DEE Development Engineers Limited (DEEDEV) Earnings Call Transcript

Ladies and gentlemen, good day, and a very warm welcome to the Q1 FY '27 Earnings Conference Call of DEE Development Engineers Limited. From the senior management, we have with us today Mr. Krishnan Lalit Bansal, Promoter Chairman and Managing Director; and Mr. Brham Yadav, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Venugopal from Adfactors PR. Thank you, and over to you, Mr. Anand.

Thank you, Avirath. Good afternoon, everyone. We welcome you to the Q1 FY 2027 earnings call of DEE Development Engineers Limited. Before we begin the earnings call, I would like to mention that some of the statements made in today's call might be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to the future financial and operating performance. Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected the soonest. I will now hand over the call to Mr. Krishan Bansal sir to share his views. Over to you, Bansal sir.

Thank you, Anand. Thank you so much. Good afternoon, everyone, and thank you for joining us. I hope all of you have had the opportunity to go through our investor presentation, which has been uploaded on the exchanges. FY '26 was the year in which we completed our major growth CapEx cycle with the full operationalization of the Anjar pipe fabrication facility and the commissioning of our seamless pipe plant. Q1 FY '27 is the first quarter in which the early results of that investments are visible in our operating performance. Starting with the financials. Revenue from operations for Q1 FY '27 was INR 294.5 crores, up 31.6% year-on-year, driven by continued execution momentum in the piping segment, supported by supplies to the power and oil and gas sector. Operating EBITDA for the quarter was INR 49.7 crores with a margin of 16.9% compared with 16% in Q1 of FY '26 and it is up by 38.7% year-on-year. Profit after tax for the quarter stood at INR 16.1 crores, up 22.4% year-on-year. Before I move on to the operating drivers, I want to flag one specific point on this quarter's numbers. Around INR 25 crores of dispatches scheduled for Q1 got pushed into Q2, primarily on the oil and gas side, where a few of our export customers deferred takeoffs given the situation in the Middle East. The material is ready at our end. Adjusting for this, our underlying performance in Q1 is on track, and we remain firmly on track on delivery on our revenue guidance for the year. The margin improvement reflects 3 things working together better capacity utilization across our facilities, operating leverage and the initial contribution from backward integration through the seamless pipe plant. As utilization at the seamless plant ramps up through the year, we expect this to support further margin improvement. Turning to the core business, which remains the foundation of the company, piping together with heavy fabrication continue to anchor our execution and account for the large majority of our revenue and order book. We serve marquee customers across the power, oil and gas and process industries, both in India and in our export markets and the full operationalization of the Anjar facility has meaningfully expanded our ability to execute larger and complex projects. With the seamless pipe plant now commissioned, we are also capturing a greater share of value in-house. A notable highlight during the quarter was the receipt of a domestic purchase order of INR 386.82 crores from Bharat Petroleum Corporation Limited for manufacturing and supply of piping. This is one of the largest single order in our recent history and reinforces our position as a preferred supplier to marquee Indian PSU refiners. On the demand environment, the policy and investment backdrop remains firmly supportive. India's CapEx cycle continues to build momentum as corporate set up investment in plant and equipment. This trend is mirrored in our overseas market and meaningful part of our core business, where we are seeing a clear pickup across energy process industries and infrastructure. Taken together, these domestic and global tailwinds create a compelling multi-year opportunity for our core offering. Coming to the biomass pellet plant, which we commissioned during FY -- during Q1 of FY '27, this is a meaningful step in how we are reshaping the noncore segment. This facility is co-located with our Malwa Power plant at Muktsar and has installed capacity of 72,000 metric tons per annum. It converts paddy straw and other agri residues into pellets that are supplied to thermal power plants for co-firing with coal and demand for this is anchored by the Renewable Purchase Obligation framework of the Government of India which gives us reasonable comfort on offtake. For FY '26, we are targeting combined revenue of around INR 80 crores from the noncore segment supported by the revised Malwa tariff of INR 5.44 per kilowatt hour. Factoring in for the full year contribution from the pellet plant as we ramp up utilization and the restructuring initiatives we have been implementing across the segment. Since the pellet plant was commissioned midway through Q1 FY '27, the current quarter reflects only a partial contribution from the pellet operations. From Q2 onwards, we will have the benefit of a near full quarter of pellet production. And alongside that, we are working on ramping up utilization over the coming quarters and securing long-term offtake tie-ups with thermal power producers. We are working on producing these pellets for use in industrial furnaces as a renewable source of energy in place of conventional fuels like LPG, LNG, furnace oil, et cetera. Coming to the capital structure as many of you are aware, the INR 300 crore preferential issue that was approved by shareholders at the AGM in June was allotted on 8th of July with the trading approvals from BSE and NSE received on 28th July. The subscriber include marquee institutional investors along with promoter participation and we are very grateful for the confidence they have placed in the company. On the net proceeds of approximately INR 293 crores. Around INR 225 crores is earmarked for repayment or prepayment of borrowings with balance towards general corporate purposes. This is expected to bring down our debt levels materially, reduce financial costs considerably on a run rate basis and improve return ratios going forward. Equally important, it strengthens our balance sheet and improves our leverage headroom at a time when we are seeing strong tailwinds across our core end markets, which give us the flexibility to pursue the growth opportunities we have been discussing without setting the balance sheet. This shall also help in our vision for establishing a facility to cater to nuclear sector for which we are moving quite fast. Our focus for FY '27 is on the asset turns, cash generation and return ratios. Improving operating cash flows are expected to support a gradual reduction in debt levels through the year with a strong order book of INR 2,428 crores as of 30th June 2026, which gives us strong revenue visibility and a healthy project pipeline across key segments. Overall demand visibility across our core end markets, particularly power, oil and gas and process industries in India and overseas remains healthy and a strong order pipeline gives us confidence in delivering profitable growth and long-term value for all stakeholders. With this, I would like to open the floor for question and answers and look forward to receiving your questions. Thank you so much to all for joining this call. Thank you so much.

