TDPOWERSYS - TD Power Systems Ltd Share Price

Management Outlook and Key Points:

1. Strong Financial Performance & Growth Trajectory:

• FY25 Guidance: Revenue target of INR 12.75 billion, with FY26 initial guidance of INR 15 billion (potential upside based on order trends).
• Export-Driven Growth: 66% of order book (excluding railways) from exports, driven by gas turbines, gas engines, and motors. International markets (U.S., Europe, Turkey) remain robust, with AI/data centers, grid stabilization, and Ukraine reconstruction fueling demand.

2. Domestic Market Recovery:

• Gradual improvement in domestic orders (steel, cement, hydro sectors), with sequential growth in inflows (Q1: INR 0.81B, Q2: INR 0.96B, Q3: INR 1.36B).
• Long-term optimism due to India's power deficit and captive power needs.

3. Capacity Expansion & Efficiency:

• New plant commissioning (phased Q1-Q2 FY26) to increase capacity to INR 18B, targeting higher production from H2 FY26.
• Focus on lean manufacturing/automation to optimize existing assets, aiming for 20-25% output boost post-expansion.

4. Margin Stability & Risks:

• EBITDA margins guided at 17-18% for FY25/FY26. Currency risks (euro volatility) partially hedged.
• U.S. tariff uncertainties mitigated by customer loyalty, long qualification cycles, and alternative manufacturing (e.g., Turkey).

5. Growth Segments:

• Motors: Nuclear (INR 0.5B order breakthrough), traction (Europe/U.S. orders), and industrial motors seen as high-potential verticals (3"“4x growth potential).
• Gas Turbines/Engines: Structural demand from AI/data centers (U.S.) and renewables-driven grid stabilization (Europe).

6. Strategic Focus:

• Diversification across geographies/products to reduce cyclical risks.
• Emphasis on high-margin, engineered solutions (e.g., API-compliant motors) for sustainable growth.

Key Risks: Raw material inflation, execution delays in capacity ramp-up, and geopolitical/tariff uncertainties.

Question 1:
What would be the impact of high storage battery systems on your generators? Because right now, some of your generators are used as backup supply. But if batteries do this job, then what would the impact be?
Answer:
Battery storage poses minimal short-term threat to generators, as they are costly and unsuitable for prolonged backup or large-scale power needs. Critical applications still rely on gas generators for reliability, and demand remains robust despite niche battery adoption.

Question 2:
The guidance for FY '25 is INR 12.75 billion. Given Q4's typical strength, can this be exceeded? How will new plant capacity affect FY '26's INR 15 billion guidance?
Answer:
FY '25 guidance remains unchanged due to production limits. FY '26's INR 15 billion target factors phased plant commissioning (Q1-Q2), with higher upside possible from strong order inflows. Efficiency improvements and automation will optimize output beyond raw capacity expansion.

Question 3:
Are you exposed to U.S. tariffs? How might they affect your business?
Answer:
8% of turnover is U.S.-focused. Tariff risks exist, but requalification costs for competitors and customer loyalty mitigate disruption. Short-term tariff costs may pass to customers; long-term solutions like Turkey production could offset duties.

Question 4:
Why is domestic order inflow slower despite India's power deficits?
Answer:
Domestic growth (steel/cement sectors) lags exports due to delayed industrial investments. Sequential quarterly domestic order increases (INR 0.81B to INR 1.36B) signal recovery, but exports (88% YoY growth) remain the primary driver.

Question 5:
Gross margins dipped to 33% in Q3. Is this due to forex or product mix?
Answer:
Margin fluctuations stem from product mix variations (e.g., aftermarket sales) and euro depreciation. Long-term guidance holds at 17-18% EBITDA; operational leverage from volume growth will stabilize margins.

Question 6:
Can the current INR 4B quarterly order inflow sustain as a baseline? Will a fourth plant be needed by FY '27?
Answer:
INR 4B quarterly orders reflect the "new normal," with spikes from large contracts. No fourth plant is planned before FY '28; focus is on optimizing existing capacity through lean manufacturing and automation.

Question 7:
How significant is the traction motors segment? Can it replicate generator success globally?
Answer:
Traction motors (current order book: ~INR 1.2B) target Europe, CIS, and the U.S. Stabilizing production quality could triple revenue to INR 3B in 3"“4 years, leveraging marquee references for broader market penetration.

Question 8:
What drives European gas turbine demand amid stagnant economies?
Answer:
European demand stems from grid stabilization (renewable energy volatility), data centers, and CHP plants. Structural needs for rapid-response power ensure sustained growth despite macroeconomic headwinds.

Question 9:
What is the nuclear power strategy post-budget announcements?
Answer:
Focus remains on replacing outdated equipment in existing plants. Long-term nuclear growth depends on new projects, with TDPS aiming for "inside dome" qualifications to secure future contracts.

Question 10:
How will AI/data center demand affect gas turbine sales?
Answer:
AI-driven power demand (100+ GW forecast in the U.S. by 2030) favors gas turbines due to wind project delays. TDPS is qualifying 50MW turbines to capture larger orders, with existing OEM partnerships ensuring growth.