Cyient DLM Limited (CYIENTDLM) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the SCIENT DLM Limited Q1 FY27 Earnings Conference Call. 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, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, non-executive chairman, Science DLM Limited. Thank you. Hand over to you, sir.

Thank you, Darwin. Good evening, ladies and gentlemen. I'm Krishna Bodanapu, non-executive chairman of Science DLM Limited. I welcome you to... Our Q1 FY27 earnings call. Joining me today are our Managing Director and CEO, Mr. Rajendra Velagapudi, and our CFO, Mr. R.M. Subramaniam. Before we begin, I would like to remind you that certain statements made during this call may be forward-looking in nature and subject to risks and uncertainties. A detailed disclaimer is available in the Investor Website section posted on our website. The Q1 FY27 performance reinforces the message that I shared in our previous earnings call, that the underlying strength of our business remains strong, and the investments we've made over the last few years are translating into tangible results. The quarter was marked by continued geopolitical uncertainties, evolving demand patterns, and disruptions across global supply chains, including the ongoing developments in the Middle East that added further complexity to the operating environment. Despite these challenges, Science ELM remained firmly focused on execution, customer commitment, and long-term value creation. I'm particularly proud of how our teams responded with proactive planning, strategic inventory build-up of critical components, alternative sourcing initiatives, and close collaboration with our customers and suppliers. These actions enabled us to maintain uninterrupted execution and consistently meet our delivery commitments, further strengthening customer trust and confidence inside DLM. Our strong performance during this quarter is a testament to the resilience of our business model, the depth of our customer relationships, and most importantly, the dedication and commitment of our people who committed to deliver exceptional excellence in a challenging global environment. One of the most encouraging aspects of our performance has been the continued momentum in order book. We closed the quarter with the highest-ever order book in the company's history, providing strong revenue visibility and reaffirming customer confidence in our capabilities. Order inflow remained extremely strong during the quarter, resulting in Europa's book-to-build ratio of 1.5x. This underscores the sustained... across our target markets and reflects the success of our continued investments in customer engagement, engineering excellence, and operational capabilities. Equally encouraging is the return of growth across our key business sectors, aerospace, defense, and industrial, all of which delivered healthy performance and continue to present attractive long-term opportunities. The increasing diversification of our revenue mix across these sectors It enhances the resilience of our business and strengthens the foundation for sustainable growth. in strengthening our commercial organization. Leadership, key leadership hiring has now been mostly completed, including the addition of Rama Alapati as the chief strategy and growth officer. This enhances our go-to-market capabilities and positions us to deepen customer engagement, expand into new opportunities, and accelerate on our ambitions. I am pleased that we now have sustained double-digit EBITDA margins for four years. This is our focus on operational excellence, improving revenue quality, disciplined cost management, and increasing value-added engagements with customers. Looking ahead, we remain excited about the opportunities emerging across our target markets. Rising electronic content, supply chain diversification initiatives, increasing investments across our focus sectors, and the broader outsourcing trend continue to create a favorable demand environment. With our differentiated design-led manufacturing model, strong customer relationships, and growing execution capabilities, we believe Giant BLM is well-positioned to capitalize on these opportunities. Most importantly, we have entered FY27 with strong momentum. The first quarter delivered healthy performance across revenue growth, profitability, and order intake. Supported by a record order book, a strengthened leadership team, and a robust business pipeline, we are confident in our ability to continue creating long-term value for our customers, employees, and shareholders. I would like to thank our customers for their continued trust, our employees for their unwavering commitment, and our shareholders for your ongoing support and confidence in our vision. We remain optimistic about the opportunities before us. The foundations we have built, the capabilities we have strengthened, and the momentum with which we went at FY27 gives us confidence that Science DLM is well-positioned for its next phase of development. profitable and sustainable growth. Before I hand over the call to Rajendra, on behalf of the board, I want to thank him for beautifully turning around the business to a situation where we can now be confident in sustained growth. We have people and we have the customers that will support this accelerated growth. With that, I would now like to hand over the call to Rajendra, who will take you through the business and the operation highlights in more detail.

