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Onward Technologies Ltd

| Q4 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤11th May 26

Summary : Onward Technologies reported record FY26 results, emphasizing digital/AI growth and strong client relationships, while addressing investor concerns on stock performance and AI impact.

Management Perspective positive : FY26 has been the strongest year in our history.We are increasingly confident about the next phase of our growth.We believe we have everything in front of us today to deliver double-digit EBITDA and revenue growth.We have amazing visibility. We have very strong visibility for delivering much better performance than this year.

Concall Report Analysis & Insights

Business Overview

  1. Delivered record revenue of INR 550 crores in FY26, a 10.5% Y-o-Y growth.
  2. Achieved record EBITDA of INR 71.9 crores, growing 60.9% Y-o-Y, with 13.2% gross margin.
  3. PAT grew 72.3% Y-o-Y, reflecting strong execution and quality earnings.
  4. Operating cash flows and net cash increased to INR 127.3 crores, highest in history.
  5. Focused on U.S. and Europe markets, with 70% revenue from North America and 30% from Europe.

Future Growth Prospects

  1. Confident in delivering double-digit revenue and EBITDA growth.
  2. Investing in digital and AI-led capabilities, planning an AI lab in Chennai.
  3. Expects substantial revenue from digital and AI projects with margin expansion.
  4. Strong visibility for better performance next year, both top and bottom line.
  5. Aiming for 20-30% annual revenue growth, with potential for higher margins.

Management Insights

  1. FY26 was the strongest year in company history, driven by consistent delivery and cost control.
  2. Balance sheet strength allows investment for higher revenue growth and improved EBITDA margins.
  3. New strategy focusing on U.S. and Europe markets delivered 15.3% revenue CAGR and 35.4% EBITDA CAGR over four years.
  4. Top 25 customers drive 88% of revenues, showing strong concentration and relevance.
  5. Board recommended an increased dividend of INR 8 per share, the highest ever.

Signs of Skepticism

  1. Analyst questioned why stock price continuously decreases despite good results.
  2. Analyst inquired about the potential negative impact of AI tools like Anthropic Claude.
  3. Analyst noted management's lack of specific growth guidance in this call compared to others.
  4. Concerns raised about the auto segment's de-growth and turnaround timeline.

Risk Factors

  1. External environment remains dynamic, despite positive demand for digital/engineering services.
  2. Transportation and auto segment experienced 1% revenue de-growth in FY26.
  3. Potential impact of AI tools on engineering services business is a recurring concern.
  4. Shareholders express concern over continuously decreasing stock price despite good results.

Good To Know

  1. Headcount as of March 31, 2026, was 2,485 employees across India, Europe, and North America.
  2. Attrition rate reduced to below 15% for the last financial year.
  3. Revenue per employee grew consistently, now close to INR 22 lakhs.
  4. Company has transitioned from 250 to 75 customers, aiming for 50.
  5. Currently, 50% of revenue comes from mechanical engineering, 50% from software.

Key Drivers

  1. Record FY26 financial performance.
  2. Strong double-digit revenue growth.
  3. Expanding digital and AI capabilities.
  4. Increased dividend payout to shareholders.

Key Analyst Discussions

Competitive Environment

  1. Analyst asked for comparable listed peers, given Onward is not a typical IT company.
  2. Questioned how customer wallet share will increase with fewer, more focused clients.
  3. Inquired about the company's strategy to gain more orders and RFQs.

Market Trends & Consumer Behavior

  1. Analyst asked if AI tools like Anthropic Claude would affect Onward's engineering services business.
  2. Inquired about the impact of AI on reducing billable hours for clients.
  3. Questioned if Onward provides services for software-defined vehicles and predictive maintenance.

Financial Highlights

  1. Analyst questioned the sustainability of 13.2% EBITDA margins for FY27.
  2. Inquired about the percentage of FY27 revenue already committed or in advanced stages.
  3. Asked for commentary on Q4 margins, which saw a decline.
  4. Requested constant currency growth numbers due to rupee depreciation.

Product Composition

  1. Analyst asked for clarity on the revenue split between mechanical and software engineering services.

Strategic Considerations

  1. Analyst suggested a large share buyback given significant net cash and low market cap.
  2. Questioned if the company should be more aggressive in building AI-led engineering capabilities.
  3. Inquired about investments in manpower and capex for the next one to two years.
  4. Asked about the strategy for the de-growing transportation and auto segment.