[Operator Instructions] . The first question is from the line of Anirudh Agarwal from ValueQuest.

Congrats on the results. A few questions from my side, sir. First one was on the HRSG and GT piping business. So if you could just give an update in terms of how has the progress been with GE on the HRSG orders as well as last call, you had mentioned on Siemens and some discussions with them. So if you could just update on both of those.

Thank you so much, Anirudh-ji. We are absolutely on track. We are continuing to receive GT orders from GE. However, HRSG order from GE is yet to come, although we have an agreement with them that they will award us around 15 to 16 units in this particular unit. We do expect that there may be some delay in that. However, it is not going to affect in any way our top line in this particular year because instead of GE, we are getting a lot more traction from other customers like Nooter Eriksen for which they have again awarded us many fresh orders which are yet to be declared. And with the incoming of those fresh orders, our Thailand facility is now practically 100% booked for the coming 3 years. And as far as -- what was your next question, sorry?

Sir, on Siemens if you could provide an update?

Yes, Siemens, we already have agreed -- we have already signed a sort of understanding or MOI with them that from next year onwards, we should be getting continuous business with them for GT piping. I'm missing exactly, but it is starting with 10 units in the coming year, then 15 units in the next year and maybe around 25 or 30 units in the third year. So that is also on track. One of the teams is coming to our Anjar facility in the third week of August itself to clear this plant also. After that, we are likely to have more business from Siemens in this particular sector.

Got it, sir. Sir, if you could quantify broadly what will be the quantum of the business from Siemens that we should expect for next year? These 10 units of GT piping, probably, what quantum would that be?

Exactly I may not be able to tell you exactly, but each unit for GT piping, you may consider it to be around EUR 1 million to EUR 1.5 million.

Okay. Got it. And secondly, sir, on the Nooter programs that you mentioned, so Thailand, sir, at peak capacity, what sort of revenues can we expect from that facility?

Sir, as we have been telling last year we did around INR 130 crores and the intention is that we have to keep that unit busy and target to achieve anything between INR 170 to INR 200 crores.

Right. Got it. Sir, another question was on the overall cost base for this quarter. So we see that the absolute employee cost and other expenses are actually lower than last few quarters despite revenue growth picking up. So how should one think about that going ahead? So as you scale up execution, should we expect that cost base will not move up too much and there is a lot of operating leverage that should play out in the next few quarters?

Sir, this is what we have been telling in all my calls that we are likely to get a lot of operational leverage because of the mix in the business and the operationalization of the Anjar facility. I have been telling earlier also that there has been a considerable -- sorry, there's has been considerable reduction in the manpower headcount. And we do not expect any major recruitment. And hence, the trend continue as it is and by the end of the year when we achieve more than INR 1,500 crores of top line, we do expect that the percentage will be much, much lower due to higher top line.

