Harsha Engineers International Limited — Investor Meet, 14-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

**Financial Performance:** For Q2 FY25, Harsha Engineers posted consolidated revenues of ₹310 crores, a dip from ₹327 crores in the previous quarter but up from ₹298 crores YoY. The EBITDA for the engineering segment improved to ₹50.2 crores from ₹40.5 crores a year earlier. However, EBITDA margins declined amid raw material costs and a sluggish European market. The solar business contributed ₹42.6 crores in revenue with an EBITDA of ₹3.68 crores. The working capital cycle remained stable at 151 days, and CAPEX for the quarter was ₹34.7 crores.

**Future Outlook and Growth Drivers:** Management is cautiously optimistic, anticipating stronger demand in H2 FY25, particularly in Q4, following inventory destocking. The India Engineering business is projected to achieve a higher single-digit growth, while the consolidated growth might be mid-single digit due to various external factors, including softening demand in Europe and the US.

**Order Book and Operational Updates:** The bronze bushing segment remains robust, with sales around ₹24 crores in Q2, while the overall industrial demand is under pressure owing to reduced inventories by clients. Challenges in Europe persist, affecting project timelines and orders, particularly in the wind and industrial segments.

**Analyst Q&A Insights:** Analysts inquired about margin pressures from OEMs, with management confirming material pass-through mechanisms help mitigate some effects. They also discussed the impact of greenfield CAPEX on margins, indicating a potential long-term benefit but with immediate uncertainties. The company sees opportunities from competitors consolidating manufacturing and believes it can capitalize on this, reinforced by ongoing negotiations for increased orders from significant clients like NBC Bearings.

**Strategic Focus Areas:** Key themes include a focus on expanding product lines, particularly in India in response to the China Plus One strategy. Management expressed a commitment to enhancing the product mix, especially concerning the challenges in Romania, where a turnaround strategy is in process.

**Investor Insight:** Current financial health and strategic positioning indicate a cautiously optimistic stance, suggesting a potential 'buy' for investors. The company's ability to manage risks, particularly in European markets, alongside growth prospects in India, supports this outlook.