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Above our estimate; India business drives operating margin

Consolidated revenue grew by ~18.2% YoY to ~INR25.9b in 1QCY22 (est. ~INR22.8b), driven by RM cost pass-through. On a constant RM price basis, both India and EU business were largely flat YoY.

EBITDA grew 3.5% YoY to ~INR3b (est. INR2.2b). EBITDA margin stood at 11.5% (est. 9.8%). EBITDA margin expansion was due to improvement in India operations. Adjusted PAT grew 5.8% YoY to INR1.6b (est. INR0.9b).

India business performance: Revenue grew 15% YoY to ~INR12.8b (est. ~INR12b). India EBITDA margin stood at 13.4% (est. 11%).

EU business performance: Revenue grew 22% YoY to ~INR13b (est. ~INR10.8b). EBITDA margin stood at 9.6% (est. 8.5%). EU margin was impacted by higher energy cost.

Key highlights from the presentation:

India Light Vehicle forecast: IHS Global forecasts a production growth of 7.7% over CY21-22 and 4.7% CAGR over CY21-26.

India M&HCV forecast: IHS Global forecasts a production growth of 7% over CY21-22 and 4.7% CAGR over CY21-26.

India Tractor forecast: CRISIL expects the domestic Tractor industry to grow at 0-2% in FY23 and at 3-5% CAGR over FY22-26.

India 2W forecast: CRISIL expects domestic 2W industry to grow at 6-8% in FY23 and at 3-5% CAGR over FY21-26.

EU Light Vehicle forecast: IHS Global expects Passenger Vehicle production to grow by 3.4% in CY22 and at 3.5% CAGR over CY21-26.  EU M&HCV forecast: IHS Global expects Europe M&HCV sales to grow at 7.5% in CY22 and production to grow at 0.3% CAGR over CY21-26.

Based on our current estimates, the stock trades at 15.8x/10.7x CY22E/CY23E consolidated EPS. We maintain our Buy rating.

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