Right. And sir, on one of the interviews I think a couple of days back...

Sorry to interrupt. Mr. Agarwal, may we request you return to the question queue for a follow up question because we have a lot of participants waiting for the question?

Sure.

The next question is from the line of Pranay Chatterjee from Burman Capital Management.

My first question is on, sir, domestic power. Is there any movement in terms of -- because I'm sure BHEL had a production plan for boiler turbine generators in FY '27. And basis whatever plan they had, they had to give out the piping orders. Is there any change in -- because last time, I think we discussed that they were moving quite slowly. Is there any change in that? And should we expect those orders to start coming in anytime soon?

Sir, the speed is not as expected but definitely they are moving with their own pace. Last quarter also we got around INR 200 crores worth of order and few more tenders are in the preparation stage. We expect that those tenders should be in the market maybe in this quarter itself and they may get finalized in the next quarter. But they are slightly slower than our expectation. However, apart from just piping jobs we are getting a lot of traction from them for other pressure parts like, their headers, their vessels, businesses there and similar such things are coming from them for which we are equally happy to get those orders because they are also very highly value-added products. And apart from BHEL I will say that we are not just depending on BHEL. L&T has awarded all the orders which they had offloaded till now, and they are discussing some more orders with us and which are likely to get finalized within this quarter. We are also discussing very, very seriously with a few more customers like JSW, we are discussing with this Hindustan Energy, we are discussing these opportunities. So we are discussing some similar opportunities in the overseas market also. So we have absolutely no worry that the order inflow will be less. The customer may change, but there is absolutely no probability that the order inflow will reduce or it will fall down.

Got it. Sir, my second question I'll probably combine 2 small questions together because I won't get another opportunity. First part, INR 2,000 crores order inflow guidance, is that still applicable in light of couple of these delays that are happening? And number two, I noted that the EBIT of the PPA division went to negative again after it was, I think, INR 1 crore positive last quarter, and it is about INR 1 crore negative this quarter, which is like a INR 2 crore negative swing. So is there any specific reason for that? So these 2 questions. INR 2,000 crores inflow guidance and what happened quarter-on-quarter in the EBIT of PPA?

EBITDA?

PPA division, the power, PPA division.

Power division. Okay. Your first question, definitely yes, it may increase also. But your first question is absolutely online. We are likely to get more than INR 2,000 crores worth of inflow in this particular year. And as far as your question on EBIT is concerned, frankly, we had commissioned our pellet plant a bit earlier. So now to -- the fuel which was available with us we could run either the power plant or the pellet plant. So our focus was more on now pellet just to establish the business and just to be sure that we shall be able to do that. But now from next October, coming October, we shall be getting the new fuel and then we shall be able to run fully the power plant as well as the pellet plant. So then this scenario will again change.

The next question is from the line of Ankit Soni from Mirae Asset.

Sir, you mentioned that there's 100% capacity or maybe utilization into your Thailand facility. And we know that our CapEx cycle is broadly ended. So any plans around in Thailand capacity expansion around?

No, sir, we are not planning any CapEx or capacity expansion in Thailand. As I have been telling earlier also that our sort of a showcase unit and we like to -- we will be very happy if we continue to do the present business. But the expectation is that we should be moving very close to INR 170 crores to INR 200 crores in the coming time.

Okay. And just to understand this order from Siemens and et cetera will be going out from the Anjar facility or will be from -- like this will be from Anjar facility, right?

Sir, Siemens, they are talking to us from both these facilities. So, for Palwal they have already signed the memorandum as I told some times back and in right in third week of August they are coming to formally clear our Anjar unit also. And then they are having so much business that they will be considering both -- actually they will be considering our Anjar facility for their modular piping work, I think.

Sure. Just the last question. What would be the capacity utilization at Anjar facility and what are the ramp-up plans around?

Sir, whatever we have planned in this particular year, we shall be doing it. But also we should be reaching around maybe around 60% to 65% of our available capacity. And our plan is that by the end of the next year, we should be utilizing almost 100% of the available capacity at Anjar.

The next question is from the line of Aditya Sahu from HDFC Securities Limited.

I think 2 of my questions were already answered. Just one of which was -- this was with regards to the revenue split because I understand in the presentation, you have mentioned that you are targeting some INR 1,500-odd crores of revenue for FY '27, right? If I have to look at the revenue split that we have, what sort of revenue split are you looking at in the coming quarters, considering that we have seen the ramp-up in the wind tower execution and the structural fabrication. So what sort of revenue split one should look at going forward?