Thank you for joining us today. I will take you the next few minutes to walk you through the Q1FA27 business updates for SignDLM. I will keep the discussion simple and clear, and I will focus on three messages. First, the EMS market continues to offer a large and structurally attractive growth opportunity. Second, SignDLM has a clearly phased strategy across strengthen, expand, and transform. And third, we are seeing tangible business highlights resulting in growth of the business. So with that framing, let me start with the industry outlook, then move to our strategic initiatives, and finally cover the key business highlights before closing. So if you look at it, the electronics manufacturing of the services market is in a genuinely attractive place. And importantly, the opportunity ahead of us is expanding rather than maturing. Today, the global EMS market sits at roughly $625 to $650 billion, but the potential we are planning against is close to $1.1 trillion by 2033. So, we are not building for the market as it exists. We are building for a market that nearly doubles over the coming decade. The blended CAGR across the market is around 6% plus, and it is meaningfully higher in... High-reliability segments where we choose to play. That distinction matters for us. We are deliberately not changing commodity, high-volume, low-margin work. We are positioning where complexity, reliability, and engineering content command a premium. Let me highlight the structural, the trends driving this. First, The electronics content for product is rising across the board, more compute, more sensing, more connectivity in virtually every device. The second driver is the growth in AI and AI infrastructure. AI is creating new demand for compute infrastructure, data center systems, power electronics, advanced hardware, networking, and related supply chain ecosystems. While this market will evolve over time, it is clear that AI infrastructure will increase the need for sophisticated electronic manufacturing capabilities. We are therefore treating this as an important area to understand, evaluate, and selectively participate in where we can build a differentiated right to win. The third, the supply chains are regionalizing. The China Plus OneShift is redistributing manufacturing globally. And that footprint realignment plays directly to supply chain resilience, which our customers now treat as a strategic priority, not an afterthought. And the last on the semiconductor side, the chiplets 2.5 and 3D packaging and high bandwidth memory are all raising the complexity of back-end equipment, test and assembly, exactly the kind of high mix, high reliability work we were built for. Our core, the segments remain aerospace and defense, industrial, and our focus is also on the semiconductor, capital, equipment, medical, and automotive, with a sharp focus on our electronics. But beyond the core, we see two clear new lanes opening. The lane one is robotics, which needs high reliability subsystems, control electronics, and test assemblies. Link two is AI infrastructure and data centers. Where AI is generating electronics-heavy, high-compressity hardware that is genuinely well-suited to specialized EMS players like us. So the takeaway from this slide is the core business is attractive and durable, and adjacencies give us room to grow into. So this naturally leads into how we intend to capture this, our long-term strategic roadmap. As we mentioned in the past, we coined it as SET, Strengthen, Expand, and Transform. The first phase, Strengthen, is where we are today. This is the foundation we bank on. We operate across four industries, Aerospace and Defense, Medical, Industrial, and Automotive, with focus on EV. This is our proven core stack, and it runs at the margins of roughly 9 to 11 percent. This is the base, reliable, established, and the platform everything else is built on. The second phase, expand, covers FI27 to FI29. The strategy here is elegantly simple. Same stack with the two new sectors. We take the capabilities we have already proven and extend them into two new industries, robotics and AI data center. Taking us from four industries to six. Because we are leveraging the same core stack into higher value sectors, margins step up roughly to 11 to 13 percent. We are not reinventing our capabilities. We are pointing them at more attractive end markets. The third phase transform is FA30 and beyond. This is where we build a product and platform mode. We stay across our six industries, but layer in expanded B2S products and new platforms. This is a shift from being a service provider to owning product and intellectual property, and that's what lifts margins to roughly 13 to 18 percent. So the true line of this slide is a deliberate progression, widen the industries we serve, and steadily elevate the value we deliver. Moving up the margin curve at each stage. This is down to what we actually delivered this quarter because strategy only matters if it shows up in execution. I think, as Krishna said, our order book. We recorded our highest ever order book at 2,598 crores. That is a strong signal of demand and of confidence from our customers. Order intake for the period stood at 551.9 crores with a healthy book-to-build ratio of 1.5. And importantly, that was driven by both existing customers, deepening their engagement. And the new customers coming on board. On customer diversification, we added two new logos during the quarter across the industrial and automotive segments. That matters because it broadens our base and reduces concentration, which is exactly the direction our strategy calls for. On capability and capacity, We completed the expansion of our built-to specifications lab from 6,000 square feet to 15,000 square feet, more than doubling that footprint and giving us headroom for the product platform development that underpins the transform phase mentioned earlier as part of our strategy. And we are seeing continued momentum in our B2S product platforms with a strong order pipeline from our key customers. On quality and certifications, we completed the NATCAP audit for cable harness assembly for our Mysore unit. NATCAP is a demanding aerospace-grade certification, and it reinforces our credibility in the high-reliability work that sits at the heart of our positioning. So, taken together, to summarize all together, the EMS market opportunity is large and expanding. And we are deliberately positioned in its high-reliability, high-value segments. We have a clear-staged strategy to widen our industry coverage and step up our margins over time. And this quarter results records order book, healthy book to bill, new logos, and expanded our lab capacity. This was a quarter of solid, tangible progress against the roadmap I just described. So, as you have seen, we have started the FH27 with a strong momentum, driven by discipline, execution, and healthy demand across our key segments. The strong order intake demonstrates our readiness for future growth. As we move forward, we will continue to expand our focus on new industry segments such as AI infrastructure, data center technologies, robotics. Which require high reliability electronics manufacturing, and we will continue to strengthen our position in build-to specifications in highly complex and regulated industries, such as aerospace and defense and healthcare. So thank you again for your time and for your continued confidence in science DLM. With that, I will hand it over to RMS, our CFO.

