Desco Infratech Ltd Q1 FY27 Earnings Analysis

- Desco Infratech Limited expects significant revenue growth, targeting INR 1,000 crores by FY2030, possibly achieving this a year earlier. - The company aims for a conservative annual growth rate of 70% to 80% over the next 2 to 3 years. - CGD (City Gas Distribution) business will contribute 60% to 65% of revenue, with the balance from power distribution and solar EPC sectors. - Compressed Biogas (CBG) revenues are expected to reach around INR 170 crores by FY2030. - The company is expanding CBG capacity from 2 tons per day (commissioned in Q1 FY26) to 15-20 tons per day within 18 months. - FY27 guidance includes 70% to 80% year-on-year growth in top line. - The company focuses on margin optimization and sustainable growth through selective project acquisition.

- The company projects a revenue growth of 70% to 80% year-on-year for the next 2 to 3 years. - PAT margin is expected to remain sustainable around 22% to 23%. - Earnings per share (EPS) increased by 33% in the latest period. - Operating EBIT grew by 76.3% year-on-year. - Profit after tax increased by 80.87% year-on-year. - Breakeven for the new compressed biogas (CBG) plants expected within 18 to 20 months. - The company aims to achieve INR 1,000 crores revenue by FY2030, possibly a year earlier. - Improved margin profile anticipated as projects mature and cost controls are tightened. - Operating cash flow expected to turn positive within the next 1 to 2 years due to better working capital management and project execution. - Debt-to-equity ratio to remain stable, supporting profitable growth without excessive leverage.

- Commissioning of a 2 tons per day (TPD) compressed biogas (CBG) plant in Q1, with a capex of approximately INR 3.5-4 crores. - Planned expansion of CBG capacity to 15-20 TPD within the next 18 months. - Capex around INR 12-15 crores expected for South Gujarat project and INR 9 crores for Madhya Pradesh Dhar project, totaling about INR 25 crores for combined expansions. - Intent to increase promoters' stake in Shri Green Agro Energies Private Limited (SGAEPL); eventual merger with Desco Biogreen Private Limited planned after commissioning 5 TPD capacity. - No current equity raising planned; funding for capex and expansions to be raised through bank loans (debt), with expected interest rates of 8.5%-9.5%. - Signed MOU for green hydrogen project, currently in early stages due to high production costs; expected to become profitable with solar park integration over next 5 years.

- The company plans to raise funds primarily through bank loans (debt financing) for upcoming capex projects, such as enhancing Gujarat capacity and establishing Madhya Pradesh capacity for CBG plants. - No comments or plans on equity raising at present. - Current debt cost is high (16%-17%), but after structuring, the expected cost of debt is around 8.5% to 9.5%. - Management aims to repay high-cost NBFC loans using internal accruals. - Debt-to-equity ratio currently at 0.2, may increase to a maximum of 0.3 in the next 1.5 years due to structured debt for growth. - Approach to financing remains balanced and prudent; financing instruments are used for efficiency, not for aggressive leveraging.

- As of the latest data, the company has an order book of INR 345 crores. - Out of this, around INR 330-332 crores are from the City Gas Distribution (CGD) sector. - The CGD orders include approximately INR 35-40 crores for operation and maintenance with timelines of about 24 months. - The rest of the CGD orders are EPC projects with execution timelines of 18 to 24 months. - Power distribution sector orders make up the remaining portion of the order book with an average timeline of 1 year. - There is a pipeline of tenders worth about INR 650 crores, with roughly INR 470-480 crores in CGD and INR 100 crores from solar EPC solutions and power distribution. - Some tenders are delayed due to Middle East crisis issues but are expected to open soon, likely boosting the order book.