Macpower CNC Machines Limited (MACPOWER) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, I welcome you all to the Q2 and H1 F527 post earnings conference call of Mac Power CNC Machines Limited. Today on the call from the management team, we have with us Mr. Rupesh Mehta, CMD, along with his management team. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements which may involve risk and uncertainties. Also a reminder that this call is being recorded. I would now request the management to brief us about the business and performance highlights for the quarter and half year ended, the growth plan and vision for the coming year, post which we will open the flow for Q&A. Over to the management team.

Thank you very much, Vineji and team Captify to arrange the meeting for quarter two. Good afternoon, everyone. I warmly welcome all of you to our Q2 FY27 H1 FY27 post-result conference call. Thank you for taking the time out of your busy schedules to join us. We truly value your continued interest and support. The financial results and presentations have been uploaded on the company's website. I hope you have had a chance to review them. I will bring you, walking you through the key highlight of our Q2 FY27 performance, followed by an update on our strategic initiative and growth outlook. After that, we will be happy to take your questions. We are further pleased to state that for Q2 FY27, also the company Ebitda Deliver is highest ever performance in MacPower's history in terms of revenue, EBITDA, and PED. Revenue stood at 120.33 crore. YOY growth of revenue is 40.39, EBITDA stood 19.93 crore, growth by 40.8 YOY with the EBITDA margin of 16.56%. Pets stood 13.48 crore, grown 43.7 YOY with a pet margin of 11.20. Net profit margin stood at 11.20, up plus 26 BPS YOY for the quarter ended. EPS stood at 13.47, up by 43.8 YOY for the quarter ended. Average machine realization is also increased now. It's 20.36 lakh. We are pleased to state that H1FY27, the company delivered its highest sever performance across revenue EBITDA and PED. Revenue stood at 215.56 crore for H1 FY27 with 46.9% YOY growth. EBITDA stood 35.36 crore for H1 FY27 with 60.2% YOY growth. Paid stood 23.6 crore for H1 27 with 65.5% YOY growth. Net profit margin stood at 10.7 up plus 120 BPS YOY for the H1 FY27. EPS stood at 23.05 up by 65.5 YOY for the H1 FY27. Average value of the machine around in six months is 20.55, like in order book. CapEx during the quarter was 2.89 crore. Incremental CapEx has lead to a corresponding increase in a depreciation. Robust order book and strong demand on pipeline. Pending order book as of Q2N stand at 476 crores, reflected 36% YOY growth. NAXA series contribute in this order book is almost 40% of the pending order book. Domestic bid submitted 745 crores. Tender bids, government business, it's 194 crores. Total bids in the pipeline is 939 crore. Product innovations. Recently, we have successfully delivered and launched several new models like DCM 5 meter V500G and VTX 1200. These are the large series NAXA products. Infrastructure and expansion of our future growth. Construction of our new capacity at newly acquired 13 acres 9 plus 4 land at nearby existing plant has started and it expanded to come into operation by end of quarter 2, 2027-2028. In order to support our long-term growth goals, this new facility will enable de-bottlenecking, de-backward integration, and major scaling of our operations. The new capacity will be announced in a detail in Q2 post-Result Concall. This land will be sufficient to support the growth of 25 to 30% in upcoming three to four years. As far as 60 acres land is considered as we are awaiting for Gujarat government defense policy. Once the policy is implemented, we will proceed with a land development on the site will commence with the new facility fully operational. Until then, We will start the work, if we can get the land within 2-3 months also, then also we will not start the 60-acre development. First we will focus to develop the 30-acre, after that we will start the 60-acre land. Because in the 30-acre land, we have a minimum 3 years visibility to increase the production. We are also expanding our market presence. Currently operating We are starting in a nine branch office and nine technical centers. Development work in our upcoming four tech centers in Kolhapur, Mumbai, Chennai, and Aurangabad is underway and we will expect to be operation in third quarter. Expanding sales and service team, we are going to display a new JAN cutting-edge 5-axis machines for aerospace and defense sector in upcoming exhibition in January 2027, India's largest exhibition, Imtex, developed by our R&D team. We are participating in almost all major industrial exhibitions in 2027, including IMTEX Bangalore 2027, EMO Milano Italy. This exhibition will provide a valuable operation to the showcase of our advanced CNC machine and automation technology, We will strengthen customer engagement and expand our market presence. We believe we will be able to improve our previous guidance and growth. I think in the first quarter we committed Thank you, sir.

