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Ceigall India’s (CIL) 1Q26 PAT at INR 559mn missed JMFe of INR 586mn due to lower margins and higher interest costs despite higher other income. EBITDA margins fell 210 bps YoY to 11.4% (JMFe: 12%) due to lower gross margins. Gross debt rose from INR 6.4bn in Mar-25 to INR 6.8bn in June-25 due to seasonality. Order backlog adjusted for cancellation of Bhubhaneshwar metro order stood at INR 94bn (2.8x TTM revenue). While only 55% of current backlog is under execution, it will entirely executable by Dec-25. CIL has maintained its revenue growth of 10-15% YoY with pure EPC EBITDA margins (ex of bonus and royalty) of 11-12% for FY26E. With bids worth INR 160bn already submitted, CIL expects inflows of INR 50bn for FY26E. We see sharp EPC cut of 11%/9%/9% in FY26/27/28E factoring in lower revenue/margins amid cancellation of metro project, delay in AD for few HAM projects and weaker margin trajectory. CIL is currently trading at 11.8x/10.6x FY27/28E EPS. We value the EPC business at 13x FY27E EPS to arrive at SoTP based revised price target of INR 342. Maintain Buy.

* PAT below JMFe due to lower margins and higher interest cost: Revenue grew by 8% YoY to INR 8.2bn (JMFe: INR 8.35bn). EBITDA declined 7% YoY to INR 935mn (JMFe: INR 1bn). EBITDA margins at 11.4% (JMFe: 12%) fell sharply by 210bps YoY due to lower gross margins (down 240bps YoY). Interest cost remained flat YoY at INR 216mn (JMFe: INR 190mn). Other income increased by 82% YoY to INR 152mn (JMFe: INR 100mn). Gross debt rose from INR 6.4bn in Mar-25 to INR 6.8bn in June-25 due to seasonality. Adjusted PAT declined by 5% YoY to INR 559mn (JMFe: INR 586mn) due to lower margins and higher interest costs despite higher other income.

* Robust order backlog; to be entirely executable by Dec-25: CIL received weak order inflows of c.INR 4bn in YTD. Order backlog adjusted for cancellation of Bhubhaneshwar metro order stood at INR 94bn (2.8x TTM revenue). While only 55% of current backlog is under execution, it will entirely executable by Dec-25. CIL has bid for orders worth INR 160bn across verticals like highways, railways, metro, irrigation and urban development where results are awaited.

* Maintains guidance for FY26E: CIL has maintained its 10-15% YoY revenue growth guidance with core EPC EBITDA margins of 11-12% for FY26E. CIL has guided for order inflows of INR 50bn for FY26E. For its HAM portfolio of 9 assets, total equity requirement is c.INR 13bn of which INR 4.2bn is infused till Jun-25 while remainder equity is to be invested over FY26-28E.

* Maintain BUY with revised price target of INR 342: Given the delay in ADs for HAM projects, cancellation of Bhubhaneshwar metro project and weaker margin trajectory, we have cut EPS by 11%/9%/9% in FY26/27/28E. Having said that, we expect EPS CAGR of 18% over FY25-28E backed by strong order backlog. We expect balance sheet to remain lean with net debt/equity of (0x) and net debt + mobilization advances/EBITDA of (0.1x) in Mar’28E. Valuations at 11.8x/10.6x FY27/28E EPS (prior to adjustment for value of assets) is attractive. We value the EPC business at 13x FY27E EPS and HAM portfolio on P/B basis to arrive at an SOTP-based revised price target of INR 342. Maintain BUY.

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