Concord Enviro Systems Limited (CEWATER) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q1FI27 Earnings Conference Call of Concord Enviro Systems 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 at the end of today's presentation. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Kanav Khanna from EY. Thank you, and over to you, sir.

Thanks, Manav, and good morning to all the participants on the call, and thank you for joining us on the Q1 FY27 earnings call. Please note that we have mailed out the results to everyone, and you can also see it on the exchanges and our website, and in case you have not received it, you can write to us. We'd be happy to send it over. Before we proceed to the call, let me remind you that the discussion may contain some forward-looking statement and may invoke some known or unknown risks, uncertainties, and factors. It must be viewed in conjunction with our business model and could also cause future results of performance to vary significantly from what is being implied. To take the results for the quarter and full year and answer to all your worries, we have the management of Concord Enviro Systems Limited with us. Please welcome Mr. Prayas Goyal, Chairman and Managing Director, Mr. Prerik Goyal, Executive Director, and Mr. Shri Shank Lahiri, Group CFO. We'll start the call with a brief overview of the quarter, and we'll follow it up with some questions and answers. With that being said, I'll transfer the call to the management. Over to you, sir.

Hi, good morning, everyone. Thank you for joining the call. A very warm welcome to Concord Enviro's Q1 FI27 earnings call. Thank you for taking the time to join us today. The first quarter of FI27 was characterized by a combination of near-term operational challenges and encouraging strategic progress across several areas of our business. Our revenue performance during the quarter was impacted by supply chain disruptions due to the conflict in the Middle East. for the better part of the quarter. However, we remain confident that these challenges are temporary and expect execution to normalize by the end of Q2, FY27. Despite the revenue impact during the quarter, our underlying business fundamentals remain robust. We're witnessing very healthy order inflows across core segments, reflecting our strength of our technology portfolio and the increasing demand for sustainable water and environmental solutions. We expect execution to accelerate and growth momentum to strengthen over the coming quarters. On the order and flow front, we continue to see encouraging momentum. Our order book has increased to 699 crores, primarily on the back of S&P order book, providing strong revenue visibility for the quarters to come. We're also witnessing a strong, healthy traction for new industrial order wins across domestic as well as international markets, supported by growing demand across industrial water treatment, ZLD, recycling and process separation solutions, etc. One of the highlights of the quarter continues to be the strong market response to our extreme heat exchanger, which we had introduced last year. This product has been gaining meaningful traction since its launch. As mentioned in the previous quarter, the product offers significant fuel savings while delivering up to 90% efficiency to recovery of both sensible and latent heat. In addition, its lightweight design and field-repairable architecture offers substantial life-cycle cost advantages to our customers. So, therefore, we believe that this product will start to see a lot of traction in the coming two quarters, especially in our thermal solution segment. And emerging industries such as solar, green hydrogen semiconductors, and carbon capture applications as well. On the key strategic developments during the quarter, we also introduced our partnership with Waha. This is a California-based company specializing in atmospheric water generation and humidity control technologies. Through this arrangement, we have invested in Waha for a small stake in the company and also secured exclusive rights for India and UAE along with global manufacturing partnership for atmospheric water generation systems. We believe this partnership opens exciting new growth avenue for Concord. It enables us to leverage our existing customer relationships across sectors such as pharmaceutical, food and beverages, batteries, solar and semiconductors, while expanding our portfolio beyond water treatment into atmospheric water generation, industrial drying and dehumidification solutions. Important is, again, a scalable business model where it combines exclusive access to high-potential markets with participation in the global manufacturing opportunity positioning as well to address the growing demand for sustainable water and energy-efficient solutions. Alongside the technology-led initiatives, we continue to make progress in expanding our presence across new markets and industry verticals. During the quarter, we achieved an important milestone by securing our first ZLD order from Europe. Marking our entry into a strategically significant market. While so far our presence in Europe was limited to membrane systems, this is our first ZLD opportunity that we have been able to bag in the European market. So we expect this to create additional opportunities for the company's products across the region over time. Also, talking about our RoServe water as a service platform, as you know, this has been performing very well. We've got some marquee projects which are being executed, and it continues to do interaction with customers. As industry is increasingly looking for asset-right and sustainable water management solutions, RoServe is emerging as a compelling offering that supports our broader objective of building, recovering, and annuity-style revenues. We remain optimistic about the long-term potential of this business and expect it to play an increased important role in the overall revenue mix. Also, taking this opportunity to mention that we have successfully delivered our first project with new IVM membranes. So these were the raw effluent membranes that we had spoken about last year. This is also in our partnership with Nala Membranes. We're working towards developing solutions for the textile and paper industry, and this continues to be a large focus for us as we announced it is a game-changer in the effluent treatment industry. Also, as mentioned in the last quarter, we are pleased to share that the orders worth $1,430 million, including orders of $1,260 million from India's largest steel manufacturers, have now been signed and are part of the order book. This, again, is one of the largest ZLD orders that would be installed in the Indian market. It further reinforces our growing presence within the SEAL sector and validates our ability to continue to deliver complex and technologically advanced solutions for this segment. Moving on to the financials for the quarter. For the quarter ended 30 June 26, revenue from operations stood at $853 million compared to $1,024 million in Q1 26. EBITDA for the quarter stood at negative $149 million compared to negative $9 million in Q1 FY 26. Net loss for the quarter stood at $176 million compared to a pat of $41 million in Q1 FY 26. Also, taking this moment to introduce our new Group CFO, Mr. Seshank Lahiri, who has rich experience in working for many Indian and global companies. We wish him all the best for the journey ahead. Looking ahead, we remain excited about the opportunities before us. Our strength in order book, growing traction for Xtreme, the continued scaling of RoServe, expanding opportunities in the steel and solar sectors, and our successful entry into Europe collectively provide multiple levers for growth. With improving supply chain conditions and healthy pipeline of opportunities, we believe the company is well positioned to deliver sustainable growth while continuing to strengthen its technology leadership across environmental and water-driven solutions. We are confident that the strategic investments we are making in the talent, technology, and execution will enable us to deliver growth this year and sustainable long-term value. With that, we now open the floor for questions.

