Summary
Harsha Engineers International Limited - Q3 FY 2026 Earnings Call Summary Thursday, February 05, 2026, 4:00 PM IST
Event Participants
Executives 3 Maulik Jasani (CFO), Sanjay Majmudar (Strategic Advisor), Vishal Rangwala (CEO)
Analysts 4 Amit (PL Capital), Harshit Patel (Equirus Securities), Jason (IDBI Capital), Manish Goyal (ThinQWise Wealth Managers), Saket Kapoor (Kapoor & Company)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (Consolidated) | ₹409.7 crores | +15% YoY; Driven by strong India Engineering performance (+17.4% YoY) and solar business contribution. |
| Engineering Revenue | ₹350.0 crores | -3.6% QoQ; Slight decline from Q2 (₹363 cr) due to seasonality in stamping and a blip in Romania. |
| Solar Revenue | ₹59.7 crores | Reported 9% EBITDA; Performance is order-driven but continues to be a positive contributor. |
| EBITDA (Adjusted) | ₹64.3 crores | Normalized for ₹5.97 cr one-time labor code provision; India margin at a healthy 23.8%. |
| EBITDA (Reported) | ₹58.6 crores | Impacted by retrospective gratuity provision and losses in foreign subsidiaries. |
| Net Profit (PAT) | ~₹36-38 crores | Impacted by ₹3.7 cr loss in Advantek and ₹3.98 cr loss in overseas subsidiaries. |
| Working Capital Cycle | 140 days | -6 days QoQ; Improved from 146 days in Q2 and 145 days YoY. |
| Capex (9M FY26) | ₹100.0 crores | ₹32 cr incurred in Q3; Includes capitalization of second building at Bhayla site. |
Geographic & Segment Commentary
- India Engineering (Standalone + Advantek): Reported 17.4% YoY revenue growth driven by volume increases in industrial and automotive segments. Management noted a dominant market share in domestic cages with exports also showing a recovery trend (+10% growth).
- Harsha Advantek (Subsidiary): Reported a net loss of ₹3.7 crores in Q3 due to higher interest and depreciation from its new greenfield facility. Revenue is expected to ramp up in Q4, leading to reduced losses, with break-even targeted for next financial year.
- China Operations: Maintained steady profitability and growth. Management announced a $9.94 million expansion plan (70-80% debt-funded) focused on steel industrial cages to penetrate the local Chinese market.
- Romania Operations: Performance remained under pressure with an operating loss in Q3. This was attributed to a lag in passing on steep copper price increases and sluggish European wind energy demand.
Company-Specific & Strategic Commentary
- Product Diversification: Bronze Bushing business grew 30%+ YoY, reaching ₹92 crores in 9M FY26. Stamping revenue stood at ₹41 crores, with new component commercialization expected in FY27.
- Strategic Expansion: The China brownfield expansion aims to double current China revenues by FY28 by localized manufacturing of steel cages for MNCs and local bearing makers.
- New Product Development: Accelerated pace with 123 new SKUs developed in Q3 alone, totaling 382 SKUs for 9M FY26, acting as a leading indicator for future revenue.
- Japanese Sourcing: Revenue from Japanese customers was stagnant at ₹51.5 crores for 9M. Management attributed this to technical delays and a cautious global supply chain shift by customers.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | >10% for FY26 | Management expects Q4 to maintain or slightly exceed current run rates. |
| PAT Target | ~₹145 crores for FY26 | Based on improved Q4 performance and normalization of one-time provisions. |
| Profitability | Break-even (Advantek) | Advantek subsidiary is expected to turn PAT positive in FY27 as utilization ramps up. |
| China Revenue | 2x Growth by FY28 | Target based on the $10M capacity expansion coming online by the end of FY28. |
Risks & Constraints
| Risk | Context |
|---|---|
| Commodity Volatility | Copper and steel price increases have a 4-month lag for pass-through to customers, impacting short-term margins. |
| Geopolitical/Macro | High exposure to European demand (35% of business) makes the company sensitive to EU industrial cycles and wind energy slowdowns. |
| Operational Ramp-up | New facilities like Advantek carry high depreciation and interest loads, requiring significant volume growth to reach PAT break-even. |
Q&A Highlights
China Expansion Rationale
- Question: Why expand in China given 55% current utilization? (Harshit Patel)
- Answer: Current capacity is brass-heavy; the expansion targets industrial steel cages where HEIL lacks local manufacturing. Localization is critical to winning contracts from local Chinese bearing manufacturers (Vishal Rangwala).
Romania Turnaround
- Question: What is the outlook for the loss-making Romania unit? (Amit)
- Answer: We are shifting focus from casting to finished cage business and implementing cost controls. While commodity volatility remains a risk, we aim for EBITDA break-even first (Vishal Rangwala).
Export & Trade Agreements
- Question: Will recent FTAs (UK, EU) benefit results? (Manish Goyal)
- Answer: While there is no direct immediate linkage, FTAs are positive for long-term export demand. US-India trade ties are less critical as US exposure is currently only 8-9% (Vishal Rangwala/Maulik Jasani).
Advantek Investment & Returns
- Question: What is the total investment and expected peak revenue for Advantek? (Jason)
- Answer: Total investment will reach ~₹250 cr by year-end. We expect a 2x asset turnover on the plant and machinery portion (~₹120 cr) once fully ramped up in 2 years (Maulik Jasani/Vishal Rangwala).
Key Takeaway
Harsha Engineers delivered a resilient Q3 FY26, characterized by 17.4% growth in its core India engineering business, offset by temporary headwinds in Romania and gestation losses at the new Advantek facility. Strategic diversification into high-margin segments like bronze bushings (₹92 cr in 9M) and large-size cages is yielding results, with the latter growing 25% YoY. Despite a one-time ₹5.97 crore labor charge impacting reported numbers, adjusted India margins remained healthy at 23.8%. Management is doubling down on China with a $10M expansion to capture the localized steel cage market, aiming to double China revenues by FY28. While European wind demand remains sluggish, the company is on track to meet its 10% FY26 growth guidance and expects Advantek to turn profitable in FY27. Management maintains a cautious but optimistic outlook, pending a full FY27 guidance update in the next quarter.
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