Thank you, Rajendra, for the business overview. Good evening, ladies and gentlemen. I will now take you through the financial performance for Q1 of FY27. We are pleased to report a strong start to the year with the DLM Group delivering its strongest first quarter performance to date. Revenue for the quarter stood at $3738 million, reflecting a robust 34.3% year-on-year growth. This growth was supported by healthy order book, improved execution, execution momentum, and continued demand across our recent segments. On profitability, EBITDA increased to Rs. 392 million, registering a strong 56.2% year-on-year growth. Importantly, our EBITDA margin improved to 10.5%, representing an expansion of 147 basis points year-on-year. This margin improvement reflects the benefits of operating leverage. Better revenue mix and disciplined cost management. Profit after tax for the quarter was Rs. 163 million, which is more than double compared to the corresponding period last year, with a 118.2% year-on-year growth. Consequently, the PAC margin improved to 4.4%, expanding by 168 basis points year-on-year. The strong PAC performance was driven by revenue growth, margin expansion, and a healthier business mix. Our audit backlog also remains strong at Rs. 25,989 million, increasing by INR 1832 million quarter-on-quarter. This represents the highest audit book level achieved so far and provides a good visibility for revenue execution in coming quarters. Overall, Q1-FI27 reflects a strong operating and financial performance, backed by healthy audit intake, sustained revenue growth, margin expansion, and a record audit book. We believe this position is well for continued growth throughout the year. Moving to the KPI trends, we would like to share quarter-wise of our revenue, normalized EBITDA, normalized EBITDA margin, and normalized FAT performance. Starting with revenue, we delivered INR $3,738 million in Q1-FI27 compared to INR $2,784 million in Q1-FI26. Reflecting. A strong year-on-year growth trajectory. The revenue also remained ahead of the previous quarter, with Q1-FI27 continuing the growth momentum seen in Q4-FI26. On normalized EBITDA, we reported INR-392 million in Q1-FI27, compared to 251 million in Q1-FI26. While EBITDA was lower sequentially compared to 231 million in Q4-FI26, it remained significantly higher on year-on-year basis, reflecting a strong operating performance. Our normalized EBITDA margins stood at 10.5% in Q1-FI27, improving by 147 basis points year-on-year, from 9% in Q1-FI26. Importantly, we now have consistently delivered WG debita margins for 4 consecutive quarters, which reflects the continuous strength in our margin profile. On profitability, normalized paths to depth are 163 million in Q1-FI27, compared to 75 million in Q1-FI26. Meaning Pat has more than double year-on-year. This improvement is aligned with a strong revenue growth and improved margin performance during the quarter. Overall, Q1FI27 started a strong north with healthy revenue growth for signed double-edged EBITDA margins and a significant year-on-year improvement in Pat. Let me now take you through the key operating and working capital metrics. Starting with our order book, we continue to see strong momentum in business intake. Our order book increased steadily from INR 21.3 billion in Q1 FI26 to 26 billion in Q1 FI27, reaching the highest level in company's history. This provides strong visibility for future revenue growth and reinforces the confidence of our customers in Cyan Dalem capabilities. On inventory, our day.

One minute. This is a one minute, please.

Inventory, our days of inventory outstanding stood at 162 days in Q1-FI27, compared to 153 days in Q4-FI26. While inventory levels increase sequentially, they remain significantly lower than the levels seen during the match of FI26, and are aligned with our business growth and execution requirements. Days of payable outstanding reduced over last three quarters and stood at 63 days in Q1-FI27. This reflects normalization of the supply-payment cycles and continuous sampling of our supply relationships. Days of sales outstanding remain broadly stable at 77 days in Q1-FI27, compared to 74 days in Q4-FI26, demonstrating continued discipline in collections despite higher business volumes. Customer advances stood at 15 days in Q1-FI27, compared to 18 days in Q4-FI26. While advances more red during the quarter, they continue to support our working traffic profile. As a result, net working capital days stood at 161 days in Q1 FY27, compared to 145 days in Q4 FY26. This increase was primarily driven by the movement in inventory and customer advances as we continue to support a growing order book and the future execution requirements. Overall, while working capital remained elevated during the quarter, the business continued to maintain a strong order backlog and a healthy growth trajectory, positioning us well for the future revenue conversion. Let me now take you through the revenue mix of Q1-FI27 across the industry segments, product categories, and geography. From an industry perspective, aerospace and industrial continue to be the largest contributors to revenue. Aerospace accounted for 42% of Q1 FI27 revenue, while our industrial contributed 32%. Together, these two segments formed the majority of our businesses during that quarter. Aerospace and industrial also delivered strong year-on-year growth of 40% and 90% respectively. The different segment contributed 9% of revenue and recorded 35% year-on-year growth. MedTech accounted for 16% of revenue, with growth remaining broadly flat year-on-year. Otto and others contributed the balance 1% of the revenue mix. Moving to the product category mix, PCBA continued to remain the largest contributor, accounting about 48% of Q1 FI27 revenue. The PCA business maintained a high share and delivered 21% year-on-year growth. Box bin was the second largest product category, contributing 21% of revenue, but delivered strong year-on-year growth of 85%. Mechanical and others contributed 10%, while cables accounted for 1%. The other categories also include B2F. From a geographical mixed perspective, the rest of the world continues to account for the major share of business of 94%, while India contributed 6%. The higher risk of the world's share was driven by all of our focus segments such as aerospace, medical, defense, and industrial customers outside India. Overall, the Q1, FI27 and revenue profile reflects a healthy mix across key industrial segments, continuous strength in PCB and Voxel, and a strong international revenue contribution led by demand from aerospace, medical, and industrial customers. Q1FI27 was a strong quarter from both growth and profitability standpoint. As I explained in key highlights section earlier, our revenue increased by 34.3% year-on-year to 3,738 million INR. EBITDA grew faster than revenue at 56.2%, reaching 392 million, while EBITDA margin improved by 147 basis points to 10.5%. Employee costs increased in line with the business expansion and capability building, while other expenses remained aligned with revenue growth. Material costs were higher due to the business mix and procurement related to B2S. Importantly, finance costs reduced by 29% year-on-year, owing to lower working capital borrowings. Profit before tax more than doubled to INR. 222 million, and PAC increased to INR 163 million, representing a growth of 118% year-on-year. PAC margin improved to 4.4%, up 168 basis points from the previous year. Overall, the quarter reflects a strong operating performance, improved efficiency, and healthy earnings growth. Q1 FI27 has been an excellent start to the year with a record first quarter performance across revenue, profitability, and other backlog. Revenue grew 34%, EBITDA grew 56%, and packed more than double year-on-year. Our record $26 billion order book provides strong visibility and reinforces confidence in our growth outlook. We as a company remain focused on execution, margin improvement, and converting the strong demand pipeline into sustainable shareholder value. Thank you, and we look forward to the 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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Gaurav Shukla with Finvestors. Please go ahead.