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

We have a first question from the line of Disha from Sapphire Capital.

Please go ahead.

Hello. Am I audible, sir?

Yeah, morning.

Yes, Disha.

Yes, thank you so much for this opportunity. So, a couple of questions, sir. Firstly, we've seen the execution being impacted in the first quarter because of the disruptions. Will it be possible for you to quantify the amount of revenue that we lost?

So if you look at our order book, we had about, you know, the S&P especially is the segment that is mainly impacted and some part of trading as well. So if you look at our trading segment, I would say we lost about 15 odd crores of revenue. And I think in the manufacturing, we had almost about 42 to 43 crores of orders that were totally down. So about 50, 55 crores was the overall impact of the quarter.

Okay, and so we expect the situation to normalize post-Q2, right? So even in Q2, we are not expecting, so will we be expecting DIGRO or will it be a flattish? Of course, how should we look at that?

At the current moment, you know, given that we are in the August month, things are stabilizing, as you know, that, you know, we've seen the current up back in July, but things have stabilized this quarter. So supply chain is getting back to normal. We expect things to be better. It should end up in a growth phase, but I would still say that it's subject to.

And so how should we look at the overall growth for the entire year with extra performance, significant improvement?

Given that we've already completed the 85, you know, even if we take a 80-85% conversion of this autobook, we should end up with a growth number. But, again, I think that there are still some challenges in the execution bit of the industry. So, you know, how much we are able to really do in Q2, in H2, would also depend on how stable things are during that period. But I think definitely from an order book period, we are – from an order book number, we definitely have the ability to exceed and deliver the growth in this year.

Right, right. Next question, sir, on the ZLD order that you received from Europe. Will it be possible for you to quantify what's been the size, how the margin is there, and when do we start seeing revenues coming in?

So, the revenues will come this year. In fact, it's a quick delivery. We should be able to deliver in Q3. It's roughly about a €600,000 order that we have got. We're doing a complete – it's a metal flag industry, so it's value recovery, basically. Thank you.

And so, given up, we also have a healthy pipeline of around 3,200 CRI, what sort of conversion are you looking at for this year, and what's the exit order book that we're targeting for this year?

