Centum Electronics Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Muted quarter, full-year confidence intact: Q1 FY27 was soft on growth and margins due to BTS project phasing, but management reiterated confidence in delivering full-year objectives and asked investors to judge performance on a full-year basis.
• EMS is the steady engine: EMS revenue grew 20% YoY with order book up 23% YoY, led by the semiconductor equipment ramp that crossed ₹100 crores in FY26 from near zero in FY25.
• BTS order inflow exploded: Total order inflow grew ~70% YoY to ~₹360 crores, with BTS alone up 150% YoY at ₹120 crores, setting up revenue acceleration in coming quarters.
• Overseas restructuring closed: The French court approved the transfer of Centum T&S operating businesses to MBDA and SII, generating a one-time ₹94 crore deconsolidation profit and ending subsidiary liabilities.
• What to watch next quarter: Whether BTS execution accelerates as promised, the pace of semiconductor equipment revenue doubling, and any first design-led manufacturing program wins.

BTS: Lumpy Quarter, Strong Order Book

• Quarterly variation, not demand weakness: Q1 was muted because build-to-spec revenue is inherently lumpy, with project execution schedules and revenue phasing driving the softness rather than any deterioration in underlying demand.
• Order inflow tells the real story: BTS order inflow of ₹120 crores grew 150% YoY, and management expects continued strong order intake through the year across space, radar, electronic warfare and air navigation programs.
• Revenue acceleration expected: With increased order intake, management expects clear strong BTS revenue growth this year and coming years, while acknowledging quarterly variations will persist due to the lumpy nature of the business.
• Margin mix impact: Margins in Q1 were impacted by relatively lower BTS contribution; the revenue mix is expected to improve as execution on key BTS programs accelerates over coming quarters.
• Program pipeline is deep: UHM completed first-phase critical design reviews with first prototypes underway; Virupaksha is in design phase with development orders expected in Q4 or Q1; TACAN technology partnership is progressing with first deliveries expected beginning of next year.
• SBS and EW momentum: The space-based surveillance program has started booking good orders with very strong order intake expected this year; a major electronic warfare payload program is executing with repeat requirements expected after delivery.

Mallavarapu: "As we mentioned consistently, we encourage investors to look at our performance and outlook on a full year basis."

Semiconductor Equipment: The Steep Ramp

• From zero to ₹100 crores in one year: Revenue from semiconductor equipment was practically zero in FY25 and exceeded ₹100 crores in FY26, with a global OEM added as a customer and continued ramp-up in new part numbers and products.
• Doubling again: Management expects semiconductor revenue to more than double in the coming year, with further ramp-up the next year, reaching USD 2.5–3 crore in 1–2 years from the current ₹100+ crore base.
• Recurring by nature: Products are in serial production after completing full qualification in FY26, with long product life cycles and a fairly good level of recurring revenue confirmed after the initial 1–2 year ramp.
• Demand visibility is strong: Fairly strong visibility exists for the next 2–3 years in terms of industry demand, though some variability may come from longer capex cycles in the broader semiconductor manufacturing industry.
• India-first competitive position: Centum is the first major supplier in India for PCBA and box build for these customers, with main competition in Southeast Asia, primarily Malaysia, and no direct Indian competitor in EMS.
• New customer discussions underway: Preliminary discussions with other customers looking at India as a supply base are at an early stage, with updates expected as they progress.

Mallavarapu: "We are their first major supplier in India. Our main competition is in Southeast Asia, basically in Malaysia. So there's nobody, I would say, in India that we would directly be competing as far as EMS business is concerned."

EMS: Steady Growth, Cost-Plus Economics

• 20% YoY revenue growth: EMS continued to perform well with revenue growing 20% YoY and order book expanding 23% YoY, with the semiconductor equipment customer ramping up in line with expectations for the current year.
• Margin benchmark is stable: EMS margins are expected in the range of about 10% EBITDA, with 10–11% as the benchmark, reflecting the cost-plus model with not huge variation.
• Electrification and grid automation: NPI processes have been initiated for a number of electrification and grid automation products as part of the localization strategy with global customers, expected to contribute meaningfully to revenue growth over the next 2 years.
• Design-led manufacturing push: Engineering services and EMS teams are being tightly integrated to deliver design-led manufacturing solutions, with the engineering services team originally created for the overseas subsidiary now refocused on EMS customers.
• First DLM wins expected soon: Management is optimistic about securing first design-led manufacturing program wins in coming quarters, with higher margin contribution expected from those businesses as they progress.
• Not chasing high-volume consumer: Management is explicit that very high-volume business like consumer electronics is not Centum's competitive space, keeping focus on complex, lower-volume, higher-mix work.

Mallavarapu: "Typically, this being a cost-plus model. 10%, 11% is a fairly benchmark EBITDA margin."

Overseas Restructuring: Chapter Closed

• French court approval received: The French court approved acquisition of substantially all operating business and employees of Centum T&S Group SA and certain subsidiaries to MBDA and SII, with entities ceasing operating activities and deconsolidated effective 4 June 2026.
• Liquidation process underway: The French court converted the process into liquidation judiciaire and appointed a judicial liquidator on 2 July 2026 to oversee remaining wind-down activities.
• One-time profit booked: Financial statements reflect a one-time profit on deconsolidation of ₹94 crores, with remaining entities now under liquidation proceedings.
• No further liabilities expected: With operating businesses transferred and restructuring substantially completed, management does not expect any further liabilities in relation to these subsidiaries.

Mallavarapu: "Importantly, with the operating businesses now transferred and restructuring process substantially completed, we do not expect any further liabilities in relation to these subsidiaries. This allows us to put this chapter behind us and move forward with a much sharper focus on our core India ESDM platform with greater management attention and capital directed towards our stand-alone business."

Space, Defense & Export BTS

• Space pedigree is deep: Centum has been in space for over 25 years, moving from niche components to modules to subsystems to complete payloads, with the objective to go further into satellite integration.
• SBS program scaling: The space-based surveillance program is moving well, has started booking good orders, and is expected to see very strong order intake this year.
• EW payload program: A major electronic warfare payload program is executing, not specifically part of SBS but closely aligned, with repeat requirements expected after delivery.
• Export BTS is relationship-based: Export BTS is attractive because it is not tender-based or L1-type business, but relationship-based with reasonable agreements, targeting around 20-plus percent margin profile.
• Global EW opportunity: Management alluded at the AGM to working with a global customer in BTS around electronic warfare for export, with various levels of discussion with different customers, though early to quantify.
• System-level export upside: Once systems like UHM are built, major demand is expected from overseas customers, with system-level export opportunities potentially carrying higher margin profiles even beyond BTS.
• Competitive positioning is credible: In space, Centum is quite ahead in capability and history; in radar and EW, some competitors may be slightly ahead but Centum is on par from a capability standpoint.

Mallavarapu: "The main difference, which is the reason why we like export BTS business in some of these cases is that they are not all tender-based. It's not an L1 type of business where it's 0 or 1."

Guidance & Commitments

Key Metrics