Elgi Equipments (ELEQ) reported a healthy quarter, with revenue growing 14.7% YoY and EBITDA margin improving by 64bps to 15.1%. During the quarter, the domestic order inquiries remained strong though the order finalizations were delayed. ELGI’s newly launched ‘Stabilisor’ is on track for a full market rollout by Q3FY26. High margin Aftermarket sales remain a key focus amid the growing installation base aiding margin expansion. Internationally, the tariff uncertainty still looms over the USA business while weakness in Europe persists. Meanwhile, the Australian business appears to have been bottomed out and shows signs of gradual recovery. The management have guided for a ~10% YoY growth with margins of ~16% in FY26. We roll forward to Mar’27E and downgrade our rating from ‘Buy’ to ‘Accumulate’ given the recent rally in the stock. We value the company at a PE of 37x Mar’27E (37x Sep’26E earlier) with a revised TP of Rs559 (Rs517 earlier). Downgrade to ‘Accumulate’.
Long-Term View: We believe ELEQ is poised for healthy long-term growth on the back of 1) it being among top 2/10 players in the Indian/global air compressors market, 2) technology development along with strong backward integration, 3) its growing global installed base driving high-margin aftermarket sales, 4) new product launches and 5) market leadership in automotive garage equipment. The stock is currently trading at a PE of 38.6x/33.1x on FY26/27E.
Improved operating leverage drive EBITDA margin: Consolidated Revenue increased by 14.7% YoY to Rs9.9bn (Ple: Rs9.5bn) driven by 12.8% YoY growth in Air Compressors sales to Rs9.0bn and 36.6% YoY growth in Automotive equipment sales to Rs938mn. EBITDA grew by 19.7% YoY to Rs1.5bn (Ple: Rs1.4bn). EBITDA margin also expanded by 64bps YoY to 15.1% (Ple:14.5%) primarily due to lower employee cost to Rs1.7bn (-227bps YoY as % of sales). PBT increased by 26.1% YoY to Rs1.4bn (Ple: Rs1.3bn). Adj. PAT increased by 33.4% YoY to Rs1.0bn (Ple: Rs860mn) supported by lower effective tax rate (down by 310bps to 27.5%) and higher other income (+14.4% to Rs167mn).
We attended the annual investor call of Grindwell Norton (GWN) in which the management highlighted the financial performance of the company for FY25 and their strategic focus on the domestic market amid export uncertainties. Significant front-end investments in Abrasives capacity position the company to cater to a broader customer base, while the Ceramics & Plastics segment continues to benefit from healthy domestic demand across precision grinding, glass grinding, defence, and industrial applications. Management’s focus on application engineering, technical servicing, & innovation will position GWN favorably among competitors. However, persistent Chinese dumping in Abrasives and subdued export demand in the C&P segment remain key near-term headwinds.
Chinese alternative products dumping, global tariff wars and change in mix of consumable demand will be key monitorable, however we remain positive on GWN due to its 1) focus on technologically advanced niche/high performance products in performance plastics, 2) penetration in newer high growth markets, 3) attention on tapping new verticals in Ceramics & Refractories, and 4) capacity expansion in coated abrasives, engineered ceramics and performance plastics. We revise our FY26/27E eps estimates by -4.7%/-6.4% given the continued threat from Chinese competition and subdued export outlook. The stock is trading at P/E of 47.3x/40.8x on FY26/27E earnings. We roll forward to Mar’27E and downgrade the rating from ‘Accumulate’ to ‘Hold’ with a revised TP of Rs1,739 (Rs1,716 earlier) valuing the stock at a PE of 40x Mar’27E (40x Sep’26E earlier). Downgrade to ‘Hold’.
Growth in Abrasives and fending off Chinese competition: Strategic capex in coated and non-woven lines has created ample capacity to meet domestic demand. The company is effectively countering Chinese competition—particularly in coated, non-woven, and thin wheel products—through innovation and enhanced customer engagement, while bonded abrasives remain competitive against European peers. Additionally, GWN’s growing presence in super abrasives positions it well to tap into high-growth sectors like semiconductors and electronics, supported by its strong focus on application engineering and technical services.
Strong domestic demand to drive the C&P segment growth: The segment is unlikely to reclaim the ~20%+ EBIT margins seen in FY23—driven by post-Covid export tailwinds—growth remains supported by domestic demand and capacity expansions at the Halol plant. PRS Permacel faced temporary setbacks due to design-related issues in the EV segment but is poised for recovery with new product introductions in thermal management and insulation. Additionally, GWN is positioned to benefit from emerging opportunities in defence armor ceramics, where approvals are progressing and geopolitical tailwinds strengthen the long-term outlook.