So, see, we are looking at an order intake number of about 1,000 CRIs overall for this financial year. I think we have close to about 200 already done, and we have some large orders in the pipeline, both in the international and in the domestic market, which we see converting over the next three to four months. So, we definitely want to, you know, the overall order intake should be close to 1,000% this year.

And just the last thing, sir, on our margins, what sort of margins are you, for this year, I know there's going to be a lot of challenges, but for the next year and going ahead, what sort of margins are we looking at? And for the next year, any sort of color on the growth that we can, I think?

Yeah, see, on the margin front, I think we've always tried to maintain a 14% to 16% EBITDA margin. We obviously have put in some investment into talent and execution for the larger projects that we're now pivoting towards. So that will have a temporary effect on margins. I see that number once we cross a figure of about 850 crores. The margins should stabilize around that period. Given that, it probably will take us two weeks financially or more to get there. So, you know, we'll be looking at 15, 20 percent. And the opportunity, as you're aware, is huge in the Indian market itself, and, you know, we can see that the new regulations that the government is bringing out, even the new liquid waste management rules, etc., this has created a lot of, you know, movement towards water recycling. So we definitely see that as the big thing to move on to. So we definitely see a lot of traction and growth should be in the 20-25% range with EBITDA margins between 12 and 16 between the next.

Okay, okay. And just the last question, if I can squeeze in, on your partnership with Waha, if you could just elaborate a bit more on what sort of opportunity size are we seeing? What sort of revenues can we expect from this business going ahead? Just a bit more color on that.

Yeah, so Waha is an interesting company. They have a product which is used both for atmospheric water generation as well as dehumidification. Both opportunities are huge in India. With the data centers, they require a lot of... If you look at the battery manufacturing, that requires the modifications. So that's the segment that we're looking at very interestingly with Vaha. So I don't have numbers at the moment that I can share with you, but hopefully by the next quarter we'll have done a lot more work on this and we can share some more numbers and details with you.

Okay. That is it. So from my side, thank you so much and all the best.

Thank you.

Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and one on your touchstone phone. Anyone who wishes to ask a question may press star and one. Next question is from the line of Nikhil Gupta from YU Capital. Please go ahead.

Thank you for the opportunity. Can you please quantify the percentage stake we have taken in Vaha and the money invested?

It's less than 2%. It's basically a stake. As I said, it's a small licensing arrangement for their products and exclusivity to the Indian and the UAE markets. So that's the essence. But yeah, the stake is only less than 2%.

And how much capital we'll choose for 2%? We put in about $575,000. Thank you.

A reminder to all participants, if you wish to ask any questions, you may press star and 1. Anyone who wishes to ask a question, may press star and 1 on the touchstone table. Next question is from the line of Subrata Sarkar from Mount Infra Capital. Please go ahead. Hello.

Hello, am I on the board?

Yes, good morning.

Hi, good morning, sir. Yeah, sir, is it possible for you to give some breakup of the order book in terms of industry? We are giving the order book breakup in terms of services and product line, but I would love to have a breakup of the order book as well as the prospective pipeline in terms of industry.

Sure, sir. Can we connect offline with you and send you that information?

Sure, sir. Just at least one point, if you can, if you can, if you look

at our major order book, I think the alcohol beverage sector, the steel sector are probably the largest orders that we have. Then pharmaceutical, chemical, that continues to be strong for us. So we've also had our first orders from SOLAR, so they're also under execution. So it's a mix, but I will send you more details offline.

Great, sir. No issues. So just one, if you qualitatively can highlight one aspect, like we are traditionally, we are strong in certain areas as well as we are trying to build up capabilities or like in certain other areas. So, if you can highlight like at least two industries where we can, what are the initiatives we are taking to get incremental order from those two industries, one is like from the petrochemical industry as well as like steel industry, given that we have already secured another one order from the steel industry, if you can highlight these industries.