I'm audible, sir.

You are audible, sir. You may proceed.

Thank you, sir, for giving me an opportunity and some lessons on a good set of numbers. Sir, I want to understand the set of this case, the crisis, and in the last couple, I said that Israel's approval is one of them.

Sorry, we are not able to hear the speaker very well. Could you repeat the question?

Yes, sir, I am lifting, sir. Now, what do you go, sir? Sir, I want to understand the effect of West Asia crisis that is going on, and in the last time, you said that Israel's leave approvals in some business are not done. Are they still now pending?

Okay, West Asia crisis. We last time said that from Israel, we still had some orders, etc. pending, and we were seeing delays. How is that changing?

Hey, Gaurav, this is Rajendra here. So on the West Asia crisis, yes, I think it is still there, going on, but as earlier, I think Krishna also pointed in terms of our planned execution and ensuring that we will be keeping some of the inventory for the long run. I think those are the things that really helped us to overcome the current challenges that we have in the West Asia crisis. What we are seeing even now today is there are some delays in the logistics in terms of shipments. And we are also seeing some of the costs going up due to the Rust Asia crisis at this point of time. But as we are already well planned in terms of our execution, so we have not seen any of those challenges in Q1. And we also just put a plan together to ensure that those things won't impact much in Q2. And to another point about the earlier Israeli things which we are seeing, we are seeing the momentum in terms of the order intake. That's what we had the good order intake we had from the Israeli customers, and we see the continued momentum in Q2 and beyond also going forward.

Thank you. Our next question comes from the line of Viprav Srivastava with Philip Capital. Please go ahead.

Hi, sir. Good evening. Great set of results. Just quickly on the new entry into the data center side, AI side. Just want to delve deeper there. Any discussion with the hyperscaler which is happening currently or at a very early stage and, you know, in coming quarters will give us more information. Any thoughts on the AI data center entry for the company?

Yes, I think we just started this thing. We have our health directors on board in this quarter. I think we'll be probably giving some updates in the next one or two quarters about where we are focusing and where are we today in terms of our momentum in AI and data centers.

Okay, that makes sense. And so secondly, you know, given the West Asia crisis, you know, which has been hampering our growth at least last year, does it have any problem now or, you know, it's fully resolved? What are your thoughts on that?

I mean, as I said just before, to another question from Gaurav. I think the restoration crisis is still there. It has not gone, but the planning what we have done to ensure that we will be getting some of the inventories, holding that wherever we have some challenges for some of the materials, I think that planning has really helped us for the Q1 outcome, and similarly, I think the Q2 also we have planned that, so we don't see much of that at this point of time.

Right. And the last question from my end, the company is also venturing into the Semicon side where you mentioned that, you know, testing and assembly at the last end is also in high demand because of the AI play. So any thoughts on that? What kind of product profiles are you looking to enter on the Semicon side? And, you know, what kind of timelines can we expect in terms of, you know, finally that coming in the P&L?

So, I think we have already, I think, you know, probably some time back, we just mentioned that we are working with the semiconductor capital equipments from other customers. I think we are continuing, so we are seeing some of the robust growth plans in that area. So, we will be continuing working towards that and where we are building some of the products for our customers in the semiconductor capital equipment. Okay, so that's what basically I mentioned in my earlier one.

Just to follow up, sir, any thoughts on timeline? I mean, when did it materially impact the P&L? Next year, next to next year, any thoughts on that?

No, I think we will be seeing some of the growth coming in, in that area. So, over the next 6 to 12 months, we will be seeing more of the revenue growth, which probably in turn will also give us some leverage in terms of the markets.

Yeah, so thank you a lot. So, thank you. Thank you.

Thank you. Our next question comes from the line of Deepak Krishnan with Kotak Institutional Equity. Please go ahead.

Hi, sir. Am I out of it? Sure. Maybe just wanted to delve a bit on a similar set of questions. So we have this expand target, the FI29. Wanted to just pick your brains in terms of how do you see the overall growth for the company in this timeframe, 26 to 29? How much of the contribution would be from, you know, AI data center, the vortex in, say, 29 in terms of revenue, and where are we in terms of, you know, client approvals, and how long after client approvals do things come into numbers? Second, maybe the transform phase, when you say margins go to 13 to 18%, you know, steady state, what are you looking at to B2S to an overall contribution to revenue? And what would be the margin delta between, say, what we do today and B2S, so, you know, so that we can perfectly see how we bridge the gap to about 13% to 18%, and then I'll come up with a follow-up question.

