Sigma Advanced System Ltd (SIGMAADV) Q2 FY27 Earnings Call: Order Book Crosses Rs. 10,000 Cr, Targets Rs. 2,000 Cr FY27 Revenue

Solid Sequential Growth; PAT Up Sharply QoQ

• Q2 FY 2026-2027 revenue of Rs.417 crore — up 11.43% QoQ from Rs.374 crore in Q1 FY 2026-2027 (management also cited ~12-13% sequential growth).
• Operating EBITDA of Rs.82.28 crore at 19.7% margin — versus Rs.61 crore in Q1 FY 2026-2027, a clear sequential margin lift.
• PAT (ex-associate share) of Rs.48.6 crore — up from Rs.35.41 crore in Q1 FY 2026-2027.
• H1 FY 2026-2027 revenue of Rs.800+ crore — management expects a ~Rs.1,200 crore ramp over H2 (Q3-Q4) toward the Rs.2,000 crore full-year FY 2026-2027 target, noting the industry-wide Q3-Q4 skew typical of Indian defense companies.
• Targeted UK capex and working capital investments — aimed at automation and process efficiency; management expects further efficiencies (period unspecified).

Rs.10,000+ Cr Book, Rs.3,915 Cr of New Wins, NATO Door Open

• Order book of Rs.10,000+ crore as of the call date — 90% international, which management cited as giving strong long-term visibility.
• Rs.3,915 crore of new orders announced from July 1, 2026 to the call date (FY 2026-2027 to date) — largely executable over 12-18 months, with contributions starting Q3-Q4 FY 2026-2027.
• Defense exports order book of Rs.2,700 crore as of Q2 FY 2026-2027 — described by the Group CEO as one of the largest defense export order books in the country.
• Supplier-of-choice status and NATO entry — on-time Q1/Q2 FY 2026-2027 execution won repeat orders tied to delivery milestones and opened the NATO order book, with discussions ongoing with additional new NATO customers.
• Management expects order books to keep rising over the medium term — citing ongoing global conflicts, restockpiling requirements, and NATO defense budgets going up as announced.
• M107 export order ~85% revenue-recognized — for the order announced June 8, 2026 (analyst-cited at 40,000 shells, 6-month execution completing December), the remaining 15% completed in October and will reflect in Q3 FY 2026-2027 results.
• Component-level orders, not full-solution contracts — announced orders cover fuses or shell bodies individually; Sigma offers the full ammunition platform except the explosive fill.

CCT Utilization at 10-15%; India Work Transfer Underway

• CCT utilization at 10-15% as of Q2 FY 2026-2027 — operations commenced Q1 FY 2026-2027; management expects utilization to rise ~10% every quarter, though no end-FY27 level was quantified.
• Work-split target of 30% UK / 70% India — steady-state target (period unspecified) for the transferred work.
• Sri City Phase 1 guided to ~50-60% utilization by end of FY28 — rising to full capacity by FY29; production commenced September 2026 and parts are already rolling out to the UK and onward to customers.
• UK-to-India work transfer began last month (FY 2026-2027) — management emphasized "We already have the orders"; no new orders are needed to fill the factory.
• 15-20% annual YoY aerospace growth expected (period unspecified), with the Tri-City facility expected to ramp ~15% per quarter (period unspecified); the aerospace order book is a long-term executable contract book running across seven UK factories, with stable, high-visibility delivery for the next 5 to 7 years.
• Defense is ~25-30% of UK revenue (Bromford and Naismith) as of Q2 FY 2026-2027 — highly restrictive, profitable work supplying Lockheed Martin, Airbus defense programs, BAE Systems and Rheinmetall that management says cannot be moved elsewhere; Sigma is a classified Tier 1 supplier directly contracting Rolls-Royce, GE, Airbus and Boeing.
• India factory will operate as a sub-contractor to Sigma UK — the aerospace P&L will continue to run through Sigma UK in published numbers (Pramod Raju).