Basically, I think, I mean, if you look at the steel sector, obviously, you know, the entire steel industry has realized that they don't have enough water for the production targets that they're setting themselves. So the steel, at least the steel sector is looking at Zeldin in a big way, and this is across all the large steel players who are working towards this. So I think, you know, markets like Odisha, et cetera, are seeing a lot of traction because of this and, you know, where the core manufacturing locations are. So, I think steel is somewhere where we have a very good solution, because if you look at the installations that we have done so far, as compared to most of our competition, we have really been able to demonstrate how well it works. Even our waste-pickle-licker treatment solution for the steel industry has been demonstrated now at one of India's largest steel manufacturers, where we will be converting that to an order in the next two months. So it's a more holistic solution that we're doing for the steel industry. I'd also like to talk about solar because solar is another area where initially we kind of looked at the market and said, okay, we need to understand the affluent a little bit more. And today, after doing a lot of work in that market, we're really going out to the bigger players and really providing them solutions which are very innovative as compared to what they have installed currently, bringing them a lot of savings and energy efficiency in their process. At least with a couple of the larger players, now we have made inroads when we've got orders from them, and we are converting a lot of what they have existingly installed, and they're either facing issues or the cost of operation is very high. We're kind of helping them to make that a lot more efficient. So I would talk about these two sectors where we're seeing a lot of traction. I think the traditional sectors like pharma, chemical, textile, the projects that we've put out in the design solution that we've done, that industry is pretty advanced. They know their wastewater, they know how to treat them. So there you could say our solutions are the same ones that we've been providing for years. But I think these are the key sectors where R&D and growth is really helping us build inroads into them.

Okay. Sir, one thought on the semiconductor sector, given that semiconductor, actually all these projects are very huge in terms of capex and size. Like, given our size, sir, please correct me, but still, given our size, it is very difficult to get standalone, on a standalone basis, this kind of order in India as well as maybe somewhere else also. So any thought of tying up with some bigger larger player, we will give more comfort to our client and then we can like get into that sector, sir, because that requires ultimately ultra-fueled water, which is far superior than.

Yeah, no, obviously, sir, I mean, we do appreciate that, and in fact, the route that we've taken for the semiconductor industry is to work with one of our U.S. partners who have a collaboration with Micron. So, we are actually working through them to get our products registered with Micron. Initially, we are targeting the membrane replacement market, and then we will move into the project segment. So, that's the approach we are taking towards the semiconductor industry.

Perfect. So, last question from my side, like, we are, we have ventures into some related sectors along with this water treatment, basically, like the way you told, et cetera, and all those things. So, can you, can you give me a broad level, your strategy, like, why we want into this, like, biomass also, why we want to get into this sector? Because water itself is a very large sector. So what is the synergy, what is the thought process to getting into those sectors, if you can highlight a little bit more.

Yeah, sir. I think we're looking at the nexus between water, energy, and energy. You know, because any of our customers who looks at anything, whether it looks at a ZLD or considers even a recycling solution, they're worried about two things. They're worried about the energy impact and they're worried about the water impact, right? Now, all of this goes to the whole carbon footprint thing that industries are today looking at. So a lot of, at least on a global level, a lot of our European clients are, for them, carbon footprint is the most important thing. Now, any kind of evaluation in any kind of process takes us to what is the water treatment that we are doing, what is the cost of that water treatment, what is the energy cost of that water treatment, what is the carbon footprint. So, as a result of that, we're realizing that all of this is connected when it comes to solutions that we offer our clients. And, you know, now the heat exchangers actually come out of our evaporation division. So, when we were building and doing R&D on our evaporators, we actually wanted a product which was non-corrosive to handle heat exchangers in the evaporators. So, every evaporator that has would have an heat exchanger because you're exchanging the condense, whatever water condenses comes with heat. So you're exchanging the heat between the condensate and the incoming feed. Now, we wanted a product which is non-corrosive, and that's how we ended up building what we call IHX today. So a lot of this development is really coming out of solutions which we are using for the water treatment industry. But obviously, when we evaluate that product on a standalone basis, we realize that it has a great potential for the industry because it solves a lot of inherent problems the industry faces. So as simple as a steel heat exchanger, you know, they make it in SS, they make it in duplex. These heat exchangers keep corroding, and then every year when you have to take a shutdown to replace it or to clean it up, it's a cumbersome process. So we're giving you something in FRP and non-metallic completely so that the corrosion levels are almost close to zero and you can really open it up and clean it and put it back in a very short time. So the heat exchangers kind of born out of that demand that the industry has today, right? So these are all, I would say, what we are working towards, or R&D is working towards, is the water industry. But obviously, because everything is related, we do come up with production solutions where we see that, you know, these are great cross implementations within the industry alone. So it's the same industry, it's the same clientele, and we're able to now solve two problems for them. So that's the approach that we're taking. Currently, even our process applications, as you mentioned last year, we've done a process separation application for a pharma industry today using our membrane. So obviously, the applications are getting wider, and we want to see how we can capture the market there. But the focus for the company remains that we want to be able to tag our existing clients. So we want to remain within our existing clients' focus. We want to look at what products they require both from a water and energy perspective, And we want to solve the solutions for them.