We will now begin the question and answer session. All those who wish to answer Thank you.

Thank you. Thank you. Thank you for giving me opportunity.

Q2 revenue has in We will continue our growth journey like 25 to 30% on coming three years. Visibility is very much clear with the new existing plant. We can able to deliver the more machines and the guidance for the coming three years is very much clear with the new existing plant, we can able to deliver the more machines and the guidance for the coming three years. is 25 to 30%.

Okay, sir. Answer, how much of recent revenue growth has come from higher volume versus price increases and product mix? Have recent price increase beneficial?

Price increase, I think we have an old inventory also, we have an old pending order also. So I think the price incremental growth we can see in quarter three because Because in this quarter, I think the all the execution with the old order book with the old inventories. So, we increased the price before two to three months back. But now, this new price execution will be in quarter three.

Thank you. We'll take the next question from Disha Chowardhya. Please go ahead.

Hello? Yeah. Am I audible? Yeah, yeah, you are audible. Yes, thank you so much, sir, for this opportunity, and congratulations, sir, for a good set of results. Firstly, sir, so this, for this quarter, you mentioned the realization was around 20.36 lakhs, so that would mean that we've delivered volumes of about 591 machines. Is that correct?

Roughly, I think you can say like that, yes, because there is some service revenue also, but nearly the number of the machine is nearly the same.

Right, so our current capacity is around, so based on that, we are at around 95% utilization. So our current capacity is 2500 and the next capacity will be coming by Q2. So for between this time, with the next three, four quarters, where do you see the major growth coming from? Because we are already at 95% utilization. So will it be more price driven?

I think Disha, we have in quarter one, we have a capacity, same capacity, almost 700 plus Because now, if you can see, our capacity is 2500. So, our per quarter capacity is almost 600, 600 plus. So, in quarter one, we have some forward inventory, which you utilize in the quarter two. So, still we have some forward inventory. So, this year, we are easily able to deliver 2300 to 2400 machines in this financial year. And the guidance for the entire year is nearly 30 percent. And we are sure that in quarter three and quarter four also will break all the historical record.

Thank you, sir. We'll take the next question from Arnav Sakhouja. Please go ahead.

Hi. Thank you for taking my question. So my first question is that, you know, in the annual report, we mentioned that we've expanded our distribution network to around 39 cities. So, you know, as we look to grow at 25-30% in the next two to three years, are we going to focus more on You know, increasing distribution network within these cities? Are we going to try and expand to even more cities?

I think almost, I think, compared to the market of consumption, mostly this 39 city is the industrial city where our top five companies of machine tools have their establishment. Previously, we are not expanding our distribution and marketing because of the capacity. Now we are going to build the big capacity in next financial year. So it is not a one day or one month journey. So, we are expanding this marketing budget, new cities development and new recruitment to get the opportunity for next year's new capacity will be added. So, 39 cities is enough for us right now and almost end of this financial year, our team will be the double team of sales, And service and tech centers and our branches.

Right. And, you know, just on your, just on some financials, so the working capital days improved very strongly this quarter from approximately 138 days in September of last year to around 110 days in September of this year. So, I mean, what were some of the reasons for this strong improvement?

I think we delivered more machines in this quarter, and there is no finished or unfinished inventory, right now we have, and some of the inventory we try to control, mainly it's natural that whatever inventory we purchase, we mostly deliver the machines. It is not because I never focus on inventory as I mentioned in my previous quarter speech also that inventory is always a game changing for us because we have more than 380 variants and we are managing the more than 20,000 component inventory. So, we can predict the business of models by 70%. 30% models is unpredictable. But in the natural way, we deliver the more machines. So, inventory days is reduced.

Thank you, sir. We'll take the next question from Mahek Talati. Please go ahead.

Sir, you mentioned that you will be coming up with a large capacity which you are starting by Q2 of FY28. Any ballpark number of how much capacity are we planning to add as we are nearing the 100% utilization levels currently?

I think for the next capacity, I am able to To explain in quarter 3 on call, because we are calculating to increase the capacity, I think first phase is debottal linking of the machining and component manufacturing. Right now we are calculating how much capex we are adding for the machines purchase, process and instrument purchase, material handling. So, we are calculating and maybe within one month, we'll freeze our capacity increase calculation and we'll announce in quarter three result. But to increase the production, we need the component. So, we are focusing right now on component manufacturing and machining and backward integration. So almost our 90% calculation is completed. Now the time is for the order placed. So we are placing the order within one month. My team is visiting the abroad. We are importing the many of the machines from other country and we'll get the benefit of Mixit Gujarat policy for this new capex by 25% of subsidy of construction.

