This reflects the growing confidence in Company’s growing expansion and financial performance. 26% Net profit annual growth, sales rising by 40%, expansion plan for new facility of generators and motors, moving manufacturing to Turkey to counter US tariffs.
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The management attributed the gross-margin hit to a one-off incident on a Turkey contract, but the disclosure is sketchy. I am surprised analysts did not probe this further. The company did not quantify the liquidated damages in rupee terms, and it did not spell out the precise root cause either, beyond saying that a shipment from India to Turkey got stuck for about 1.5 months. It did not clarify whether the delay arose from external disruption, logistics failure, or some other issue, nor did it mention whether any contractual remedies such as force majeure relief or a back-to-back claim against the logistics provider were pursued. It is also puzzling how, when Turkey is a very small part of TDPS’ business, a Turkey-linked transaction was large enough to cause a meaningful hit to gross margins.
Finally, as a prudent accounting policy, is it not possible for the company to make provisions in advance whenever clauses of liquidated damages are in-built into customer contracts? I came across this in the latest Inox India Annual Report
This is more conservative, but TDPS seems to make no such provisions.
(Disc.: Invested)
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Hi, I am new to this company. Although I understand the company’s business and the products it manufactures and its future prospects, it would be helpful if someone can put out some great videos which explain the whole process of generating power and at which stage the company’s products come in i.e. how do steam and gas generators and turbines work? All those visual representations would be helpful.
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Any view on why TD power fell sharply by 10% today along with other power stocks?
To me appears a case of mistaken identity as TD power focus on exports specially for DCs . views invited
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A few comments & observations from the TD Power Annual Report for FY26:
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FY26 ended on a strong note with sales growth of 45 % and PAT growth of 37%.
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The growth was primarily driven by gas turbine and gas engine business with demand from AI and data centre applications in the United States, along with distributed power and industrial applications across international markets.
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Operating margin remained steady at 17.5 %, and operating profit jumped 44 % for the year. But despite the rapid volume growth, margins have not improved in the last two years. No operating leverage, as yet.
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Company is almost debt free. CRISIL upgraded the company’s credit rating recently.
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Working capital management improved and stood at about 3 months of sales for the year. This led to an improved CFO - which stood at Rs.129 crore for the year compared to just Rs.40 crore last year.
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Yet, cash conversion remains poor. (CFO / PAT for the last 3 years is 0.71, 0.23, 0.54).
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Receivables are growing faster than revenue. This year sales grew 45 % and receivables 70 %. Last year sales grew 28 % and receivables 42 %.
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Capex doubled and stood at a tad above Rs.100 crore for the year. The Tumkur facility has commenced operations during the year. Free cash flow was positive despite higher capex.
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Against a dividend of Rs.1.25 per share last year, company is paying Rs.2.10 per share for FY26. A 2:1 stock split has also been announced.
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Asset turnover has improved to nearly 4 X of previous year’s gross block.
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Fresh order inflow during the year was significantly higher at Rs.2238 crore, almost entirely contributed by export orders which rose to 80 % of total orders. Domestic order inflow was flat. Recent growth has been almost entirely due to data centers & renewables.
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The “Advance received from Customers” line item shows a 50 % jump from Rs.127 crore last year to Rs.187 crore. This is a good sign.
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Customer concentration remains a significant risk, with the top customer contributing 23 % of the total revenues for FY26. And 43 % of the receivables as well. Top customer exposure is not only high, but it has also risen during the year. Top 10 customers contribute 84 % of the total revenues, so clearly this is a very concentrated customer pool that the company is catering to.
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Company is routing part of its sales through its overseas subsidiaries, but the entire manufacturing is happening in India only. Turkey is dormant currently, facing hyperinflation and unfavorable policies for foreign manufacturers. Overseas offices are largely operating as service centers.
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The three plants in India can reportedly support revenues of Rs.2500-2600 crore, which means the company will be operating at nearly full capacity by end FY27.
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Realization per unit sold has increased from about Rs.18 lacs to Rs.23 lacs, indicating improving product mix.
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The Annual Report contains no mention of liquidated damages that the company blamed lower margins in Q4 on. This is surprising, since the hit must have been quite significant at about Rs.40 crore (For context, the average quarterly PAT of the previous 4 quarters was Rs.55 crore). I have commented on this matter in my previous post.
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The Annual Report says revenues in FY27 are expected to exceed Rs.2400 crores. This is at least 30 % growth for the year.
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The company’s execution cycle for orders is 3-6 months, which means business will inherently be volatile in nature. A decline in orders will quickly reflect in a decline in revenues.
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The R&D centre in the UK is working on larger generators ranging from 40 MW to 200 MW, says the report. This will help the company get bigger orders.
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The order intake in the US is strong, and the company says it is expected to grow this year as well. Europe will grow 15-20 % this year
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During the year, the company successfully developed a range of 2-pole to 10-pole, 60 Hz High Tension (HT) motors conforming to the API 541 standard. This is a notable achievement. It opens up a higher-margin, harder-to-enter customer segment (global oil & gas majors) for the company.
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The report also says the company supplied an induction motor to NPCIL - the largest induction motor deployed by NPCIL. Supplying to nuclear power sector is also a great certificate of quality, since the quality bar in the industry is high.
(Disc.: Holding, but have reduced my exposure since my last post)
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