I think in the expand phase, So, when I said I would expand first, I think some of the new things that you mentioned about the robotics and the AI data centers and infrastructure, I think that is the area where we will be focusing in FY28 and 27 to 29. Okay, so that will be taking some time for us to see the revenue coming in, but the order intake is where we'll be seeing it in this year itself. Okay, so I think, as I said, we already have the people on board. I think so we are driving that growth in those new areas. So that will really probably give us some leverage in terms of the margin expansion there, too. And coming back to your other thing on the transfer site, So, you just mentioned, I mean, that is one of the B2S. So, we already have our internal plans, both in terms of your expand stage, but here you asked me a question about what percentage of the revenue will be coming from each industry and also these new two segments. So, we already have the plan of actions in that and what will be our CAGR growth going towards for the next two years. And also for FA30 and beyond, the plan what we have for the B2S, the percentage of revenues coming from the B2S in FA30 and beyond. So based on that, that's where we have just arrived at the margin profile ratio, what you mentioned there.

Sure, any range of AI data centers or what is that you could give, and by what percentage, and maybe just another question, given you're a net exporter, you know, what factors drove to an FX loss in this particular portal, if you could sort of highlight that as well. Maybe both these two questions, if you could, you know, get back to it.

I think, as you said, we are not giving that guidance how much of that growth will be coming from these new sectors. As you said, that is an internal thing which we have a plan of actions to take. So we will probably, once we have some new customers in the area, then definitely we will probably let you know in the next two to three quarters.

On Forex, let me try and answer that. In the last quarter, the last month was to be appreciated a bit. So, as you know, our balance sheet is pretty exposed in terms of our businesses on the export side, pretty large, both on the exports and imports. So, the net impact is what you're seeing on the balance sheet with respect to the last one month, where the impact is seen.

Sure, sir. Maybe just one follow-up. Also, order book, any sort of range that you want to end the year with in terms of book-to-build ratio?

Book-to-build ratio, we will be at the same thing where we are today at 1.5X. We will be at that number for the year, too.

Sure, sir. Those were my questions. I'll get back on the queue.

Thank you. Ladies and gentlemen, in order that the management is able to address questions from all participants in the queue, you are requested to please restrict yourselves to two questions only. You may rejoin the queue if you have any further questions. Our next question comes from the line of Ashubhi Gupta with the Trinitra Asset Managers. Please go ahead.

Hi, sir. Congratulations on the numbers. So I wanted to understand, we see that the MedTech segment's growth is quite flat. So I wanted to understand why is that and also how do we see that progress for the rest of the year?

Yeah, I think the Thank you. The MedTech is where we have some seasonal impact in terms of one of our customers right now, which is there. And in terms of the growth for the MedTech, yes, we don't see any of the concerns. We have the pipeline which is available right now in our sales pipeline. We already have some of the opportunities in that sector. So we don't see a challenge in anything in terms of the MedTech there right now.

Sir, how much of the pipeline is coming from Mettech?

Mettech is around the same what we have today in terms of our revenue mix, maybe around the 17% to 20% range is where we have today our sales pipeline for the Mettech too.

Okay, sir. Thank you.

Thank you. Our next question is from the line of Bala Subramanian with Arihant Capital. Please go ahead.

Good evening, sir. Thank you so much for the opportunity. Sir, pipeline, nearly 4,000 crore. What is the breakout in terms of vertical like aerospace, defense, industrial, and medtech? And that platform, sir, why is legacy SS, lean, and lean 2?

I mean, if you are looking at the distribution of that order book or order intake, you are looking at the order book, you are looking at?

Sir, order pipeline, sir.

So, order pipeline.

We have nearly 4,000 crores.

Order pipeline, no. 4,000 is...

No, it's more than that.

No, it's more than that. We don't get it. We don't get it. We don't get it. Order pipeline. It's $0.5 billion, sir. That is order intake.

What is the number of order books?

No, sir, that's a future pipeline, it's around 0.5 billion dollars. It's anywhere 4,000 to 5,000 crore range.

No, I think we have more than that order pipeline, okay? So, the number, I don't know where did you get that one, but we have a substantially higher pipeline at this point of time, yes. Very, very high sales pipeline.

And we report order book and order intake, and, you know, order pipeline is obviously much ahead of it. That's something which we don't report at this course.

Yes, actually, I'm trying to understand that we have a new growth with like AI and data centers and robotic side, so I'm trying to understand that point of time. And we could explain in terms of platform side, whether the legacy businesses like Aerospace Defense and Industrial and MedTech and how that lane one, lane two, so how the things are moving up in terms of a pipeline.

Yeah, I think, see, if you look at it, the various segments, what you have in aerospace defense, close to around 48 percent will be there in aerospace and defense in terms of the pipelines what we have, and close to 40 percent, roughly, less than 40, roughly on the industrial and semiconductor equipment side, capital equipment side. And the balance is predominantly coming from medical and, yeah, is basically coming from the medical industry, and automotive is a small one there.

