The digital engineering heavyweight took a brutal hit on Friday, October 16, with shares sliding as much as 17% in the open. This was a direct reaction to the Q2 financials released after market close on Thursday. While the top line looked healthy—revenue grew 27% year-on-year driven by aerospace and industrial segments—the bottom line told a different story.
Margins were the culprit. EBITDA margin slipped 130 basis points to 8.7%, while gross margin collapsed by 400 basis points to 37.4%. The net profit figure was further distorted by a one-time gain of ₹18.2 crore from an earnings payout reversal. This compression reflects heavy ongoing investments in R&D and sales, which management claims are now largely complete.
The order book remains a bright spot, hitting a record ₹2,814 crore, up 23% year-on-year. These orders are expected to be executed over the next 18 to 24 months. However, Net Working Capital days have stretched to 154 from 138, signaling tighter cash flow dynamics.
On the earnings call, management reaffirmed FY27 guidance of 30-35% revenue growth and an EBITDA margin of 8-9%. They are eyeing double-digit margins from FY28 and a long-term target of 13-18% by FY30.
Street reaction has been mixed to negative. Antique Stock Broking downgraded the stock to 'Hold' from 'Buy,' keeping the target at ₹1,025. Kotak Mahindra has a 'Sell' recommendation with a target of ₹790. Across 13 analysts, eight maintain a 'Buy,' one is 'Hold,' and four are 'Sell.' The stock, down 19% from its 52-week high, is still up 105% year-to-date as of Friday's close at ₹860.95.