So, are we confident that we will be able to set up the new capacity in like three quarters

I think, yes, the delivery time for all the machines is three months. We are not placed the order because we also not required the machine before May or June. So the delivery time is three months and logistic time is one month. So we have enough time. And I think now next month we are placing all the order, almost 20% order we already, where the lead time and delivery time is more, five months to six months, where we already placed the orders to increase the spindle capacity, to increase the sheet metal capacity, to increase the telescopic cover. So now we are focusing on grinding and machining capacity and the lead time is not more than three months. So we are on time and I'm sure that we'll because construction work, compound wall work is completed, board work is completed, architect team, contractors is already appointed. So we have a clause to complete the building within six months with the penalty clause. So, I am 100% sure that we will utilize this plant on time.

Thank you, sir. We will take the next question from Bhargav Bhutadev. Please go ahead.

Yeah. Good afternoon, sir. Yeah, yeah. Good afternoon, sir. And congratulations on a good set of numbers. Thank you very much. Sir, my first question is that if you look at the operating cash flow, the operating cash flow for the quarter was very strong at about 30 odd crores. And a lot of improvement has come in terms of your receivable days reducing significantly. So, is it a coincidence that your receivable days are reducing and your revenues are also rising? Meaning, is there a change in terms of customer profile that you are getting good payments and hence you are also giving good revenues accordingly? So is there a correlation, sir, between both of them?

Exactly, we are not giving credit to any of the customers. Some of the corporates, like recently, as I mentioned, that they will pay us 5%, 10%, or 20%, last 10% or 10% after machines received and we hand over to them with the commissioning report. So we not entertain the And recently, in the last few months, we are entertaining the customer like Hero, Kiloscar, Graphite India. So we are now focusing more on corporate. So some of the 10% or 20% is the credit. Once machine will receive, they will pay us. But previously, in certain months, we have one tie-up with some NVFC that with their commitment letter for 15 days, 20 days, short-term financing, because some of the customer of document is pending, margin is pending, so they will give us the assurance letter that you may dispate the machine, will release the fund within 15 days, two weeks. So, this time, strictly, we not accept this kind of, because this scheme is not valid right now. So, cash flow is increased.

Great. Secondly, sir, I was just reading your annual report, and I saw that almost 80% of the components are now manufactured in-house. So, for example, your spindles, sheet and metal exposure, then powder coating facility. So, when do we see the benefits of this in your margin? Because now that a large part of manufacturing is in-house, can we expect those benefits to start flowing into the EBITDA margins as well, sir?

Bhargava, exactly our capacity of component is not that much enough. Right now our spindle capacity is nearly 1400-1500. So we are purchasing 1500 components. So we are de-bottling and adding our capacity in the new capex. Yes, definitely. Once our capex will be added, our margin also will increase. Simultaneously, our salary cost and operating cost also will increase. But definitely, there is a fixed leverage, as you know, that will give us a good, sufficient improvement in the margin also. And gradually, for the next year, next year vision also, we are investing some operating costs and we are adding some more R&D team. So, our budget, if you can see the R&D expenses is also gradually increased. But definitely, once this new capacity will added, our margin will definitely will increase.

Thank you, sir. We'll take the next question from Dagash Sanghvi. Please go ahead.

Hello. Thank you for the opportunity and congratulations on the numbers.

Thank you, Dagash.

I just wanted to have some clarity on the land area that you mentioned in the PBT. So, in the previous quarter, it was mentioned that 30 acres of land is what is under the Greenfield expansion plan, but in this quarter's PPT, it is mentioned 60 acres land. So, I just wondered, is that 30 acres more land has been allotted to us or how is it like and when are we going to utilize the same?

First of all, this 30-acre land is just, I think, excellent by the government two years back, that this 30-acre land we are able to give you for the defense policy, and after that, I think there is some issue in that land, and after that, they show us the 60-acre land. And we approved that 60-acre land and we had paid the token money amount and all the documents, more than 32 departments, clearance is completed. And after that, there is no defense policy. We are waiting for the new policy because 2016 policy is expired. And they extended that policy up to August. And now within one or two months or any time we are waiting for the new policy, then we'll receive this 60-acre land. But right now we have a 13-acre land for another three years vision. So right now we are eligible to get the 60-acre land, not 30-acre land.