OK, sir. Thank you. Thank you. My next question is from the line of Praveen Sahay with PL Capital. Please go ahead.

Thank you for the opportunity and many congratulations for a good set of numbers. My first question is related to the ROW sales, because there is a 40% of the growth on the YUI side we are seeing, but there would be some element of a rupee depreciation as well. So in the same currency terms, how was the growth there?

In terms of reporting, normally we do the reporting in INA. Okay. In terms of... Dollar and free. We can give, we can give the numbers separately to you in terms of we can get back to you on it. Sure.

Okay. Second question, sir, is related to the, you know, the, as you had a report, the negative, your operating cash flow is still negative. So, what's the primary reason, and when do you expect the working capital to normalize?

Yeah, as I explained to you earlier, the negative free cash flow is essentially coming up from higher inventory and lesser customer advances, and we have talked about it earlier as a company, we're growing, and we need to keep making sure that the growth is well felt in terms of inventory, because inventory is something what we need to do as leading indicator. And we have to stock enough to make sure during this difficult time our revenue is not... I'm happy to say that that's something which you've been able to achieve and as you can see in the results, okay. So as long as you have this growth, this investments which we need to do it, but once we have the growth and the inventory coming under control, which we are working on, the cash flow will turn positive and that's what we are all working towards.

Last question is regarding the B2S platform. So, when do you expect the meaningful revenue contribution from B2S product, and what would be the, you know, the margin compared to the EMS business?

So, probably you'll be seeing, I mean, we already started having some revenues coming from them in the B2S. So, we will be seeing substantially good revenues from them in the next one year to 18 months. That's what we will be seeing, revenues. And in terms of margins, as you said, overall, when you just look at the combined one, you will be getting additional 250 to 300 pips, additional margins, when you have consolidated EBITDA margins due to the BDS opportunities.

Okay. Thank you, sir. Thank you.

Our next question is from the line of Samit Sinha with Macquarie. Please go ahead.

Yes, thank you very much. So, in context of the strength that you saw in the first quarter, can you talk about any sense of guidance for the year? I know last time you said, didn't give hard guidance, but you said sequential growth. And my second question is, in terms of your revenue increase sequentially, but gross profit and gross margins declined, is that a mixed issue? Is that a tariff reimbursement? Can you talk about that, please?

Yeah. I mean, in terms of the Q2 and going forward, we will be seeing similar momentum in the range. Okay, so we don't see any of the major concern on the momentum in terms of our revenues and ordering things. And in terms of the gas margins, what you said, even though it's slightly higher and it is lower than the last quarter, because of some of the investments what we have made into our organization, so the investments are where we have already budgeted and we have already kept it, because that is the one thing probably which is just driving us our gas margins slightly lower.

Got it. Thank you very much.

Thank you. Our next question is from the line of Santosh Seshadri with Vendis Spark. Please go ahead.

Yeah, hi, good evening. Thanks for picking up my questions. So, can you walk us through in detail on your...

Sorry to interrupt, Santosh, but your voice is slightly echoing. I request you to please use the handset mode while asking your question. Is it better now? This is much better. Please go ahead.

Yeah, so my first question is on the targets to drive margin expansion in the medium term. Can you provide us some color on how much of that margin expansion is coming from new categories like semiconductor equipment, AI servers, and robotics, and also how much of the expansion is coming from operating leverage?

And as I said earlier, in the expansion phase, we will continue to do what we are doing with, right? Those are the industries we will be having the focus. That is basically our code. We will continue that. We will sustain that. And the new industries like AI data centers and robotics. Coupled with some of the semiconductor capital equipments, I think those are the things which probably expand us between FA27 and 29, which will be giving us the margins of, I mean, the EBITDA margins of 11 to 13 percent.

If you may add, I think today the margin expansion of what you're seeing is essentially because of filling the hopper and the operating leverage. What Rajendra talked about in terms of what is going to come in the future, which will be in addition to the call.

Thank you. Just to follow up on that, so what product categories are we specifically targeting within AI data centers? Because, you know, just if I look at the margins of some of the global players in the AI server segment, it's in the mid-tringed digits, and given that we are anchoring on some of these new segments for long-term margin expansion. So is it just a product margin, you know, a product category difference that is driving up margins, or do you see any inherent cost advantage, you know, for Asian players?

No, see, it is not an inherent cost advantage or anything. It is basically the products which we will be working out, which we will be working for this area, data centers, and also the robotics, which has basically a high-profile margin business. So, as I said, we have the strategy in place. We have put those action items, which are those products which will be working in these areas, in these new sectors. And what are the revenues they're going to have for the next two years, and how that margin profile is going to be. So, based on that, this is what we have put in there, where we will be going to be in the FY27 and FY29 in the expand phase.

Got it. And one final question. So, in terms of winning businesses in these new categories like robotics and AI, is it something that can be delivered with the existing capability, or do we need some sort of acquired capability to gain exposure in these segments?

I think for all this, we can use our existing capabilities, and probably we need to have some of the skills.

Thank you very much, sir. Good luck for your execution.

Thank you, sir.

Thank you. Our next question is from the line of Deepak with Unify Capital. Please go ahead.