I mean, if I understood your question correctly, what we are planning is that we should be doing anything between INR 1,150 crores to INR 1,250 crores from our piping segment and the rest will come from other subsidiaries, including Thailand. So this is what I thought -- I think this is what your question is. If it's something different, then please you have to tell me again.

Right. So INR 1,250 crores from here you are saying from the piping segment of the INR 1,700 crores and the balance is from the other segment, including the model?

That's right.

Okay. And on the margin guidance, if you can provide some sort of what margins are we looking at?

Sir, as we have told earlier, we remain fully committed for our top line of INR 1,500 crores plus and EBITDA margin of more than 19%, 100% without any doubt in that.

Okay. 19% a bit more --

Yes. Yes.

[Operator Instructions] The next question is from the line of Riken Gopani from Capri Global.

Congratulations on a good set of numbers. Sir, just I have one question. I'm trying to understand more in terms of the inflow outlook for the current year. What we are sort of in a way indicating that this could be for the remainder of the year also, we could see more than INR 2,000 crores of inflows in this year. If you could broadly outline which all sectors will see what kind of inflows basis the kind of bids that you expect to win in the next 9 months?

Sir, we have a very healthy. I will tell the pipeline and it is equally distributed among us oil and gas and this power sector jobs. Plus we are targeting very seriously, as I have been telling earlier also that some data center jobs will also come up. So I won't be able to tell you exactly from which -- what will come, but the pipeline is quite strong, and we do expect that there will be an addition of at least INR 2,000 crores of fresh orders in this particular financial year.

Got it. That is basically aggregate for the year or in the remainder of the year?

I'm saying total inflow. Actually the order inflow will be more. Order inflow will be more. What I'm saying is we have already got around INR 700 crores worth of orders in this year already. And we are saying that minimum will be around INR 1,300 crores, but it can to around INR 1,800 crores. For the remainder. For the remainder.

Got it. And sir, just in terms of any visibility or any further progress on the fertilizer related projects, anything that we see in the near term or next 9 to 12 months?

Sir, we do see it because the Government of India has announced some new projects, particularly in Assam. We are eyeing that project very seriously, as a matter of fact. But as of now, if you tell there is nothing much available. We had been discussing with one of the foreign customers, but that foreign customer has awarded to some local person in that country only. So that opportunity has been missed. But still -- I mean, there are many more opportunities which are likely to come, but that will come maybe after -- maybe in the next year or something like that, nothing in this year.

The next question is from the line of Chandresh from NIVESHAAY

Sir, since you showed a lot of confidence in order inflow booking for the year. But my question is regarding this thermal, as a medium-term opportunity where we are seeing that 80 gigawatt would be awarded until 2031. But there are states like Rajasthan, in June cancelled 3.2 gigawatt order because they are saying that the power generation is at a good level because of renewables adding to it. So what's your overall view on this? Because we are kind of shifting our order book towards more power projects so and they basically thermal power plants. So some sense on that.

Sir, first of all, I will say that we are not saying that we are shifting our entire focus on this fossil fuel boilers. Our focus is equally large on oil and gas and power equally as a matter of fact. And in addition to that, we are also eyeing new sectors like data centers and we have a very clear vision that we have to have nuclear sector in our fold in next 2 years' time that I have been telling in all my meetings and we are quite near to meeting that target to meeting our sort of a partner through whom we shall be working on this nuclear sector. So we are just not dependent upon fossil fuel boilers. But at the same time, I will say that if PSUs are not putting up the plant. So let us say I'm saying that if NTPC is not putting up the plant, we are still not worried. Reason for that is that a lot of private players like JSW are putting up their plant, this Mundra here is putting up the plant then this Bajaj Hindusthan group is putting up their -- own 800-megawatt power plant. And yes, there I still feel there is an endless demand and the capacity which we have, we won't be able to cater to all such needs even now also. So as said earlier, till 2030, we have absolutely no concern on booking the orders in this particular sector.

Okay. That is good to know, sir. And sir, secondly basically, we are being adamant on the fact that you will achieve a revenue of about INR 1,500 crore in this year. But let's say in the June quarter where we have a spillover of INR 25-odd crore rupees revenue and still we have grown Y-o-Y 32% kind of revenue growth. So and we are like confident on the execution also. So is it possible that we'll exceed this guidance?