Thank you. We'll take the next question from Sagar Shetty. Please go ahead. Yes, I will. We'll move on to Ankit Shah. Please go ahead.

Hello? Yes, Ankit. Yes, yes. My first question was about replacement demand. This machine, what I have, 5XM machine, what is the replacement? How useful is it?

Replacement, there is a background noise coming.

Yes, please continue.

If we talk about automobiles, the same machines, three to five years will be very good. Maintenance, mileage, wear and tear will be less. After that, the whole reconditioning, spare cost, normally, the high-accuracy machines, where you have less than five microns, less than three microns, their life is 5 years old. रहती है उसके बाद उनकी एक्यूरेसी बहुत कराब और मैंटेनंस के लिए वो सेकंड में बेश देंगे या फिर रिकर्णिशनिंग में डाल देंगे तो एवरेज लाइफ मैं जो प्रिडिक करता हूं वो फाई यर्स का

आज

अजिए अजिए अजिए अजिए अजिए अज

Good morning, everyone, and welcome to the call. Thank you. We have to give you the good growth on YOY minimum 25 to 30% in existing flat on quarter one and quarter two also. And then we'll give you the good numbers.

Thank you. We'll take the next question from Manish Reddy. Please go ahead.

Hello. Good afternoon. Thanks for the opportunity. Congratulations for the wonderful set of numbers. Thank you. My question is regarding the 5-axis machines program. So, what is the current commercial status of that? Have customer validations or commercial orders commenced? And what revenue contribution could this product category is expected to deliver by FI 29?

And the second question. I will complete your first question. Right now, compared to our Indian machine tools demand, almost India is consuming 38,000 to 40,000 crore machines and India is producing 16,000. If you just see, our market contribution is consumption 2% and India's production 4%. So, we are, I think, negligible market share right now. So, my first priority is to capture the minimum 10% market share in coming 3 to 4 years, and this 5-6 market is a niche market. It is not a technology. We already produce display, but we require this kind of special team to distribute, to sell, to train, to programming, a special team for aerospace industries. Right now, I am not focusing on this Ferrari because the market is very nice. Market consumption of this kind of machine is not more than 150 machines. Out of that, 90% machine is imported. So there are lots of legalities also to sell the 5-axis machines. This kind of machine is This is very tricky. If this kind of machine is used in the defense purpose, then our entire production line will choke up because some of the European and Japanese company will not give us the material. So this is not the product which we cannot manufacture. We already Right now, we are going to display also, but to sell 5-axis machines simultaneously. Right now, 4 plus 1, we are focusing every month, we are selling one machine. But this 5-axis machine is not that much our focused area. Maybe after 60-acre plant, we will focus on 5-axis machine. Right now, our focus is to get the more and more market share, which This business is very easily available for us. Right now, if you can see our order book and our product basket and our distribution network, this business is very much easy for us. We need to focus only and only for execution of this order. So, 5-axis machine, I think, will not focus, but yes, to develop some of the case study, we'll dispatch this 5-axis machine. Recently, we have a one order of 2 crore, one machine value of 2 crore. But we are not focusing if in a natural way it will come, we'll deliver this kind of the machine. But our mainly focus is 3 plus 1, 4 axis and 4 plus 1, 5 axis machine. So mainly we focus to make the numbers.

Thank you. My second question is regarding the defense and aerospace pipeline, you know, order pipeline. What is the current status of the major tenders under evaluation and what is a realistic timeline for conversion into confirmed orders and revenue? Also, you mentioned the long-term plan of reserving 50% of the new plan for defense work. Is this allocation based on confirmed demand or Customer discussions or some green shots you are seeing in this particular segment?

Manuji, exactly right now we have good orders of HAL, we have good orders of the rifle factories and some of the ordinance factory, and definitely all the order will execute And after that, right now, we are, we limitedly and with the two higher price, we are submitting our all the bids and average bids is released more than 1000 crores, but we are participating only on 25 to 30% with the two higher price. Once we have a good capacity for the defence area, we will aggressively participate and all the tenders will participate and we will try to get the bond number. So for the defence visibility, we have good numbers and we have a good strategy also for coming years when we have good numbers and good capacity for the defence area.

Thank you, sir. We'll take the next question from Gaurav Shukla. Please go ahead.

I'm audible, sir. Sir, how much your machine technology developed in-house and how dependent are you on imports, imported components, such as controller drivers, spindles, and procedures?

