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Strong traction from user industries, outlook bright; maintaining a Buy

Good performances: standalone (sales up ~24% y/y) and international (up ~20% y/y) enabled GMM’s revenue to grew 20.5% y/y to Rs7.8bn (in line with ARe). Ordering traction is healthy with PLI-led investments in India, while international operations improvement is on the cards from the rampup of its German and Chinese plants. With strong demand in chemicals, pharma and services, consolidated OB was a robust ~Rs21.2bn at endSep’22. The company expects better India business margins in H2, and 12-13% international EBITDA margins despite fluctuating commodity prices and higher energy costs. Successful integration of its international business, cross-selling efforts, value-sourcing and the strong demand outlook keep us upbeat on GMM’s business momentum. We retain our Buy rating, with a higher TP of Rs2.440 (33x FY25e EPS), earlier Rs1,929.

Better-than-expected margins. GMM’s performance was encouraging: 20.5% revenue growth, 15.2% better-than-expected EBITDA margin (largely led by the international business). The standalone EBITDA margin was weak (16.5%), hurt by high-priced steel inventory, an unfavourable product mix and higher costs. Management expects better standalone margins in H2 and to retain 12-13% international margins. Hence, we raise our FY23e EBITDA margin.

Efforts toward gaining share. Acquisitions in the last two years have made GMM a stronger global player with efforts in cross-selling and enhanced capabilities. Levering this should help it capture greater wallet share of customers and add others. Further, value-sourcing from India enables it to gain customers due to its cost competitiveness. With this, the overall market has expanded and GMM’s enhanced abilities support it in catering to this demand.

Valuations. We introduce FY25e, expecting revenue and PAT to grow ~13% and ~22%, respectively, and a 14.2% EBITDA margin. Consequently, we expect revenue/PAT CAGRs of ~18%/~56% over FY22-25. On rolling forward to FY25e and higher EBITDA margin estimates, we arrive at a higher target price of Rs.2,440. Risk: Less-than-expected demand.

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