Admach says EBITDA margin should stay above 20% in H2

Admach Systems Limited said its H1 FY27 earnings before interest, tax, depreciation and amortisation (EBITDA) margin reached 23% after it brought previously outsourced component production in-house. Management attributed the change to lower vendor payouts, transportation costs and production time, and said the EBITDA margin should remain above 20% in H2 FY27.

Why did Admach’s EBITDA margin reach 23% in H1 FY27?

Admach said its 23% H1 FY27 EBITDA margin reflected internal production of machine components that had been outsourced to vendor partners in the prior year. Managing Director Ajay Longani said equipment purchases enabled the company to make these components in-house, reducing time, transportation and payments to external vendors.

The margin improvement was linked to manufacturing integration rather than to a disclosed change in pricing or product mix. Admach did not quantify savings from freight, labour, materials or vendor charges separately, but management identified lower transportation costs and lower outsourced-production payouts as the operating mechanisms behind the 23% margin.

H1 FY27 revenue from operations rose 48.34% year on year to Rs 42.2 crore, while EBITDA increased 47.62% to Rs 9.95 crore and profit after tax rose 45.91% to Rs 6.53 crore. Revenue and EBITDA therefore grew at similar reported rates, while management specifically attributed the margin level to the shift from outsourced to in-house component manufacturing.

Will Admach keep EBITDA margin above 20% in H2 FY27?

Admach management said it expects to maintain a 20%-plus EBITDA margin in H2 FY27. Longani said the margin could be slightly better than the H1 FY27 result but would not be lower, and described the improved profitability level as sustainable.

An analyst noted that margins had appeared uneven over the prior two to three years, with first-half margins higher before declining in the second half. Longani said EBITDA margins had improved compared with the preceding half and agreed that the H1 FY27 level would be replicated in H2 if it did not improve. The call did not disclose the exact H2 FY26 margin, preventing a numerical comparison.

When asked whether computer numerical control (CNC) machines had affected the 23% H1 FY27 margin, Longani did not give a machine-specific contribution. He instead reiterated that the improved margin was sustainable and confirmed the 20%-plus H2 FY27 expectation, rather than setting a precise percentage target above 20%.

What capital expenditure supports Admach’s in-house manufacturing?

Admach estimated FY27 capital expenditure at about Rs 15 crore to Rs 16 crore for improvements to existing infrastructure, including a new shed, power facilities, testing facilities, plant and machinery. Longani said the programme was intended to support the production equipment required for future profitability.

Account Manager Hanshil Patel said about 60% of the capital expenditure relates to plant and machinery and about 40% to factory buildings. He said the building work includes a shed under construction and improvements to the existing facility, while the machinery portion supports the company’s plan to manufacture more components internally.

Longani said the infrastructure requirement goes beyond installing machines. Added equipment requires power, tooling, raw materials and suitable operating infrastructure, he said, which is why Admach is expanding supporting facilities alongside machinery. This links the FY27 investment plan directly to the in-house manufacturing process cited as the reason for the 23% H1 margin.

How does Admach’s order book affect the H2 FY27 outlook?

Admach had an order book of Rs 77.42 crore at the latest reporting period and expects to execute about Rs 65 crore to Rs 70 crore before FY27 ends. Longani said many projects were nearly ready, under testing and expected to be dispatched soon, supporting his view that the current quarter would be favourable for revenue.

In a separate response, management said about 80% of the order book would be executed by the end of March. The call did not explain the difference between that percentage and the Rs 65 crore to Rs 70 crore execution range, and it did not disclose project-level profitability. Order execution can support H2 revenue, but management gave no margin breakdown by project or segment.

Admach committed to crossing Rs 100 crore of FY27 revenue, while saying a higher outcome was possible if execution moved smoothly. At that turnover level, management said steel would account for about 50% of revenue and non-destructive testing (NDT) and nuclear activities for the remaining 50%. This was management’s outlook rather than a reported H1 FY27 revenue mix.

What could support Admach’s manufacturing utilisation after FY27?

Admach said it is developing two products currently imported from Europe, with launches expected about three to three-and-a-half months after the call. Longani identified one product as serving steel and the other nuclear applications, but did not disclose their names because of contractual and commercial restrictions.

The company also said it was working in three additional areas at the Nuclear Fuel Complex, involving equipment different from that supplied under its Rs 10.62 crore order. Longani said these projects would need to move from technical to commercial stages. Nuclear and defence represented about 4% to 5% of the current order book, though management expects that share to rise in the near future.

Management said European partners had become more inclined to assign work to India and that Admach was already working on two or three projects normally executed by those partners. Longani linked this to challenges in Europe and competition from Chinese suppliers. These are pipeline opportunities rather than reported orders, and Admach did not disclose associated revenue or margin contributions.

Conclusion

Admach’s H1 FY27 EBITDA margin of 23% was attributed by management to bringing component manufacturing in-house, lowering vendor payouts, transportation requirements and production time. The operating change coincided with revenue of Rs 42.2 crore, EBITDA of Rs 9.95 crore and profit after tax of Rs 6.53 crore, each up about 46% to 48% year on year.

The next measure will be H2 FY27 execution of the Rs 77.42 crore order book while maintaining management’s 20%-plus EBITDA margin expectation. Investors will also watch the Rs 15 crore to Rs 16 crore FY27 capital expenditure programme, the planned launch of two import-substitution products in about three to three-and-a-half months, and management’s plan to rebuild the order book by the end of March.