I think our story is same, like all the Indian players' story, that ball screw, linear motion guideways, CNC controls, bearings, so it's like, I think everybody is dependent on some of the components, and it is not a good decision, just like a car, if you can see the car manufacturers, they never manufacture the tires, so some of the component is, Viable in the large scale only, and it's required the different focused area where the new R&D, new technology, and this kind of things. If I'm giving you the example that FANU is manufacturing the CNC control, their per month capacity is 40,000 control, 40,000 control. They are manufacturing almost 40,000 per month. So, this kind of the component is required the large-scale linear motion guideways and bowl screws, manufactured by the three companies. And these three companies are giving the 99% word market. So, it is not a good idea to manufacture all the components in-house. This is not your core area. About the technology, yes, out Over all the design, nearly we have a 388, 390 basket model, which develop 100% in our R&D team. We not pay a single rupees of design. We don't have any collaboration. We don't have any takeover also. So our team is capable to manufacture next generation's component and machines.

Thank you, sir. We'll take the next question from Abhishek Jain. Please go ahead.

Thanks for opportunity and Congress for a strong set of numbers, sir.

Thank you, Abhishekji, Aji.

Sir, my first question is related with the land acquisitions. So, what are the key hurdles for the land acquisition? Why it is delaying a lot? And if this land acquisition is not done, then what is your plan B?

Plan B, Abhishekji, we already executed, because this land we are waiting last one and a half year, and Plan B is this 13-acre land, where almost our construction work and capex work is in execution way. So, Plan B is already implemented. We are now waiting for the Plan A of 60-acre land. This is delayed because of the government policy, where we are getting the good numbers of benefit compared to the state government policy, and this policy is expired on last February. We are waiting for the new policy. The huddle is there is no policy. If they give us the land then we have to pay the market rate. And I don't want to pay the market rate because I don't require this land within one month or two months. If it will come within five months, six months, then it will come. It's also okay for me. So I hope that we can get this land very soon. And once we'll get this land, we'll not start any of capex in this land. First of all, we'll complete our 13-acre land project, and then we'll start another capacity, another foundry, another component manufacturing, and gradually we'll increase our capacity. And this both land will give us the 10,000 machines visibility.

So just wanted to understand that you are going for the backward integration of many components. But if I say that the gap between you and your peers in terms of the margin is quite high. You are having a margin around 16 to 17% while your peer is at 25 to 26% margin. So just wanted to understand what's your plan for the backward integration going ahead and what kind of the margin potential you have.

I think, yes, we can able to extend the margin month capacity will be 10,000, maybe more than 20% margin we can able to sustain after 10,000 machine. And margin will increase in a two, three different way. Some higher end product, some fixed cost is there. So once you increase the numbers, your margin will definitely increase and the backward integration also. So, yes, we will increase the once our capacity, once our backward integration capacity will increase. It's a natural way and definitely will increase the margin also.

Thank you, sir. We'll take the next question from Aniket Jain. Please go ahead.

Good afternoon, sir.

Good afternoon, sir. I wanted to check how difficult or how easy it is to push incremental pricing to customers.

So, usually, we're receptive to customers. Thank you very much. Good morning, everyone, and welcome to the call.

Thank you sir. Thank you.

Thank you. Thank you. We'll take the next question from Disha Chordiya. Please go ahead.

Yeah, thank you so much sir for this opportunity again. Just so one thing you mentioned sir that 20% plus margins you're looking at post all the capex happens. So this year what sort of margin should we look at and what will be the average realization that we should work with for this year?

This year, average realisation will be same, but gradually from the new plant, maybe average realisation will increase. But as I mentioned, if I manufacture the average realisation of 22 lakh rupees, 25 lakh, and then I am able to deliver 700 machines, but I will focus I want us to deliver 800 machines with the average realization of 21 lakhs. So, for me, the total revenue is important, not the average price is important, because you can get the same margin because your expenses are also distributed with your total revenue. So, but then also definitely will increase the average realization, more sophisticated machines we recently developed. If you can see our NEXA product basket order book is also increasing. So, maybe year on year, our average price realization will increase.

Thank you, sir. We'll take the next question from Vineet Agarwal. Please go ahead.

Hello. Am I audible? Thank you for the opportunity, sir. And congratulations on good set of numbers. So my first question is, since we are seeing most of the domestic peers as well as your global OEMs who are localizing in India are all adding capacity, so how do you estimate total industry capacity additions over the next couple of years compared with the growth in Indian CNC consumption? I know there is a gap still, but still wanted to get your sense on that.