Hello, sir. Thank you for the opportunity and congrats to the management on a good recovery. Sir, my question is around the order inflow. Actually, this 550 crore order inflow run rate that we saw in this quarter, I just want to understand how much is it from the existing business, which is our core business, like aerospace, defense, medical. And from the new logos that we've onboarded last year, basically, I want to understand how much scale have you achieved from the sales efforts we did last year and how much more can we juice out from the new logos addition. So that's the first question. Next thing is this 550 crore. Were there any lumpy one-off orders in this or this should be the new sustainable run rate for the company? And can one extrapolate this run rate for the full year? You've mentioned AI, data centers, and robotics in your slide. So can you just... Some details on, you know, what products and data centers that you're targeting or robotics that you're targeting. I just want to hear the strategy that you guys have in place to get the business from these two new segments that you're targeting. Thanks.

Okay. I think in terms of the order intake which we had, there was no lumpy order intake in that. As you see from our existing customers plus the new customers. Okay, and also your other question is, are you going to maintain the similar things for the year? As I said earlier, so probably we'll be there at a 1.5X of the book-to-build ratio in that range for over the year also. And the other thing which you asked about is a mix between the new segment from the existing customers versus the new customers whom we added in the last one or two years. So if you look at that one, probably close to around 70% of that is where it is from our existing customers, and the balanced 30% is from the new customers whom we added in the last. For equipment, at least in the last four to six quarters.

And I think to extend that into a question you asked, there's a lot of opportunities still with those customers.

Yeah, absolutely. There's a lot of opportunities from the existing and the new customers there. And the other thing which you asked about, I think earlier also you just mentioned about the AI and data centers. I said we have the people on the board, we have put the strategy in place. Probably just we'll come back to you in the next two to three quarters when we will be seeing the products. which we are going to focus, and as I said, we don't need any additional capex for that, so existing machine will be sufficient for us to execute any of those products which we are looking at. And we also, as I said, we have some people on board who will probably be working with our new prospects in these areas, going and talking with them. So I think it is going to be the expansion plan from FY27 to FY29, okay? So this is what we just want to just make sure that the focus is there. That's where the growth is going to be, and that's where I think you'll be seeing both the revenue growth and also the expansion.

Just on the order inflow run rate, you mentioned one and a half times order book to revenue. So, we are already at that rate today. So, if I assume that you're going to grow at a healthy 20-30% this year, your order book is already 2,600 crores, which is more than one and a half times. So, what kind of number that we should look at in terms of order inflows for this entire year, if you can help us understand. That, that would be useful.

So, no, but probably I think we are not giving that guidance in terms of the number right now. As I said, you will be seeing it, we will be having a 1.5, which is what I will just say that we will be there for the year. So, I think the guidance-wise, we are not giving that where you are going to be, what the order book is going to be by end of the financial year.

Deepak RMS here, I think, Lalindra talked about the aspiration revenue growth rates and the book to bin ratio. I'm sure you are good enough to calculate it.

Thank you. Okay. Thank you. All the best.

Thank you. Our next question comes from the line of Aditya Pal with MSA Capital Partners. Please go ahead.

Hello. I'm audible? You're audible, sir. Yeah, thank you so much, and congratulations on the great set of results. Question for Rajendra. So, just wanted to quickly understand, because if I see over the last three years, right, there's been a lot of defense going very fast, then petering out, and then completely vanishing from F525 number, and because of the bell order, then industrial seeing the up and down. Out of all this, aerospace is the one place where we've continuously grown. Over the last three years, on a quarterly runway, we've expanded Forex. Wanted to understand what is the strategy, how are we able to grow and maintain the space, and also our large customers like Honeywell, Aerospace, and Safran, and Thales, they are more and more talking about that they want to expand outsourcing from India. How are we placed on that? So, it's a bit of what has worked and how are we placed? So, a bit of strategic question rather than a guidance question.

I think, as probably I just mentioned earlier, so we are very well placed on the aerospace side. I think Honeywell, we just mentioned about some of the big work which we had won several years back. I think that is where now, right now, some of the initial builds are happening. So, we will be seeing the ramp-up coming on those things in the next 18 months. So, that's where we will be seeing a big growth coming from the Honeywell Aerospace. So, I think we have a very good engagement with them at various levels. And that account, and you also said about the Thales, I think both of the accounts is where we will be seeing an extraordinary growth in this year.

If I may just add to that, the aerospace business is a double-edged school. It's very, very difficult to get into, but once you're in, you're in, and we're fortunate that we're pretty much in with every single major OEM or significant tier one that buys any electronics. Obviously, Rajinder mentioned two, Thales and Honeywell. Those are the large ones. But there's also many, many others. So I think it was a deliberate choice. And now, of course, for the first few years, aerospace is always an investment. But it was a deliberate choice to build a very strong aerospace business because aerospace and defense gives you a steady revenue stream on which we can build many other things. Look at the data center business. The reality of that is it is up now. It will go down. That's just how some of these technology-related businesses work. What really differentiates us is our strong aerospace capability, because that's a moat that's impossible to, or it's very, very difficult to breach for a new entry, and we're in the moat, and we're very strongly placed in the moat. So I think that's a very key element for us, and that's why.