Okay, and sir, there's one thought process of your basically, how serious Indian government in terms of carbon capture as a whole, and what are the initiatives they are taking? Can this really become a big thing within next five years?

I think carbon will become larger than water because every industry is impacted by carbon, right? It's not water, as you could still say, of fewer industries who are manufacturing, etc. But carbon is something that impacts everybody. I mean, see the initial steps that the industry has taken, the government has taken towards carbon capture, I'm encouraging. They have mandated it for a few industries, which obviously have a higher carbon footprint. The implementation obviously is being worked out. I think the mechanisms are still being put into place. So we still see this to be taking some more time. I think in the next three to five years, you will see this to be a very large segment that people are working on. And there are two routes to it. One is the chemical route and one is the biological route. We are here, you know, we are sticking with the biological route because we believe that's going to be the more longer-term solution instead of chemicals. So, but, yeah, I mean, I think... Three to five-year horizon for this industry to become as big, but potentially it's...

Okay, but the Indian government is serious on this, as per your understanding.

Yes, I think if you look at the mandate that they've given, you know, the steel, the fertilizer, cement, I think a couple more industries, which I'm forgetting right now, but if you look at the mandate that they've given them, they have to start doing carbon capture almost immediately. So, you know, the implementation, giving them... Time to implement the right technology. All of that will take some time, but that's what I'm saying, so I think that learning curve will take about three to five years, and we've seen it in the water sector, so 2004 is when India really started off implementing, you know, compliance for water treatment and ZLD, and you can see it's taken the country 20, 25 years to really reach that point. But carbon will be faster because just the impact of carbon is huge. I mean, we're living in the cities. We all know the air that we breathe. So that will definitely be faster as compared to what we've seen in the water segment.

Thank you, sir.

Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and 1. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. We have our next question from the line of Nikhil Tiwari from Time Wheel Investments. Please go ahead.

Hello, I'm Alvin. Yeah, morning, sir.

Thank you so much for your opportunity. Sir, one question. Would there are competitors, like one-to-one competitors in the ZN segment in India?

Sir, I think, I mean, if you look at the top five or top six players, I would say Ion Exchange, Termax, I mean, then we saw... Thank you. I think there are a couple of other players, sorry, Gray Engineering would be there, and a couple of smaller players like Permian H and Hyperfiltration, etc. These would be the five or six key players that are there. I think if you look at the more organized, larger corporates, we would generally see IonExchange and Thermax there. If you see the smaller segments, yeah, textile, et cetera, you would see other companies. But, yeah, I mean, today there are a lot of players, sir, and they're all specializing in either certain industries or certain regions. I think Thermax, IonExchange, even then we saw would pretty much be Pan-India who would be operating today.

Okay. So as to the market share, I think we would be in the top three.

So I think we've done our industry survey about a couple of years back. We were just below ion exchange in the whole ZLD segment.

My second question is around, but our products we also use in the data centers and do you see it turning into the market in the next two tiers?

Yes, so the data centers, the demand for water and both the recycling of water, both of these areas is where we can provide solutions to data centers. Our sales teams are in talk with most of the larger players, and obviously their plans are something we are working towards and understanding how we can work with them to come up with the right solutions. In fact, the whole dehumidification product entry that we've done with Baha, that will also solve for the data centers in terms of their cooling needs as well. So we're looking at data centers with a significant product both on the cooling and the water side.

Okay, thank you very much for coming.

Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and 1.

Anyone who wishes to ask a question, you may press star and one.

As there are no further questions from the participants, I now hand the conference over to Mr. Prerik Gould for closing comments. Over to you, sir.

Thank you, everyone, for joining the call, and we look forward to speaking again in the next quarter.

Thank you. On behalf of Concord Enviro Systems Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.