, we have around 10% exposure. So, do you see any interim challenges in the short-term and any long-term growth challenges within the region and segment?

So, like during this political situation also, the exports have increased tremendously for us. And we feel that this would be giving us even more opportunity. And because of this political situation, we think that a lot of people would be moving towards electrification of their processes. That could fuel up even the, like, our heater business and also our, like, all the three businesses that we are into. So this would kind of, maybe in the very short term, this could be a little bit impacted. We have not seen any impact as of now, but I think in mid-term, it will be a positive thing for the company.

Got it. So, no revenue impact as such for the upcoming quarters or this year as such is what, is my understanding correct?

For the next quarters, I don't think there is any negative impact. For maybe next year, it could be a positive impact.

Understood. So, the next question is on the order book. So, we mentioned a lot of new age industries that might aid in acceleration of growth going forward, data centers, semiconductors, and many other industries. So, are these industries order book based or do we have a visible order book for a couple of months or are they just-in-time delivery basis or how is the business over there?

So, our typical customer base, which is based on heavy industry, so the order book is like four, four and a half months. That is a typical order book for us. But these kind of OEM players, so they have a much larger visibility. So, there's the order cycle, like the visibility could be maybe for 9 to 12 months, visibility is there, that we're seeing with Victoria and other players as well. Like, also for our furnace, we have got a contract for 5 years now. So, the visibility is much larger for the kind of OEM players.

Understood. So, for fuel cells also, when we'll be supplying As you mentioned in one of your remarks, so there also we have a visible order book, a contracted order book, or you have visibility of order book building up going forward?

We have got a clear visibility on that front, too.

Would you like to guide on the size of order book that we might receive?

So, I think as we execute, we would be disclosing to the market. So, as of now, I would say that we have got a solid order book, but we are in the execution case.

Understood. Just one last thing from my side. I missed your comment on margin recovery. Could you just help me understand the bridge of margin recovery? So, 200 basis points was on gross margin, which was coming on a high base, and around 100 basis points was on employee So how would the margins from the employee cost side recover going forward?

Yes. As already I mentioned in my commentary that we are expanding very in this new area. Like we are seeding a few of the projects. So we are ramping up our headcounts for future growth. So, that's why this is increasing, and once the full year will be executed, and this margin, this cost will be absorbed by the revenue.

Okay, so FY28, we should see margin recovering from FY28. Yes.

No, in FY27, also, you can see the recovery of the margin in the next half year.

Understood.

Thank you.

And all the best for the future.

Thank you. The next question is from the line of Panavagrawal from Second Theory Capital. Please, go ahead.

Hi, yes. Am I audible?

Yes, sir.

Yeah, hi, hi. So, my question was, your presentation says sensing is shifting towards OEMs in fuel cells, injection molding, and CBD. So, on fuel cells, I first want to understand, what do you actually supply? Is it the temperature sensors and thermocouple assemblies themselves, or other items like cable, wiring, or heaters?

So, we are mostly supplying them temperature sensors. So, as mentioned, these fuel cells, they have to work in a very tight temperature band, And we make these, let's say, critical sensors to map the temperature across the fuel cell. So that is why we are working on. And we are also exploring other opportunities there as well across our product line.

Okay. And I want to understand about qualification. You had mentioned the qualification process is a bit more rigorous. So once OEM has qualified you, do you typically keep supplying that customer for life, you know, on their product, or is there a rebidding process every year? And are you seeing more of the OEM business moving into an annual contract basis? I'm just trying to understand how does contracting with OEMs work.

So, usually when you're qualified as a vendor for an OEM, you're built into their spec as well as their machine frame. So, usually they would be a lot more sticky than the usual process industries, which are more project-to-project based. So, of course, there's not a 100% guarantee that they'll work with you all the time. But you have a very good, let's say, stickiness with these kind of customers. And usually these, even for these projects, other than the furnace contract that we have for five years, these are PO to PO. They would give us visibility and then give us POs based on milestones. So that is usually how we are working with these kind of OEMs. Okay. All right.

That's it for my side. Thanks.

Thank you. Next question is from Land of Korov Javalkar from JM Financial. Please go ahead.

Yeah. Hi, sir. First of all, congratulations for a great sheet of number. Just a few numbers that I'm working on. First is employee cost, as you mentioned, that it will remain, I mean, It will come down and your margins will be at the same level as F526. So, fair to assume that the revenue growth should be anywhere above 25% for F527 at least?