Understood. Just last question from my side before I come back in the queue. So, one on the aerospace. So, SkyDrive has started receiving a lot of certifications from the aerospace or airplane authorities, and it is one of the large B2S. How are the discussions going over there? Do you think that it can rectify much sooner than expected? And second is on the entire defense spend. And this, again, ties to that we are in, I would say, each and every European defense at this point of time. How are we seeing...

I'm starting with the defense, and, sorry,

you're asking about the defense, then, yeah, so two questions, one is on SkyDrive B2S, and because they are getting certification much faster than expected, however, because they will have to start making their aircraft, and the Is there a possibility that we start booking the B2S revenues much sooner than expected on SkyDrive, if those are the discussions that are going on? And on the defense side, specifically on the European defense, because the reason I'm asking this is that because we are, I would say, in each and every defense company in the Europe side, maybe Bay Systems, Safran, Tallinn, and then we also onboard a few other defense companies over the last four, five quarters. How are we looking that panning out? So, two questions, both on aerospace and defense.

Okay, I think the one which you mentioned about, the one, is one of the Japan customers, which we mentioned earlier, they're all the UAVs, which we are working out with them, and as I said, we are doing it currently, the engineering designs for their products, for BTS products. And that will be probably taking another year to 18 months for us to come into the production line. So that is the one which is probably very high-end, and it is a long-term for us, as Krishna said. Those are the customers once you come in, and particularly if they are on the build-to-step, I think we are the ones who will be doing it throughout the life cycle of the product. We will be maintaining the product there. So that way, I think that is the one business which we are very, very strong with the customers in Japan. And the other ones that you said about the other aerospace customers, I think we continue with them, so we are working with them, the value what we provide, I think in terms of their…

The second part is on the European defense. Aerospace, I understood that Krishna and you also spoke in detail, but on the European defense, are we seeing a lot of negotiations, pipeline building up on that side?

Yeah, I think there is one right now, which we, that is also a part of a built-to-spec, which we are working out with one of the European defense organizations. So, there is an area trade at this point of time that is there in the order pipeline. So, we are working out towards...

Is your question specifically B2S for European defense or European defense? Not, not really.

It is on the demand end.

Okay. So on the European dimension, I think we said, I think, so one of the things which you already mentioned to Thales earlier, so we are working out with them. There is, again, a defense customer, so we continue. I think we are very, very strong in terms of our engagement with them, the value of what we provide to them, and we also have other defense customers in Europe, which probably I don't want to name it at this point of time, based on the financials, the equipment that we have with them. So, we are working on the bill-to-print, apart from what I said earlier, the bill-to-spec is another one, but bill-to-print is continuing, the momentum is still there, having very, very strong momentum, both in North America. You're up.

Understood. If I can just...

Sorry to interrupt you. We request you to please... No, this one last. We need to... This one last, if it's possible. Please go ahead.

So on all tech, because our strategy on medtech is a barbarous strategy, where we also deal with a lot of early stage and startups in the product space. With Octag and with ITAR, is there any probability that we can start working with defense technology in North America?

Yeah, that's what I think. We have now one project going on right now for one of the defense customers there. We have the ITAR facility, as we said, it is the ITAR certified one. So, we are working out with a few more other US defense customers there. So, it is still at the early stages of our pipeline. But we see a value there, what we can bring into our customers in the US, the different customers in the US.

Thank you. Ladies and gentlemen, we will now take one last question, which would be from the line of Anil Mehta with Iqris Securities. Please go ahead.

Yeah, hi, sir. Thank you for the opportunity and, of course, very congratulations for the good set of numbers. Sir, my first question is that, you know, as we are going in expansion phase in FY27, FY29, particularly in the AI data center and robotics projects, I just wanted to know in that segment, particularly in which product side that we are answering, it is from a rack side or a cooling side or power supply side, that is, if you can share light on that. Second thing is that how much incremental capacity, particularly for the expansion phase and from the transformation phase that we are going to spend for the next couple of years. So if these two things you can share. Thank you so much.

So, I think as I said probably earlier, so I think we are still working out on that. We have the strategy in place. I think the team is in place right now. So, probably we will be letting you know in the next two to three quarters where the focus, which are the product lines we are working, going to work, and which are working out in that area, both in the AI data centers and the robotics. Okay. And the other one is... The CAPEX, correct? The CAPEX, I think, as you said, whatever we have today, closely around 1.75 to 2x of the revenue, so we don't need any such additional CAPEX, apart from a regular annual CAPEX, which we will be working out for our running the business.

Thank you. I would now like to hand the conference over to Mr. Krishna Bodhanapu for closing comments. Over to you, sir.

Thank you very much, and thank you, everybody, for joining the call this evening. Obviously, it's been a very good quarter, and again, I want to compliment Rajendra and his leadership team for delivering an excellent set of results. I also want to assure you that I think a lot of the challenges of the past have been overcome. We find ourselves in a very good position, both with the core business, which is aerospace, medical, defense. And industrial, but also with some of the expansion that we're looking at, which includes semiconductor equipment, data centers, etc. So I think we find ourselves in a good spot. So thank you for the patience. Thank you for the support. We'll again speak next quarter, but I want to assure you that we will keep our focus on delivering again, continuing to deliver a good set of results going forward. Thank you. Thank you.

Thank you. On behalf of Scient DLM Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.