Accumulate Ingersoll Rand Ltd For Target Rs.4,271 by Prabhudas Liladhar Capital Ltd
Muted Q2; capacity commissioning key to growth
Quick Pointers:
* The new Sanand facility has been commissioned in October month with trial production started and commercial production will begin by CY25.
* EBITDA margins contracted by 104bps YoY to 23.6% due to muted performance and weaker operating leverage
We revise our FY27E/FY28E EPS estimates by -8.7%/-4.6% and downgrade our rating from ‘BUY’ to “Accumulate’ factoring in deferred revenue due to delay in capacity commercialization. Ingersoll-Rand India (INGR) reported a muted quarter, with revenue flat YoY to Rs3.2bn while EBITDA margin contracted by 104bps YoY to 23.6%. IR new facility at Sanand has been commissioned, with trial production underway and commercial operations expected to begin by CY25; this is expected to support the next leg of growth and strengthen IR’s domestic market leadership. While underlying domestic demand for air compressors remains healthy, elongated decision-making cycles are delaying order finalizations across industry. Additionally, geopolitical and tariff-related uncertainties continue to pose risks to export volumes to the parent, weighing on near-term visibility. The stock is currently trading at a PE of 40.4x/34.9x on FY27/28E. We roll forward to Sep’27E and downgrade our rating from ‘BUY’ to ‘Accumulate’ with a revised TP of Rs4,271 (Rs4,335 earlier) valuing the stock at a PE of 42x Sep’27E (42x Mar’27E earlier). Downgrade to ‘Accumulate’.
Long term view: IR India is well-positioned to capitalize on the growing demand for compressors in India given it is 1) among the top 3 air compressor players in India, 2) expanding its air compressor manufacturing capacity by 50% which will drive volumes & scale, and 3) backed by strong global parentage of Ingersoll Rand Inc (IR Inc.), providing access to cutting-edge R&D and technology.
Capacity constraint led to muted growth: Revenue remains flattish YoY to Rs3.2bn (Ple: Rs3.4bn) likely due to capacity constraints. Gross margin expanded by 66bps YoY to 44.8% (Ple: 43.7%). EBITDA decreased by 4.3% YoY to Rs759mn (Ple: Rs816mn) while EBITDA margin contracted by 104bps YoY to 23.6% (Ple: 23.8%) due to higher other expenses (+16.2% YoY to Rs358mn). PBT remain flattish YoY to Rs809mn (Ple: Rs856mn) despite increase in other income by 44.1% YoY to Rs90mn. Adj.PAT remains flattish YoY to R604mn (Ple: Rs638mn) due to weaker operating performance.
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SEBI Registration No. INH000000271
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