S P Apparels Ltd Q2 FY26 Earnings Analysis

- Sri Lanka operations target scaling from 650 to 2,000 machines by March 2026, potentially achieving revenue of INR 150-200 crores by FY26, with no immediate further capex planned until utilization stabilizes. - Total group capacity, including Young Brand, expected to reach around 7,800 machines by FY26 end and approximately 9,800-10,000 machines by FY27, supporting topline growth toward INR 2,000 crores. - SPUK business aims for GBP 10-12 million revenue in FY26, with shipments and customer acquisitions starting Q3 onwards. - Domestic standalone business added 700 machines via capex of INR 75-80 crores, enhancing production and driving 35% YoY growth in garment division in Q1 FY26. - Expansion focus includes onboarding new European and UK customers and moving some US business to Sri Lanka to mitigate tariff impact. - Retail segment (Angel & Rocket) expected to break even within FY26.

- Q1 FY26 standalone business showed strong growth: 34.5% revenue increase and 15.2% EBITDA margin. - Plans to increase capacity significantly: targeting close to 10,000 machines by FY27 (7,800 by FY26 end). - Sri Lanka operations to scale from 650 machines currently to 2,000 by March 2026, supporting export growth. - Expansion projects ongoing (e.g., new factory at Sivakasi starting Q3 FY26) expected to contribute to higher revenues. - Management confident of top-line growth driving better fixed cost absorption, supporting margin improvement. - Retail brands (Angel & Rocket) targeting breakeven in FY26. - Challenges from US tariffs causing strategic shifts, but mitigation by diversifying customers, especially in Europe and UK. - Capex for FY26 and FY27 expected to be moderate (INR 20-30 crores annually) focusing more on utilization. - Overall, cautious optimism with expected growth in earnings, profitability, and EPS supported by capacity additions and new customers.

- Capex of approximately INR 75-80 crores incurred for adding around 700 machines across Palladam (new factory), SIPCOT, and Thuraiyur, mainly in India. - Expansion projects in India expected to be completed by FY26 end, including acquisitions in Sri Lanka. - FY26 and FY27 maintenance capex estimated at INR 20-30 crores per year. - Sri Lanka operations targeting scale-up from current 650 machines to 2,000 by March 2026 with no immediate further capex planned until utilization stabilizes. - Total machine capacity across India, Sri Lanka, and Young Brand expected to reach around 9,700-10,000 by FY27. - No backward integration capex planned currently; existing capacity fully utilized. - Strategic plan includes mitigating US tariff challenges via shifting SPAL's US business to Sri Lanka and acquiring new customers, especially in Europe and UK. - New factories and expansions underway, including a printing and knitting capacity increase.

- There are ongoing internal conversations about raising equity, with some investor interest shown in the retail segment. - The company aims to avoid operational losses and allow the retail business to become self-sustained, possibly making a fundraising decision by end of Q4 FY26. - No specific commitments or timelines for debt or equity fundraising have been mentioned so far. - The company currently manages a consolidated gross debt of INR 382.4 crores and net debt of INR 327 crores as of Q1 FY26. - No immediate plans for new debt fundraising were highlighted in the discussion.

- As of Q1 FY26, the Garment division's order book stands at INR 404 crores. - SPUK business had an order book value of GBP 3.97 million as of the same period. - SPUK expects shipments to start from Q3 FY26, with a planned revenue target of GBP 10-12 million for the financial year. - The company is onboarding new customers in Sri Lanka post-acquisition of factories, expecting small quantities in Q2 FY26 and full production from Q3 FY26. - Young Brand is expanding its customer base to mitigate geographic risk and ensure steady order flow. - The focus is on building capacity and getting customer approvals for new factories, which requires history of production (6 months typically) before major orders flow in.