Accumulate Ingersoll-Rand Ltd For Target Rs.5,029 by Prabhudas Liladhar Capital Ltd
Healthy Q1, new facility ramp-up to aid volume growth
Ingersoll-Rand India (INGR) reported a healthy quarter, with revenue growing 20% YoY to Rs3.8bn and EBITDA margin expanding 23bps YoY to 23.8%, supported by better operating leverage. Demand remained broad-based across automotive, metals, engineering, textiles, pharmaceuticals, electronics, infrastructure and food processing. The commissioning of the Sanand facility should support the next leg of volume growth, while enable localisation and launch of new air-treatment and compression solutions. Export opportunities across Asia, Middle East and Africa provide additional growth avenues. In centrifugal compressors, INGR continues to strengthen its market position with higher-capacity frames exceeding 10,000 cfm. The company is also strategically focused on oil-free low-pressure solutions, contact-cooled rotary technologies, OEM/rental growth and diversified oil-free platforms. Increasing localisation, with >90% localisation of rotary screw compressors should further enhance competitiveness and support medium-term margin resilience. The stock is currently trading at a PE of 46.2x/38.5x on FY27/28E. We maintain our ‘Accumulate’ rating on the stock with a revised TP of Rs5,029 (Rs4,934 earlier) valuing the stock at a PE of 42x Mar’28E (same as earlier).
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) capacity expansion to 15,000 units which will drive volumes & scale
3) innovation-led product expansion across oil-free low-pressure, contact-cooled rotary and hydrogen compressors, enabling deeper penetration into Tier-2 and emerging industrial markets
4) backed by strong global parentage of Ingersoll Rand Inc (IR Inc.), providing access to cutting-edge R&D and technology.
Healthy execution aided profitability:
Revenue increased by 20.3% YoY to Rs3.8bn (Ple: Rs3.6bn) driven by healthy execution. Gross margin contracted by 121bps YoY to 42.5% (Ple: 43.8%). EBITDA increased by 21.5% YoY to Rs902mn (Ple: Rs841mn) while EBITDA margin expanded by 23bps YoY to 23.8% (Ple: 23.6%) led by better operating leverage despite lower gross margin. PBT (exc. Extra-ordinaries) increased by 19.4% YoY to Rs950mn (Ple: Rs889n). Adj.PAT increased by 19.5% YoY to R704mn (Ple: Rs663mn) led by better operating performance and flattish YoY effective tax rate to 25.8%
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