The plan is that only plan is for that to exceed that guidance and that I'm -- again I'm saying that that the INR 1,500 crores which we are saying is the bare minimum numbers, which must be on there on our top line balance sheet. So that's what it is. And again, right, I think Q1 is the weakest quarter although that has been the best this year but still Q1 is the weakest quarter and it ramps up in Q2, Q3 and the best quarter is always the Q4.

Got it. And sir, one more question on the gross margin profile basically has been very volatile around 63% Y-o-Y when we compare Q1 FY '26 to Q1 FY '27. So what could be the reason here? And how should we look at it? Because as you have mentioned in previous con calls also that from this Thailand facility, we just do the job work part and not material plus the job work. So I mean just a sense how should we look at the gross margin profile going forward with more and more power projects getting executed.

Sir, the gross margin may be falling slightly because the material cost for power sector jobs is higher compared to your oil and gas job. When job work is there then we are considering that there is absolutely no material cost. However the conversion cost remains much lower in case of power sector jobs than the oil and gas sector jobs. So overall EBITDA margins, which we have projected of above 19% is absolutely on track, and we will be able to achieve it without any doubt in to that -- doubt in that, sir.

Okay. And one last question is on the data center. You have been mentioning about the data center...

Sorry to interrupt. Mr. Chandresh, may we request you to return the question queue for a follow-up question.

Okay.

The next question is from the line of [ Akash Rahul ] from Shanghvi Family Office.

Sir, I have a question regarding the new opportunities which we are going to tap which is of course HRSG data center and the nuclear. So I just wanted to understand how the piping requirements changes. What are the customer approval process in this and how are you seeing going forward that it can become a reasonable part of our order book?

Sir, again I will say that for nuclear, you have to have lot many approvals for the same. Some of the approvals are already in place with us. Some of the approvals we are working on that. And majorly I will say that we are looking for a partner who shall help us to do that because we shall need a lot of pre qualification for those jobs for which our partner will bring in that to do the export jobs. However for Indian jobs we are well qualified. But since Indian jobs are right now moving slowly but in coming years they will pick up. So we are expecting huge potential from nuclear sector on our own stance f it is in India. If we have to cater to the export market, we definitely need a sort of a partner for which as I told earlier we are in an advanced stage of discussions and target is to close the discussion and formalize the agreement in Q2 under any circumstances. That's the plan. It may spill over for 1 month, 2 months this way, that way. But that is what the plan is. However the piping remains the same. The material composition vary from sector to sector and the quality requirements and the demand of the customer and the mix of the materials varies from project to project. So in nuclear sector the value addition is much, much more than power sector. In data center it may be less than what we are doing at present. And it varies. Again I will say it varies from sector to sector and it varies with respect to the material of construction.

Got it, sir. And sir, regarding the Thailand facility since the capacity is booked for the next 3 years, any plans on expansion over there since there's a lot of demand regarding that?

No, we are not planning any expansion in our Thailand facility. That's our -- again, I will tell you it's our showcase unit so whatever expansion or whatever you think we have to do that plan is only to do it in India.

Okay, sir. And sir, any guidance on the working capital since the order book is of INR 2,000 crores and above. So how do we view the working capital and the debt of the business going forward?

Sir, that is going to come only after the introduction of this preferential issue of INR 300 crores, we have INR 293 crores available with us out of which INR 224 crores, INR 225 crores has already been paid for reduction of working capital and the remaining INR 64 crores or whatever that is for GCP purpose. So the net debt as on quarter1 FY '27 closing was around INR 718 crores, while it was INR 733 crores on FY '25, '26 closing. So we do expect that with the introduction of the net debt by close of this FY '27 should not be more than INR 400 crores, INR 425. And there is no plan -- absolutely no plan for any new debt in this particular year. And if some requirement comes, that is going to be very, very small. It will be sort of an immaterial thing or we should be doing it from GCP

The next question is from the line of Vineet from Toro Wealth Managers.

Sir. I actually wanted to understand more about the in-house manufacturing of P91 and P92 pipes that we are doing at Anjar facility. Sir, earlier we used to import these pipes, right? So yes, first of all, if you can explain me what percentage of this pipes form of a HRSG solution. And also when used to import what was the percentage of cost versus now when we are making it in-house. So what is the savings that we are doing.