OTIF at ~97%; Aerospace Margin Bridge to Indian-Peer Levels by FY28

• OTIF delivery improved from 65% to ~97% — over the last few quarters through Q2 FY 2026-2027, following ~£8-9mn of post-acquisition investment in Naismith and Bromford (working capital plus capex on new equipment kits).
• Sigma UK EBITDA margin delivered at least a 200% per-quarter improvement (as stated) from Q3 FY 2025-2026 to Q2 FY 2026-2027, driven by the investments and insourcing of work; the quarterly improvement trend is expected to continue through Q3-Q4 FY 2026-2027.
• Aerospace EBITDA margin guided to 25-30% by FY28 — CEO: "possible... 25 to 30% is what we should look at"; Pramod Raju affirmed FY28 at 25-30%, in response to the analyst citing defense's current 22-30% range.
• Margin bridge to FY28 — Western aerospace operations run at upper single-digit EBITDA margins absent automation/capex; management expects aerospace EBITDA margin to be in line with Indian peers by FY28 while maintaining a UK base of ~500+ employees.
• Q2 FY 2026-2027 defense exports margins expanded much stronger — despite slightly smaller Q2 M107 sales, driven by supply-chain changes and higher in-house content.
• No new capex required — all capex for the facilities is already invested and visible in the Q2 FY 2026-2027 balance sheet; management sees no capacity constraint and is positioned to execute the existing order book "for the next couple of years."
• Capacity headroom as of Q2 FY 2026-2027 — aerospace in India at ~15%, shells/ammunition at ~20%, defense electronics on a single shift during infrastructure expansion.

Rs.3,000 Cr Raise Aimed at $100-150mn Revenue Targets

• Plan to raise up to Rs.3,000 crore, primarily for M&A — subject to shareholder approval in due course, with potential progress flagged for Q4 FY 2026-2027; management has worked on multiple acquisition opportunities over the last 6-8 months and expects to close transactions in Q4 FY 2026-2027.
• Target profile of roughly $100-150 million revenue scale (period unspecified) — spread across different customers and capability sets; per Pramod Raju, targets must have a good customer base and be EBITDA-positive — no loss-making or sick companies.
• Acquisitions being evaluated across all three geographies — including Europe and the US beyond the completed UK acquisitions; per the Q1 FY 2026-2027 investor meet, the company is building a global platform over the next two-three years via horizontal and vertical integration and customer penetration.
• Balance sheet: ~Rs.350 crore cash as of Q2 FY 2026-2027 — partly from the June preferential placement; debt minimal at ~Rs.80 crore (borrowed from the parent for previous acquisitions); H1 debt increase is working-capital driven and in line with industry standards.
• Preferential issue funds temporarily parked in fixed deposits — CFO Sridat Sathacharya clarified the bank balances under operating adjustments in the Q2 FY 2026-2027 cash flow statement are interim parking and can be read as a financing item; no deployment timeline was specified.
• Rs.76 crore of term loans have no finalized repayment strategy yet (period unspecified); other term borrowings on the H1 FY 2026-2027 balance sheet are scheduled for payback from January 1 to December 31, calendar 2027.
• Nismat Group clarification — responding to an analyst citing ~Rs.250 crore purchase price and Rs.750 crore top line, Kalidindi said the company was already EBITDA-positive the day Sigma took over, its financial stress predated the acquisition, and Sigma has since driven incremental improvements.

FY27 Target Near Rs.1,900-2,000 Cr; ~90% Export Mix

• FY 2026-2027 revenue targeted at close to Rs.1,900-2,000 crore with ~20% EBITDA margin — with EBITDA margin improvement of 200-400 bps by end of FY27 and a further 400-600 bps by end of FY28 as select manufacturing transitions to India.
• Revenue mix guided at ~90% export-driven vs ~10% domestic for FY 2026-2027 — GBP/USD/EUR-denominated global contracts; management declined to give an FY27/FY28 export breakdown or facility/entity-level split.
• Domestic defense at only ~3-4% of the mix (figure cited in the analyst's question) — Kalidindi said it remains a strategic focus, involves building full solutions, carries a healthy margin profile, and will continue to grow.
• Counter-drone leadership — Sigma is "one of the leaders in the country" in Counter Drone Solutions, with successful supplies to the Army and Navy; a large BSF contract — the largest in the country under MSA (Ministry of Home Affairs) for BSF — is under execution, and management cited a good pipeline plus a capability unique to Sigma to supply these systems overseas with all certifications from NASM.
• Exclusive CCF MOU with Munitions India Limited — technology developed by Sigma's European joint-venture partner, in testing since 2017, field-tested and combat-deployed across Europe and America, and indigenized into India for offer to MIL on an exclusive basis; management expects actual supply to MIL within 6-18 months (i.e., supplies expected from FY 2027-2028 onward).
• Management declined to quantify aerospace work moving to India by FY28 — it gives only a one-two quarter maximum outlook; quantum updates to be shared Q on Q. Management also declined to break out the order book by customer, citing NDAs.
• Industry context cited by management — global aerospace OEMs are increasingly looking to India for engineering depth and scale beyond cost advantage; NATO and allied nations are strengthening ammunition manufacturing capacity and require dependable supply-chain partners; the Government of India continues to emphasize indigenous defense manufacturing.