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Utilization ramp-up to support growth

Consumerware, which contributed 63.6% of Q1FY27 revenue, reported a muted performance as discretionary spending remained subdued amid inflationary pressures and macroeconomic uncertainties, while steel bottle sales declined substantially due to the absence of imported inventory. In-house steel bottle manufacturing has commenced, with 8 lines operational but yet to reach optimal utilization; management expects the lines to ramp up over the next few quarters. Glassware utilization remained at ~60%, with scale-up slower than anticipated due to continued dumping from China, while Opalware growth remained muted during the quarter despite ~80-85% utilization. Writing Instruments delivered strong 52% YoY growth in Q1FY27, supported by a healthy contribution from the Cello brand.

Management highlighted Glassware and Steelware ramp-up as key priorities for FY27, with another 10%-15% Glassware utilization expected to support healthy profitability, while the current 8 steelware lines are expected to reach peak efficiency over the next couple of quarters. The company also noted that the current 8 steelware lines have peak revenue potential of ~INR3bn.

We estimate revenue/EBITDA/PAT CAGR of 8.1%/11.3%/10.1% for FY26-28E. We downward revise FY27/FY28 earning estimate by 1.2%/2.2% factoring in the muted consumerware performance and slower-than-expected ramp-up of the Glassware and Steelware businesses. We assign SOTP-based TP of INR410 (earlier INR503), implying PE of 22x FY28E. Downgrade to ‘Accumulate’ from ‘BUY’.

Q1FY27 financial performance:

Revenue declined by 0.4% YoY to INR5.3bn (PLe: INR5.8bn). Consumerware revenue (63.6% of Q1FY27 revenue) declined by 8.4% YoY to INR3.3bn. Writing Instruments revenue (21.2%) increased by 51.8% YoY to INR1.1bn. Moulded Furniture & Allied Products revenue (15.2%) declined by 11% YoY to INR800mn. Gross margin contracted by 160bps YoY to 52.4% (PLe: 52.2%). Consumerware gross margin contracted by 120bps to 55%, Writing Instruments by 490bps to 53.9%, and Moulded Furniture by 140bps to 39.5%. EBITDA declined by 9.2% YoY to INR990mn (PLe: INR1.2bn). PAT declined by 9% YoY to INR734mn (PLe: INR799mn).

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