So, the growth should be in line with the historical numbers. So, blended three-year growth is actually a good number to look at for F527. So, it should be around the number that we suggested. But we'll get better usability as we may deal with each year. So, we are targeting markets across the world, essentially through these newer companies set up in Mexico, Poland, and in South Korea. So, these markets will remain in focus. And within our existing geographies, we are seeing a pretty good traction in the Middle East. So, mostly targeting our existing set of industries. It is around oil and gas, steel, cement, also energy, of course. So, we are, I mean, bidding a decent amount of projects throughout the geographies. I mean, we should see some positive things throughout the year as well. The Middle East is opening up significantly, and the, let's say, the quoted pipeline has, of course, increased dramatically as that happens. But, I mean, the firm orders, there is still some runway there till the time we get those.

Okay, thank you so much for that. That's it from my side.

Thank you. Next question is from Nainaf Poojan Shah from Molecule Ventures. Please go ahead.

Hi, sir. Thanks for the opportunity. So, first question pertains to the fuel sales. As we are mentioning about our products offering for the fuel sales, and we have seen in the U.S. due to green infrastructure issues, there is a rapid growth in fuel sales and adoption of fuel sales. I just wanted to understand on that pie. So, in terms of thermal sensing, as well as there are a few couple of products which have been used, let's suppose thermocouplers and etc. So, are we seeing increasing RFQs can ultimately convert into revenue for the next year, and we see a visibility of 25-30% of the total pie can be coming from fuel sales, because this seems to be a rapid phase, and it might be a new technology adoption going forward.

So, yeah, I would say that that is one area that we are working. So, exact numbers we would see as the kind of execute these things. But, yeah, we are working towards this direction, and we are looking at the execution, and this is a critical area that we are working for.

Got it. I suggest you understand that we might be starting with them. So, are there any complementary products like specialized cables or like thermal sensing solutions which we can provide, which can help us to get and address to their demand constantly?

Yeah, yeah. So all these kind of, like it is not just in this industry, most of the industry that we are working, so these temperature sensors go into high temperature area, and they have to be connected with some special cables which can work with the high temperature side. It could be maybe 500 degrees centigrade, 800 degrees centigrade. So surely there is a scope, and we are working also with the customers for cross-selling of other products.

Yes, you got it, sir. Sir, just to understand the competitive scenario, so what are the competitive landscape in terms of the current situation? So, do we see Chinese are being present over there, who are keen in terms of trying to tap in the new markets or trying to be our key

So, sir, as I told you that these are all engineered products made to order and like the customers need according to their fit and size. So, there are not many Chinese players who have this kind of engineering and heavy engineering requirement is there. So, we think that we are in a unique position to serve this kind of market, and we don't see much of Chinese competition in most of the products or maybe the customers with whom we are working. And also, I would say because of some political reason, also people would like to move to India, and we have seen a few customers not using China for some of the product ranges and coming to us. Got it, sir.

And just to get a sense on the alternatives, which is fuel cell or hydrogen cell, do we see the order book can be mixed up to 250-300 crore in the next one to two years?

So, we wish it will happen, but we are not, like, we cannot comment on what could be the order book.

Got it. Thank you so much. I have joined the committee.

Thanks. Thank you. The next question is from the line of Vedant S. from Mars Investments. Please, go ahead.

Hi, sir. I wanted to check the guidance that you have given about the run rate, sorry, about the update capacity expansion, 500 CRs, that additional that we can do. So, when can we expect that run rate? By the end of FY28, or when we're citing FY29, can we achieve that full capacity utilization? Or, if not, then when?

So, we have started commissioning some of the, started construction on some of the projects. So, these projects should come online starting Q1 FY28, and, I mean, a lot of the construction should have stopped by FY28 Q16. To fully realize that, let's say, utilize these kind of capacities might take a little time. So, what we are seeing is that we are just building these capacities ahead of time. I think you can get a good estimate on, I mean, other historical growth rates. We believe this will sustain those kind of growth rates going three years down the line as well.

Okay, so, okay, so for next three years, right, kind of, you know, by FI 29.9, FI 30.30, we can have full utilization.

Yes, yes, broadly, broadly. Okay, and, but, usually, yes, full utilization for us, we usually have some spare capacity.

Thank you very much. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference, O2B Management, for closing comments.

So, I think as you have seen with the results, we think that the company has got a good, strong quarter Q1, and the revenue is up almost 30% plus, and the export is close to 80% plus. Heating has more than doubled. The profit grew 16% because we have invested ahead of time, and we expect the results of this investment to come from the second half of this year. So, we are engineered, made to order, made in India, made for the world, and we believe that we have got a tremendous support team in front of us, larger than ever before. So, yeah, thank you.

Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.