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CP remains weak; margin recovery underway

Consumer Products (CP) revenue grew by 1.7% YoY, impacted by subdued demand and weakness in fans, while Lighting Solutions revenue grew 4.4%, supported by growth in professional lighting and healthy consumer lighting performance. CP EBIT margin improved to 3.8%, with management expecting further improvement through VAVE initiatives, while Lighting EBIT margin expanded to 6.7%, aided by a shift towards premium products from low-margin commodity products. Professional lighting margins were impacted by higher costs on projects with predetermined rates, with management targeting double-digit margins once legacy projects are completed. Ecommerce contributed ~15.0% of revenue and grew double digit, while alternate channels also witnessed strong growth. Net working capital days improved despite a slight increase in inventory, while overall cash flow remained negative due to tax payments related to Morphy Richards, TDS and GST. We estimate FY26-28E revenue/EBITDA CAGR of 9.9%/57.7%. We value the stock at 25x Mar’28 EPS and arrive at revised TP of INR403 (earlier Rs382). We upward revise our FY27/28 earnings estimate by 4.5%/0.6%. Maintain ‘Accumulate’.

Q1FY27 performance:

Revenue grew by 2.3% YoY to INR10.9bn (PLe: INR11.4bn). Consumer Products revenue grew by 4% YoY to INR8.2bn, while Lighting revenue grew by 4.4% YoY to INR2.7bn. Gross margin expanded by 130bps YoY to 32.3% (PLe: 29.9%). EBITDA grew by 131.3% YoY to INR771mn (PLe: INR354mn), with EBITDA margin expanding by 390bps YoY to 7.1% (PLe: 3.1%). Consumer Products reported EBIT margin expansion of 560bps YoY to 3.9%, while Lighting reported EBIT margin contraction of 390bps YoY to 6.7%. The company reported a net profit of INR484mn, including a JV gain of Rs4mn and a one-time exceptional gain of INR88mn from the sale of immovable property.

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