Exactly. The Indian machine tools had recently released the numbers that our consumption in 2030 will cross the 50,000 crore. Because right now, Vinit Ji, as you know that our manufacturing contribution in our Indian GDP is just 15% nearly. And government aim is to increase by 25%. And if they wanted to increase the manufacturing contribution in our GDP by 25%, I think they required our machines because we are contributing more than 3,000 segment, electronic, engine parts, stand malls, aeronautics, everywhere the machines is required. Still, we will not able to manufacture 50% also because of the demand. And there is no new player entry will be coming in coming 10 years also. Whatever the growth of country, we have to contribute by the 6-7 players. So I am not worried about the demand in this segment. My game model is different. I'm controlling the operating cost. I'm not paying the interest cost. If I'm doing backward integration, my interest cost will increase. Ultimately, the market is just thinking about EBITDA. I'm thinking about the paid margin. So I have a different model and I think I'm making I think there's something different within coming five years about the highest margin, highest capacity and minimum debt. So demand-wise, Vineetji, I'm saying that India will not catch up the demand in coming five to seven years.

Great, sir. Thank you for that. And my next question is for us, are we seeing, because of the capacity constraint, are we seeing any cancellation or customers moving to some other competitors because of waiting time? And what share of the order book is backed by advances?

All the order book is with the advance. And second thing is accept my distributor. Second thing is, and government orders. Second thing is, yes, every month we are refunding 10 to 20 machines average, not able to give the deliveries.

Thank you, sir. We'll take the next question from Bhavya Sonawala. Please go ahead.

Thank you for the opportunity and congratulations, a fantastic execution. Just two questions. Our first question is in terms of what is our criteria when we look at backward integration? Is it only in terms of cost competitiveness or is it also supply chain? Can you just explain how we look at backward integration?

Bhaviyaji, we are calculating in three different ways for the backward integration. One is supply chain. Your backward integration cost, maybe I am buying these things or I am doing the machining with 100 rupees and my machining cost is 102 rupees. Then also I have to put this capacity because there is no availability of this component in India or abroad. So this is a compulsion. I have to manufacture if I wanted to increase the capacity. Second thing is the accuracy. This component is available, but not with your standard. So to get the accuracy, you have to invest in plan B. And plan C is the long delivery time, long logistic time, and plan D is to reduce the cost. It's increase your margin. So, we have four different categories. We are focusing. We have a huge number of component inventory. We are putting each and every component in Excel and we are calculating the capacity analysis. This component will not be available. So, you have to manufacture either it's affordable cost or not affordable. This component accuracy will not be available. So, we are putting the Excel sheet A is our most priority, B, C, and D. So, we all together, we are working on this A, B, C, D. So, there are four types of different elements to manufacture the backward integration component.

Thank you, sir. We'll take the next question from Mahek Talati. Please go ahead.

Yeah. Hi, sir. Thank you for the follow-up. A couple of questions. Number one is the update on JV. Are you expecting the JV partner to finalize soon or there is still some delay there?

Maykji, recently we had a discussion in Germany with a few companies and they are also participating in January exhibition in India. And we set up the meeting and I think they are also waiting for our new facility. So maybe once we have our facility, all the paperwork is completed, Maybe we can announce once our capacity will be executed.

So is this a new partner or it's one of the three partners which we had finalized earlier?

Yeah, yeah. I think we, same which we finalized.

Thank you. We'll take the next question from Saurabh Vyas. Please go ahead.

Hello, sir. Am I audible? Hi, sir. Congratulations on a good set of numbers. Sir, first question regarding the 5-axis machines. Congratulations that we have cracked that on our R&D team. But just wanted to know that this 5-axis machines right now cannot be built on the capacities and the entire work floor plan area of our current facility. So, are we able to get this 5XS machine's production get started once the backward integration capacity has gone live and we have achieved maximum capacity or this entire 5XS machine will be manufactured in our new facility of the land acre parcel that we are trying to get it from a very long time. Just wanted to get a picture about how this 5-axis machine's production will be started in our books.

Dharav Ji, first of all, understand the technology. The machine is same. There is a rotary table, tilting rotary table, which we are using in 4-axis also, 4 plus 1, 5-axis also. Phi-axis mainly depends on the Phi-axis license by the Siemens because Panuk and Mitsubishi is not giving Phi-axis control to India. The machines is same which we are manufacturing right now. It's a vertical machining center with the rotary table and these are the rotary table. So same machines, the control variant is only different. There is no much more difference The difference between the regular machines and 5-axis is software and hardware, and it's available only and only by the Siemens, but there are lots of clearance that will not utilize this with the Our defense purpose will not export to the some enemies countries, some will not export to the some of the country where the some restrictions by the US and the market of India like Azad and some of the customer are using the Fiaxis machine is not more than 200 machines. Out of 200 machines, my belief is more than 65 to 75% is imported because they require the FANUC. They require the Mitsubishi. But in India, Mitsubishi and FANUC of 5-axis will not be permittable because of the restriction of the Japanese and some other country. So, I am not focusing on 5-axis, there the clearance is too long. And second thing is, this is the Ferrari, why should I focus and utilize my capacity to develop the new market? Right now, market is open for me. Everywhere I can get the order of entire market. Out of 40,000, India will produce 40,000 machines this year. Out of that, there is a 200 machines market in India. So I am not focusing in this financial year. There is no much more rocket science to manufacture the 5-axis. If you can visit the Bangalore exhibition, I am demonstrating the lots of aircraft component manufacturing I am selling in my Fiexis machines in coming exhibition in Italy and in Bangalore. But my business model will not permit to waste the energy, time to encase this business when you have a very easy fruits in your pocket, then why you have to catch these tough fruits? It's tough by the law, tough by to get the license, tough by to get the restrictions. And one of our previous company had already faced this problem, like they supplied to the Russia, low-cash machine is sanctioned for two years. So I don't want to take any single person's risk to show the market about 5-axis, 5-axis. So, my focus is to sell the machine for medical industries or some of the commercial aircraft manufacturing company as a testimonial basis. But I will focus once I have a 10,000 machines capacity.

Got it, got it. So one last question from my side. You said that the entire facility will be full up and running for the backward integration by Q2FR27. So meanwhile, we will be building up our inventory on a bit higher scale. So is there any working capital stress due to which we can see that the EBITDA margins may grow by Q3, Q4, but we see a slight side compression. On the pat margins, or is it that the backward integration will be started by Q3, Q4 itself, and then the working capital compression will be negative? Just wanted to get a bit clearer picture on that.

I think our working capital will not be an issue for these industries because we are getting almost 90% material with the long-term credit basis like 90 days, 120 days, sometimes 6 months also. So, to keep the inventory for two months, three months, our manufacturing time one month, four months, then you can get the advance money, then you can get 100% for dispatch. So I think if you are properly managing this, so always you can generate the cash flow. There is no problem for these industries if you cannot divert the fund into the capex or any other activities. So, I am not worried about the inventory, interest cost of the inventory because we have a huge cash flow once your production capacity will increase. Yes, definitely our debtors will be increased, but our working capital utilization will not that much. If you can see, I have a 30 crore rupees cash right now, which is not my money. It is I think that our suppliers money. So if we utilize the proper way, we can generate the cash flow, not impact on the pet, or it will not increase the working capital interest cost also. Yes, definitely, once we do the backward integration and the sum of the fixed cost is there, so definitely, with this new capacity, we'll increase our margin also.

Thank you, sir. We'll take the next question from Veerag Shah. Please go ahead.

Hello. Am I audible? Yeah, so I wanted to ask that currently you are manufacturing 600 machines every quarter, right?

No. Totally, our capacity is 2500. So average, you can say 800 machines per quarter.

600, right? 800 would mean it would be 3200, 3200, sorry, yeah. Yeah. So after the 13 acre plant, how many, how many will you be able to produce from 600 to,

as I mentioned, I'm quarter three, I will exactly announce the numbers of total visibility of coming three years. But I am 100% sure that with this new capacity, next financial year, Here we are definitely able to give you the 25 to 30% growth in a year on year basis.

Okay, sir. And lastly, what, how do you plan the NEXA? Like currently it is 40% of your total book. So will it increase substantially because I believe that this is a high margin side and low volume product, but high margin can also improve the, your operating level margins and I think

40% is more than enough, I think, for the next uproader. But definitely, we'll try to increase this 40% in terms of the numbers. If you just see the terms of the value, definitely it will increase. But our aim is to reach the 50% in 2028-29.

Thank you, sir. We'll take the next question from Anup Kumar. Please go ahead.

Congratulations on a good set of numbers.

Thank you. Thank you.

Sir, which industries currently contribute the most of the revenue like automotive, general engineering, aerospace, defense, and others? And which segments are expected to grow fastest over the next three years?

I think I'm not worried about the segment right now, Anupji, as I told you that consumption is 2% market share. So wherever we are, but we have good data numbers. Right now, the automobile is the fastest growing and diet mode, medical, agriculture. Each and every industry is booming right now in MacMor customer base. So I think highest number I'm believing in still automobile.

Okay, sir. My next question is, I joined late. If my question is repeated, please, sorry. And what are the operating margin for Fy28?

Definitely it will increase by gradually it will increase but definitely it will be more than 20%.

Thank you, sir. We'll take the next question from Sanjay Mahajan. Please go ahead. Yeah.

Thank you for the opportunity, sir. And the demand is very strong. And one of the thing that we analysts are trying to understand is that demand is so strong. Thank you. Is it just land or anything else? Because demand is strong, balance is strong, and we still are struggling to come up with a capex at that speed. And the concern is not only about losing the order or we are becoming too ambitious about the growth. The other angle, probably, how important would be it from management side, that if other competitors are putting huge capacity at a fast pace, then talent pool is also difficult. It is sufficient talent for everyone to grow at that pace, because the capacity recently added by listed and unlisted players is that thing we are trying to understand.

Thank you. My service, my customer relationship, the demand is definitely good, but the Mac power is double. If you look at all companies, it is a generalized word for all companies, which are single-digit companies, which are not eligible for all companies, which are not eligible for all companies. Thank you very much. Thank you. I am going to say that the single digit market share is 50% of the price. Because operating costs are fixed and interest costs are very high. If you have 200% of the capital, I am going to say that no company will double. Thank you very much. This is my financial and business model.

Thank you, sir. So due to a time constraint, we'll take the last question from Piyush Jain. Please go ahead.

Hello. Rupesh Bhai, today you are in excellent form. Yeah, yeah, in different form. In different form. Today, listening you is great. Sir, only one thing to know. We are working on the DAIHR machine, and with the average realization, we are making more or less 500-600 machine quarter, so we will work on almost full utilization. This new, which we have taken the lease on the 13-acre land, I believe, will start in Q2 next year. So, next year, we will go on almost optimal utilization, so more or less, we will stay in the DAIHR capacity, correct? So, the larger impact of the new facility, which I believe is again 2500 machine, correct me if the number is wrong, will come in 2028 second half and 29th full year. Is my understanding correct, sir?

Thank you. I am 100% sure, and my whole groundwork, paperwork and visibility is clear.

Sir, one more thing, like our competitors, their average realization is about 37,40,000. We have reached the last few years in 2019-20,500,000. So, what is our, which you have told us about, if you don't have any focus on 5x, because it is a little bit of a percentage of the overall market, which is your strength. But over a period of time, we will be moving towards a higher realization machine, Let's say 24,25,000, because we have said that in the past, you have said that backward integration, we can try to get the margin of 20% above the margin. In the past few quarters, we are talking about 16-17% in the last quarter. So what is your thought process in this side? Not today, maybe in one year, two years, will we move towards the value chain of 24,25,27, will we move towards the margin of Thank you very much.

Good morning, everyone. This is my operating cost, my debt, which is much higher, and this is the area that I have to do so that I have to eat easy fruit in front of me. After that, I will go to phase two. First, I will go to 5,000 machines to market, then I will go to 500 machines in the world market or higher-end products. अच्परवेशन के साथ उसको मैं आगे बढ़ूं, जिसमें मैं कोई एक्सपेरिमेंट ना करूं, तो मैरे पास ब्रोड़क्ट पर फोकस और अबूरेज प्राइस में तब करना चाहिए, जब आपके पास एक सफीशन मार्केट हो चुका है, अब आप वो एरिया Thank you. Good morning, everyone, and welcome to the call.

Thank you, sir. Sir, since that was the last question, would you like to give any closing comments?

Do you have any last question, Mohsin bhai?

No, no, last question is done, sir. You want to say something in the end?

I think thank you very much, everyone, for joining with us on our Q2 concourse. And thank you, Vinay ji and team Captify, Mohsin bhai and your team. Thank you very much to arrange the, I think, largest meeting ever. I think more than 130-140 people are in this group. I think this is also a record break participation in this call. And I hope soon that with the new record, we'll see you soon in quarter three. Thank you very much.

Thank you, sir. Thank you to the management team and thank you to all the participants for joining on this call. This brings us to the end of this conference call. Thank you.